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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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(AMENDMENT NO. 1)
ARVIDA/JMB PARTNERS, L.P.
(NAME OF SUBJECT COMPANY)
ARVIDA/JMB PARTNERS, L.P.
(NAME OF PERSON FILING STATEMENT)
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(TITLE OF CLASS OF SECURITIES)
NONE
(CUSIP NUMBERS OF CLASSES OF SECURITIES)
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GARY NICKELE
ARVIDA/JMB MANAGERS, INC.
900 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
(312) 440-4800
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
MICHAEL H. KERR, P.C.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2094
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<PAGE>
This Amendment amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Statement") filed by Arvida/JMB Partners,
L.P. (the "Partnership"), on July 3, 1996. Unless otherwise indicated,
capitalized terms used herein have the same meanings as set forth in the
originally filed Statement.
ITEM 2. TENDER OFFER OF THE BIDDER
Item 2 of the Statement is amended to add the following information:
On July 10, 1996, Raleigh, by Amendment No. 3 to the Raleigh Schedule
14D-1 dated July 10, 1996, amended the Raleigh Offer (as so amended, the
"Amended Raleigh Offer") to increase the purchase price to $435 per
Interest, net to the seller in cash, without interest, upon the terms and
conditions set forth in the Raleigh Offer to Purchase, and to extend the
expiration date under the Amended Raleigh Offer to 12:00 midnight, New York
City time, on July 23, 1996, unless further extended.
ITEM 3. IDENTITY AND BACKGROUND
Item 3(b)(2) of the Statement is amended to add the following information
under the heading "Raleigh":
The Amended Raleigh Offer discloses that Raleigh and its general partner,
Raleigh GP Corp., have agreed in principal to admit Rockland Partners, Inc.
("Rockland") as a general partner of Raleigh. Rockland is described as
being wholly owned by Tiger/Westbrook Real Estate Fund, L.P. ("TREF") and
Tiger/Westbrook Real Estate Co-Investment Partnership, L.P., the sole
general partner of each of which is described as being Tiger/Westbrook Real
Estate Partners Management, L.L.C., of which Westbrook Real Estate Fund I,
L.L.C. is described as being the sole managing member. The Amended Raleigh
Offer also discloses that Lennar Corporation ("Lennar"), a national full-
service real estate company, has agreed in principal to a transaction that,
if and when completed, will give Lennar equal control of Rockland.
In March, 1996, Tiger Real Estate Fund, L.P. (now TREF according to the
Amended Raleigh Offer) and certain of its affiliates, all of which are
affiliates of Rockland, together with affiliates of Lennar, purchased all
of the outstanding partnership interests and certain related notes payable
of Coto de Caza Ltd., a California limited partnership ("Coto de Caza"),
from Chevron Land and Development Company and the Partnership. The
Partnership owned 20% of the partnership interests as well as a note
payable of Coto de Caza, for which it was paid $12,000,000. Tiger Real
Estate Fund, L.P. and certain of its affiliates also had discussions with
the Partnership and certain of its affiliates concerning a possible co-
investment in Coto de Caza. However, no agreement was reached with respect
to such co-investment, and as previously stated the Partnership sold its
entire interest in Coto de Caza in March 1996. In addition, an affiliate of
the Partnership had discussions with Tiger Real Estate Fund, L.P. and
certain of its affiliates concerning an arrangement whereby such affiliate
of the Partnership would act as developer/manager of the real estate
project owned by Coto de Caza. However, such discussions have ceased, and
no such arrangement was entered into. Additionally, in the Spring of 1996,
Tiger Real Estate Fund, L.P. held preliminary discussions with an affiliate
of the Partnership with respect to managing a to-be-developed residential
community in Orlando, Florida. The discussions have since ceased and the
affiliate of the Partnership is no longer a candidate for managing the
proposed project.
The Amended Raleigh Offer also discloses that Raleigh has engaged in
preliminary discussions with various third parties, including
representatives of Walton and Whitehall, regarding admission of such
parties or affiliates thereof as additional partners of Raleigh, although
it is further disclosed that no agreement has been reached and there can be
no assurance that any agreement will be reached. Reference is made to the
originally filed Statement for a description of material contracts,
agreements, arrangements and understandings and actual or potential
material conflicts of interest between Walton and Whitehall and their
respective affiliates, on the one hand, and the Partnership, Managers and
their respective affiliates, on the other hand.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4 of the Statement is amended to add the following information:
Following the Partnership's receipt of the Amended Raleigh Offer, on July
12, 1996, the Special Committee of the Board of Directors of Managers met
with its financial and legal advisors to review and
2
<PAGE>
consider the Amended Raleigh Offer. Based on its analysis and its
consultation with its advisors, the Special Committee has determined that
with respect to Interestholders who have no current or anticipated need for
liquidity and who expect to retain the Interests through an anticipated
orderly liquidation of the Partnership by October, 2002, the Amended
Raleigh Offer is inadequate and not in the best interests of such
Interestholders. Accordingly, the Partnership recommends that such
Interestholders reject the Amended Raleigh Offer and not tender their
Interests. With respect to all other Interestholders, the Special Committee
is expressing no opinion and remains neutral.
The Special Committee reached such conclusion after considering a variety
of factors, including those set forth under Item 4 of the Statement as
originally filed, as well as a letter dated July 12, 1996 from Lehman in
which Lehman reaffirmed the Lehman Estimated Liquidation Value and
expressed its opinion that the consideration offered in the Amended Raleigh
Offer is inadequate from a financial point of view to the Interestholders
as a class as compared to the Lehman Estimated Liquidation Value. However,
because the decision of each individual Interestholder as to whether to
accept the consideration offered pursuant to the Amended Raleigh Offer may
be based to a significant extent on such holder's current or anticipated
need for liquidity, Lehman was not requested to, and did not, render any
opinion as to the adequacy, from a financial point of view, of the
consideration offered in the Amended Raleigh Offer to any particular
Interestholder who has an immediate need or desire for liquidity or any
particular Interestholder who anticipates a need for liquidity prior to
October, 2002. It should also be noted that the Lehman Estimated
Liquidation Value does not represent an estimate by Lehman of the fair
market value of an Interest. A copy of such letter is filed as Exhibit
(c)(6) hereto.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 of the Statement is amended to add the following information:
A complaint was filed in the County Department, Chancery Division in the
Circuit Court of Cook County, Illinois on July 1, 1996, and amended on July
8, 1996, in the matter of Jack M. Carlstrom and Lynn M. Carlstrom v.
Arvida/JMB Managers, Inc., Neil G. Bluhm, Walton Street Capital Acquisition
Co. III, L.L.C., Whitehall Street Real Estate Limited Partnership VII,
Lehman Brothers Inc. and Arvida/JMB Partners L.P. (Case No. 96CH 6892).
This complaint, as amended, is brought derivatively on behalf of the
Partnership and individually on behalf of Jack M. Carlstrom and Lynn M.
Carlstrom and a purported class of all other holders of Interests
(excluding current or former management or affiliates of Managers) and
seeks to compel defendants to foster bidding for control of the Partnership
and to bar (i) Managers and Mr. Bluhm from taking any action to chill
tender offers from non-affiliates, (ii) the officers, directors and
shareholders of the defendants from participating in any special committee
on tender offers, (iii) Lehman from advising any such special committee,
and (iv) defendants and their affiliates from making tender offers
(including enjoining tender offers by controlling persons and affiliates of
Managers). The complaint alleges, inter alia, that Managers breached its
fiduciary duty owed plaintiffs and members of the purported class by
tilting the playing field in favor of itself and against potential bidders
for the Partnership, preferring the "General Partner's" tender offer over
those of other bidders, failing to disclose non-public information to other
bidders to prevent them from making competing offers, discouraging a fair
bidding contest and entrenching the defendants, and that Whitehall and
Lehman participated in such breaches of fiduciary duty. In addition to
seeking the relief described above, plaintiffs on behalf of themselves and
members of the purported class seek damages in a sum to be determined at
trial, such other and further relief as the Court may deem just and proper
and the award of attorneys' fees and costs. Managers for itself and acting
for the Partnership believes this action is groundless and has no merit,
and intends to vigorously defend this lawsuit.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 of the Statement is amended to add the following Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S> <C>
(a)(2) Letter, dated July 12, 1996, from Arvida/JMB Part-
ners, L.P. to its Limited Partners
(c)(6) Letter, dated July 12, 1996, from Lehman Brothers ad-
dressed to the Special Committee
</TABLE>
3
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SIGNATURE
After reasonable 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.
Arvida/JMB Partners, L.P.
Arvida/JMB Managers, Inc.,
By: _________________________________
General Partner of the Partnership
/s/ Judd D. Malkin
By: _________________________________
Name: Judd D. Malkin
Title: Chairman
Dated: July 12, 1996
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page No.
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<S> <C> <C>
(a)(2) Letter, dated July 12, 1996, from
Arvida/JMB Partners, L.P. to its
Limited Partners
(c)(6) Letter, dated July 12, 1996, from Lehman
Brothers addressed to the Special
Committee
</TABLE>
4
<PAGE>
ARVIDA/JMB PARTNERS, L.P.
900 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
312-440-4800
July 12, 1996
Dear Limited Partners:
Since our July 3, 1996, letter to you regarding the unsolicited offers
(collectively and as amended to date, the "Offers") made by Raleigh Capital
Associates L.P. ("Raleigh") and Walton Street Capital Acquisition Co. III,
L.L.C. ("Walton") to acquire interests and assignee interests ("Interests") in
Arvida/JMB Partners, L.P. (the "Partnership"), Raleigh amended its Offer to
modestly increase the purchase price from $421 per Interest to $435 per
Interest, net to the seller in cash (the "Amended Raleigh Offer"). As more fully
discussed below, the Special Committee (the "Special Committee") of the Board of
Directors of Arvida/JMB Managers, Inc., the general partner of the Partnership
("Mangers"), has determined that THE AMENDED RALEIGH OFFER IS STILL INADEQUATE
AND NOT IN THE BEST INTERESTS OF INTERESTHOLDERS WHO HAVE THE EXPECTATION OF
RETAINING THE INTERESTS THROUGH AN ANTICIPATED ORDERLY LIQUIDATION OF THE
PARTNERSHIP'S ASSETS. MOREOVER, RALEIGH HAS MISSTATED THE VALUE OF THE INTERESTS
AS PURPORTEDLY DETERMINED ON BEHALF OF THE PARTNERSHIP. RALEIGH HAS ALSO FAILED
TO COMPLY WITH CERTAIN DISCLOSURE REQUIREMENTS OF THE SECURITIES AND EXCHANGE
COMMISSION IN THE MOST RECENT AMENDMENT TO ITS OFFER.
As stated in our letter to you of July 3, 1996, the Special Committee has
retained the services of Lehman Brothers Inc. ("Lehman") as its financial
advisor and has directed Lehman to render (a) its estimate of the present
discounted value (the "Lehman Estimated Liquidation Value") of an Interest based
on the assumption that the Partnership commences an orderly liquidation in
October 1997 and completes the liquidation by October 2002 (the "Assumed
Liquidation"), and (b) its opinion as to the adequacy, from a financial point of
view, to the holders of Interests as a class, of the consideration offered in
any offer to acquire Interests (including the Offers), as compared to the Lehman
Estimated Liquidation Value. BY LETTER DATED JULY 2, 1996, LEHMAN ADVISED THE
SPECIAL COMMITTEE THAT THE LEHMAN ESTIMATED LIQUIDATION VALUE AS OF SUCH DATE
WAS A RANGE OF $565 TO $610 PER INTEREST. SUCH VALUE REPRESENTS LEHMAN'S
ESTIMATE OF THE GROSS CASH DISTRIBUTIONS THAT AN INTERESTHOLDER WOULD RECEIVE
OVER THE ASSUMED LIQUIDATION PERIOD, DISCOUNTED TO REFLECT THE PRESENT VALUE OF
SUCH DISTRIBUTIONS.
. Following receipt of the Amended Raleigh Offer, on July 12, 1996, the
Special Committee met with its financial and legal advisors to review and
consider the Amended Raleigh Offer. Based upon its analysis and its
consultations with its advisors, the Special Committee has determined that the
Amended Raleigh Offer is still inadequate and not in the best interests of
Interestholders who have the expectation of retaining the Interests through an
anticipated orderly liquidation of the Partnership's assets by October 31, 2002,
and who have no current or anticipated need for liquidity. Accordingly, the
Special Committee recommends that such Interestholders reject the Amended
Raleigh Offer and not tender their Interests pursuant to the Amended Raleigh
Offer.
<PAGE>
. By letter addressed to the Special Committee dated July 12, 1996, Lehman
reaffirmed that the Lehman Estimated Liquidation Value, as of such date, is a
range of $565 to $610 per Interest, and expressed its opinion that the
consideration offered in the Amended Raleigh Offer is inadequate from a
financial point of view to the Interestholders as a class as compared to the
Lehman Estimated Liquidation Value. As more fully discussed in the
Partnership's Schedule 14D-9 previously sent to all Limited Partners,
Lehman's opinion does not address the adequacy of the Amended Raleigh Offer
with respect to Interestholders who have a present or anticipated need for
liquidity. It should be noted, however, that the Lehman Estimated Liquidation
Value does not represent an estimate by Lehman of the fair market value of an
Interest.
. The Special Committee does not express any opinion and remains neutral as to
the Amended Raleigh Offer with respect to any Interestholders other than
those who have the expectation of retaining the Interests through an
anticipated orderly liquidation of the Partnership's assets by October 31,
2002, and who have no current or anticipated need for liquidity. It should be
noted that because there is no established market for the Interests, once the
Offers have expired, the price for Interests through privately negotiated
sales and sales through intermediaries may be substantially less than the
purchase price under either of the Offers.
. In its zeal to obtain an anticipated return from the purchase of Interests
that, based upon the projected budgets of the Partnership as adjusted by
Lehman in connection with its determination of the Lehman Estimated
Liquidation Value, would be in excess of 25% compounded annually, Raleigh has
made up "facts" to have its Offer appear better than it really is. Raleigh's
letter sent to Limited Partners discussing its price of $435 per Interest
claims that such amount represents "a 48% premium to the $294 appraised value
prepared by the Partnership's own ERISA appraiser as of September 30, 1995."
In fact, the Partnership has no "ERISA appraiser" and no such appraisal has
been prepared or authorized on behalf of the Partnership. The only third
party analysis as to the value of an Interest sought on behalf of the
Partnership has been the liquidation analysis prepared by Lehman at the
request of the Special Committee, which analysis resulted in the Lehman
Estimated Liquidation Value of a range of $565 to $610 per Interest.
. In spite of the disclosure requirements of the Securities and Exchange
Commission, Raleigh has failed to disclose in the most recent amendment to
its Offer the number of Interests tendered to it. Is the reason for this that
so few Interests have been tendered to date?
. Over the past three years (i.e., 1993, 1994 and 1995), the Partnership has
generated cash flow after operating expenses and before debt service ("net
operating cash flow") in an aggregate amount of approximately $157,000,000. A
substantial portion of the Partnership's net operating cash flow was required
to be used to make scheduled and additional principal payments on its term
loan, income property term loan and revolving line of credit and was
otherwise severely restricted with respect to the amount of distributions
that could be made to the partners. The aggregate outstanding principal
balance of such loans has been reduced from approximately $180,000,000 on
June 30, 1992 to approximately $28,000,000 as of
<PAGE>
JUNE 30, 1996. The Partnership currently anticipates that it will have fully
repaid its existing term loan by the end of the first quarter of 1997 and
expects to obtain a refinancing of its income property term loan and
revolving line of credit, the terms of which are not expected to impose
substantial restrictions on the Partnership's ability to make distributions
to its partners. GIVEN ITS CURRENT STRONG FINANCIAL CONDITION, THE
PARTNERSHIP ANTICIPATES THAT IT WILL REINSTATE REGULARLY SCHEDULED
DISTRIBUTIONS TO ITS PARTNERS COMMENCING IN THE SECOND HALF OF 1997.
. Under the Partnership's partnership agreement, Managers is required to elect
to pursue one of the following courses of action: (i) to cause the Interests
to be listed on a national exchange or to be reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") at
any time one or prior to October 31, 1997; (ii) to purchase, to cause JMB
Realty Corporation or its affiliates to purchase, on October 31, 1997 all of
the Interests of the Interestholders at their then appraised fair market
value as limited partnership interests (as determined by an independent
nationally recognized investment banking firm or real estate advisory
company); or (iii) to commence a liquidation phase on October 31, 1997, in
which all of the Partnership's remaining assets will be sold or disposed of
by October 31, 2002. The Special Committee of Managers at a meeting on
June 27, 1996, expressed the position of the members of such Committee that,
if such choice were to be submitted to the board of Managers at the present
time, based on the facts and circumstances then known to them, such members
would vote in favor of commencing a liquidation phase on October 31, 1997, in
which all of the Partnership's remaining assets would be sold over five
years. It should be noted that Managers has not approved a plan of
liquidation and that Managers expressly reserves the right to choose any of
the three alternatives on or prior to October 31, 1997.
YOU SHOULD CONSULT WITH YOUR PERSONAL TAX ADVISOR AND FINANCIAL CONSULTANT
PRIOR TO ACCEPTING EITHER OF THE OFFERS AND TENDERING YOUR INTERESTS.
Under the terms of the Raleigh and Walton Offers, they cannot, until July
23, 1996, and July 26, 1996, respectively, purchase and pay for any Interests
tendered prior to such times, and you may withdraw Interests tendered to Raleigh
or Walton at any time prior to 12:00 midnight on July 23, 1996 or July 26, 1996,
respectively. IF YOU WISH TO RETAIN YOUR INTERESTS AND YOU HAVE NOT ALREADY
TENDERED YOUR INTERESTS PURSUANT TO EITHER OF THE OFFERS, YOU NEED NOT TAKE ANY
ACTION REGARDING THE OFFERS.
In arriving at the recommendation, the Special Committee gave careful
consideration to a number of business, financial and other factors described in
the Partnership's Schedule 14D-9, as amended by the enclosed Amendment No. 1
thereto and filed with the Securities and Exchange Commission. The opinion
letter of Lehman dated July 12, 1996 is enclosed with Amendment No. 1 to the
Partnership's Schedule 14D-9. INTERESTHOLDERS ARE URGED TO READ CAREFULLY THE
PARTNERSHIP'S SCHEDULE 14D-9, AS AMENDED BY AMENDMENT NO. 1 THERETO.
On behalf of the Special Committee.
Very truly yours,
Arvida/JMB Partners, L.P.
By: Arvida/JMB Managers, Inc.
General Partner
By:
Judd D. Malkin
Chairman
<PAGE>
[LETTERHEAD OF LEHMAN BROTHERS]
Exhibit (c)(6)
July 12, 1996
Special Committee of the Board of Directors
Arvida/JMB Managers, Inc.
900 North Michigan Avenue
Chicago, Il 60611-1575
Members of the Board:
We understand that the unsolicited tender offer (the "Raleigh Offer") commenced
by Raleigh Capital Associates, L.P. ("Raleigh") to purchase up to 185,000 units
of limited partnership interest ("Units")(46% of the outstanding Units) in
Arvida/JMB Partners, L.P. (the "Partnership") at a cash purchase price of $421
per Unit, has been amended to increase the purchase price to $435 per Unit in
cash (the "Raleigh Offer"). We also understand that Raleigh and its general
partner have agreed in principle to admit Rockland Partners, Inc. as a partner
in the Raleigh Offer, and that Rockland is wholly-owned by Tiger/Westbrook Real
Estate Fund, L.P. and Tiger/Westbrook Real Estate Co-Investment Partnership,
L.P. (collectively, "Tiger/Westbrook"). We further understand that Lennar
Corporation ("Lennar") has agreed in principle to a transaction, if and when
completed, that will give it equal control of Rockland. The terms and conditions
of the Raleigh Offer, as amended, are set forth in more detail in the Offer to
Purchase relating thereto dated June 19, 1996, as supplemented and amended by
Amendment No. 1 thereto dated June 28, 1996, Amendment No. 2 thereto dated July
1, 1996 and Amendment No. 3 thereto dated July 10, 1996 (as amended, the
"Raleigh Offer to Purchase").
We have been requested by the special committee of the Board of Directors (the
"Special Committee") of Arvida/JMB Managers, Inc., in its capacity as general
partner of the Partnership (the "General Partner"), to render: (i) our estimate
as to the hypothetical liquidation value (the "Hypothetical Liquidation Value")
of a Unit based on the assumption that the Partnership commences a theoretical
orderly liquidation of the Partnership's assets in October 1997 and completes
that liquidation by the year 2002 (the "Liquidation"); and (ii) our opinion as
to the adequacy, from a financial point of view, to the holders of the Units as
a class, of the consideration offered to such holders in the Raleigh Offer as
compared to the Hypothetical Liquidation Value. However, because the decision of
each individual holder of Units as to whether to accept the consideration
offered pursuant to the Raleigh Offer may be based to a significant extent on
such holder's current or anticipated need or desire for liquidity, we have not
been requested to opine as to, and our opinion does not in any manner address,
the adequacy, from a financial point of view, of such consideration to any
particular holder of the Units who
<PAGE>
Arvida/JMB Managers, Inc.
July 12, 1996
Page 2
has an immediate need or desire for liquidity or any particular holder of the
Units who anticipates a need for liquidity prior to 2002.
In arriving at our opinion, we reviewed and analyzed:
(i) the Raleigh Offer to Purchase and the specific terms and conditions of
the Raleigh Offer;
(ii) publicly available information regarding the Partnership set forth in
the Partnership's Form 10-Q for the quarter ended March 31, 1996 and Form
10-K for the year ended December 31, 1995;
(iii) financial and operating information with respect to the business,
operations and prospects of the Partnership furnished to us by the
Partnership;
(iv) independent appraisals, market studies and other information regarding
certain of the Partnership's assets furnished to us by the Partnership or
obtained from third parties; and
(v) a comparison of the financial terms of the Raleigh Offer with the
results of the analysis of the Hypothetical Liquidation Value performed by
us as described below.
In addition, we have had discussions with the management of the Partnership and
the General Partner concerning the Partnership's business, operations, assets,
financial condition and prospects and undertook such other studies, analyses and
investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the financial
and other information used by us in arriving at our opinion without assuming
responsibility for the independent verification of such information and have
further relied upon the assurances of management of the Partnership and the
General Partner that they are not aware of any facts that would make such
information inaccurate or misleading in any material respect. With respect to
the financial projections of the Partnership, we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Partnership
as to the future financial performance of the Partnership. However, for purposes
of our analysis, and based upon our review of certain independent market data,
we also utilized certain somewhat more conservative assumptions and estimates
which resulted in certain adjustments to the Partnership's projections. In
arriving at our opinion, we have not conducted a physical inspection of the
Partnership's properties, but have obtained and
<PAGE>
Arvida/JMB Managers, Inc.
July 12, 1996
Page 3
reviewed existing independent appraisals and market studies of certain of the
assets of the Partnership. Our opinion is necessarily based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
You have advised us that, based on current circumstances, the members of the
Special Committee currently intend to commence an orderly liquidation of the
Partnership's assets in October 1997 and complete that liquidation by 2002.
Accordingly, at your direction, the only valuation analysis we have performed is
a discounted cash flow analysis applied to the cash distributions to be received
by the limited partners in the Partnership based on the financial projections
referred to in the preceding paragraph and the assumption that the Partnership
commences and completes the Liquidation as described above. The projected cash
distributions to limited partners are based on a series of important assumptions
underlying such financial projections, including assumptions as to the prices
and other terms for which the Partnership's assets can be sold and the timing of
those sales. Many of these assumptions are beyond the control of the Partnership
and may or may not prove to be correct. Based solely on this limited valuation
methodology, we have estimated a Hypothetical Liquidation Value of $565 to $610
per Unit.
Based on the limited valuation methodology discussed above, and subject to the
assumptions, limitations and other considerations referred to herein, we are of
the opinion that, as of the date hereof, the consideration offered to the
holders of the Units in the Raleigh Offer is inadequate, from a financial point
of view, to the holders of the Units as a class as compared to the Hypothetical
Liquidation Value. However, as mentioned above, we express no opinion as to the
adequacy, from a financial point of view, of the consideration offered in the
Raleigh Offer to any particular holder of the Units who has an immediate need or
desire for liquidity or any particular holder of the Units who anticipates a
need for liquidity prior to 2002.
Because, in the future, other alternative strategies may be selected by the
General Partner for realizing the value of the Partnership's assets, our
analysis described herein cannot and does not take into account the potential
value of the Units if other strategies are employed.
We have acted as financial advisor to the Partnership in connection with the
Raleigh Offer and will receive a fee for our services a portion of which may be
dependent upon the price at which a tender offer for the Units is consummated.
In addition, the Partnership has agreed to indemnify us for certain liabilities
that might arise out of the rendering of this opinion. We also have performed
various investment banking services for affiliates of the Partnership and the
General Partner in the past and have received customary fees for such services.
<PAGE>
Arvida/JMB Managers, Inc.
July 12, 1996
Page 4
This opinion is for the use and benefit of the Board of Directors of the General
Partner. This opinion is not intended to be and does not constitute a
recommendation to any limited partner of the Partnership as to whether or not to
accept the consideration offered for the Units in the Raleigh Offer, whether as
a means to liquidate such limited partner's interest in the Units or otherwise.
Very truly yours,
LEHMAN BROTHERS
/s/
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Managing Director
