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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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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)
----------------
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 NOTICE 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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ITEM 1. SECURITY AND SUBJECT COMPANY
The subject company is Arvida/JMB Partners, L.P., a Delaware limited
partnership (the "Partnership"). The address of the principal executive offices
of the Partnership and Arvida/JMB Managers, Inc., a Delaware corporation and
the general partner of the Partnership ("Managers"), is 900 North Michigan
Avenue, Chicago, Illinois 60611. The title of the class of equity securities to
which this statement relates is the outstanding limited partnership interests
and assignee interests therein (the "Interests") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER
This statement (the "Statement") relates to the offer by Raleigh Capital
Associates, L.P., Raleigh GP Corp., Rockland Partners, Inc. and Zephyr Partners
(collectively, "Raleigh") disclosed on a Tender Offer Statement on Schedule
14D-1 dated October 17, 1996 (the "Raleigh Schedule 14D-1"), to purchase from
the holders of Interests (hereinafter sometimes referred to as
"Interestholders") up to 100,000 Interests, representing approximately 24.8% of
the total Interests outstanding as of June 30, 1996, at a purchase price of
$500 per Interest, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated October
17, 1996, (the "Raleigh Offer to Purchase"), and the related Letter of
Transmittal (collectively with the Raleigh Offer to Purchase, the "Offer"),
copies of which are attached to the Raleigh Schedule 14D-1.
The address of the principal executive office of Raleigh Capital Associates,
L.P. is One International Place, Boston, Massachusetts 02110. The Raleigh Offer
to Purchase does not disclose the principal executive office of either Raleigh
GP Corp. or Rockland Partners, Inc. ("Rockland"), both of which are co-bidders
and general partners of Raleigh Capital Associates, L.P. According to the
Raleigh Offer to Purchase, the principal executive office of Zephyr Partners,
an affiliate of Carl C. Icahn, a co-bidder in the Offer and a general partner
of Raleigh Capital Associates, L.P. ("Zephyr"), is 100 South Bedford Road, Mt.
Kisco, New York 10549.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Partnership, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) Pursuant to the Partnership's Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement" filed as Exhibit (c)(1)
hereto), Managers is the sole general partner of the Partnership. All of the
outstanding shares of Managers are owned by Northbrook Corporation, a Delaware
corporation ("Northbrook"), and substantially all of the outstanding shares of
Northbrook are owned by JMB Realty Corporation, a Delaware corporation ("JMB"),
and certain of JMB's officers, directors, members of their families and their
affiliates. Managers has responsibility for all aspects of the Partnership's
operations. Arvida/JMB Associates, an Illinois general partnership, of which
certain officers, directors and affiliates of JMB are partners, and Arvida/JMB
Limited Partnership, an Illinois limited partnership, of which Arvida/JMB
Associates is the general partner and ML Real Estate Associates II, an
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), is the limited partner, are the Associate Limited Partners of the
Partnership. For a discussion of certain material contracts, agreements, or
arrangements between (i) Managers, its executive officers, directors or its
affiliates and (ii) the Partnership or its affiliates, and certain potential or
actual conflicts of interest, please refer to Item 3(b)(1) of the Partnership's
Schedule 14D-9 to the Prior Tender Offer (as hereinafter defined), as amended
and attached hereto as Exhibit (c)(2). Except as described therein or herein,
there are no material contracts, agreements, arrangements or understandings or
any actual or potential material conflicts of interest between Managers, its
executive officers, directors or affiliates, on the one hand, and the
Partnership or its affiliates, on the other hand.
On September 12, 1996, the Partnership entered into a commitment (the
"Commitment") with Starwood/Florida Funding L.L.C. and one or more of its
affiliates (individually and collectively, "Starwood") for a term loan to be
made to the Partnership in the amount of $160 million (the "Starwood
Financing"). If completed, the Partnership expects to use the proceeds from the
Starwood Financing to repay one of its existing
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bank term loans and to make a nontaxable distribution, including a nontaxable
distribution of $350 per Interest to the Interestholders. Pursuant to the
terms of the Partnership Agreement, Managers and the Associate Limited
Partners would collectively receive an aggregate of approximately $7.8 million
as their share of any such distribution. Removal of Managers as the general
partner of the Partnership or termination of the Management, Advisory and
Supervisory Agreement between the Partnership and Arvida Company (filed as
Exhibit (c)(3) hereto) could, in certain circumstances, cause an acceleration
of the Starwood Financing. Reference is made to the description of the
Starwood Financing set forth in Item 8 herein.
(b)(2) Except as described below, to the knowledge of Managers, there are no
material contracts, agreements, arrangements or understandings or any actual
or potential material conflicts of interest between the Partnership, Managers
or its affiliates, on the one hand, and Raleigh, or its respective executive
officers, directors or affiliates, on the other hand.
Raleigh
On June 19, 1996, Raleigh commenced a tender offer for up to 185,000
Interests initially at a price of $411 per Interest. Raleigh subsequently
raised the offered price to $421, then to $435 and finally to $461, at which
point entities affiliated with Carl Icahn (one of which had been making a
competing tender offer) were admitted to Raleigh Capital Associates, L.P. (the
"Prior Tender Offer"). According to the Raleigh Offer to Purchase, on August
1, 1996 Raleigh acquired 79,696 Interests (approximately 20% of the
outstanding Interests) at a price of $461 per Interest pursuant to the Prior
Tender Offer.
On June 24, 1996, Raleigh requested a confidentiality agreement with the
Partnership pursuant to which Raleigh would be entitled, among other things,
to review certain non-public information concerning the Partnership, and, in
return, Raleigh would agree, among other things, to treat such information as
confidential in accordance with the terms of such agreement. The Partnership
provided Raleigh with a form of confidentiality agreement, but, to date,
Raleigh has not executed such a confidentiality agreement with the
Partnership.
On October 17, 1996, Raleigh Capital Associates, L.P. filed with the
Securities and Exchange Commission preliminary proxy materials for a
solicitation of written consents to remove Managers as the general partner of
the Partnership and to replace it with Raleigh Realty Management L.P., an
affiliate of Raleigh Capital Associates L.P. This consent solicitation creates
a conflict of interest between Managers and Raleigh, as the consent
solicitation, if successful, would result in Managers being removed as general
partner of the Partnership. In the event of the removal of Managers as general
partner, the Partnership Agreement provides that the interests of Managers and
the Associate Limited Partners in the Partnership will be purchased for fair
market value, as such value is determined pursuant to the Partnership
Agreement.
According to the Raleigh Offer to Purchase, Rockland is a general partner of
Raleigh Capital Associates, L.P. and is a co-bidder in the Offer. Raleigh's
Offer to Purchase describes Rockland 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. In addition, Raleigh's Offer to Purchase discloses that Lennar
Corporation ("Lennar"), a real estate company, has entered into a binding
agreement to become a shareholder of Rockland and under that agreement Lennar
has funded its proportionate share of Rockland's capital requirements. (The
Prior Tender Offer materials indicated that Lennar would have equal control of
Rockland.) Lennar is a direct competitor with the Partnership in a number of
residential developments in Florida.
In March, 1996, Tiger Real Estate Fund, L.P. (now TREF according to the
Prior Tender 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
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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.
Raleigh GP Corp. is a Delaware corporation which, according to the Raleigh
Offer to Purchase, is ultimately controlled by Apollo Real Estate Capital
Advisors II, Inc. ("Advisors"), as general partner of Apollo Real Estate
Advisors II, L.P. ("AREA II"), the general partner of Apollo Real Estate
Investment Fund II, L.P., a recently formed private real estate investment
fund and the sole shareholder of Raleigh GP Corp. The Raleigh Offer to
Purchase reports that the directors of Advisors are Leon D. Black and John J.
Hannan who were founding principals of Apollo Advisors, L.P., the respective
managing general partner of Apollo Investment Fund, L.P., AIF II, L.P. and
Apollo Investment Fund III, L.P., private securities investment funds, and,
together with William L. Mack, of Apollo Real Estate Advisors, L.P. ("AREA")
and AREA II, the respective managing general partners of Apollo Real Estate
Investment Fund, L.P. and Apollo Real Estate Investment Fund II, L.P. The
business address for Messrs. Black, Hannan and Mack is 1301 Avenue of the
Americas, New York, New York 10019. During 1993 and 1994, AREA, either itself
or through its affiliates, has invested, on a negotiated basis, approximately
$50,000,000 in real estate assets with affiliates of JMB.
General
If Managers were to admit Raleigh as a substitute Limited Partner with
respect to the Interests it acquired pursuant to the Prior Tender Offer and
any additional Interests it acquires pursuant to the Offer, Raleigh would be
in a position to significantly influence future Partnership decisions on which
Limited Partners may vote. However, as of the date hereof, Raleigh has not
been admitted as a substitute Limited Partner with respect to any Interests
currently owned by it. Under the terms of the Partnership Agreement, a
decision whether to admit Raleigh as a substitute Limited Partner depends
upon, among other things, whether Managers, as the General Partner, consents
to such admission in its sole and absolute discretion. Managers has not
decided under what circumstances, if any, it would admit Raleigh as a
substitute Limited Partner with respect to any Interests owned by it. In the
event that Managers were to recognize Raleigh as a substitute Limited Partner
with respect to a substantial number of Interests, Raleigh may be in a
position to (i) prevent non-tendering Interestholders entitled to vote on
Partnership matters from taking action they desire but that Raleigh opposes,
and (ii) take action desired by Raleigh but opposed by non-tendering
Interestholders entitled to vote on Partnership matters. Under the Partnership
Agreement, upon receipt of a request in writing signed by 10% or more in
interest of the Limited Partners, the General Partner shall call a meeting of
Limited Partners or submit any matter (upon which the Limited Partners are
entitled to act) to the Limited Partners for a vote by written consent without
a meeting. A majority in interest of the Limited Partners is entitled to take
action with respect to a variety of matters, including: removal of Managers as
the general partner of the Partnership (in which event the interests of
Managers and the Associate Limited Partners in the Partnership must be
purchased for fair market value); election of a successor general partner;
dissolution of the Partnership; the sale of all or substantially all of the
Partnership's properties (other than in the ordinary course of the
Partnership's business); and most types of amendments to the Partnership
Agreement (subject to the consent of the General Partner in the case of an
amendment which would alter the rights, powers and duties of the General
Partner). If it were admitted as a substitute Limited Partner, Raleigh, when
voting on such matters, would, according to the Raleigh Offer to Purchase, be
expected to vote Interests owned and acquired by it in its interest, which may
not be in the interest of other Interestholders or Managers.
CERTAIN STATEMENTS MADE IN THE RALEIGH OFFER TO PURCHASE WITH RESPECT TO
RALEIGH'S VOTING POWER ARE, IN THE VIEW OF MANAGERS, INCORRECT. For example,
Raleigh alleges in the Raleigh Offer to Purchase that Raleigh, because of its
ownership of approximately 20% of the outstanding Interests, "is in a position
to significantly influence all Partnership decisions on which
[Interestholders] may vote, including decisions regarding removal of the
General Partner, merger, sales of assets and liquidation." The Raleigh Offer
to Purchase further states that "[t]he acquisition of additional [Interests]
pursuant to the Offer would enhance such voting influence" and that Raleigh
"intends to vote all [Interests] owned by it, including any [Interests]
acquired in the Offer, in favor of the removal of the [Managers] and its
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replacement with Raleigh Realty Management." On October 18, 1996, the Delaware
Chancery Court, in a ruling on the defendants' motion to dismiss an action
brought by Raleigh (and one of its affiliates) for declaratory and injunctive
relief (see Item 8 below), stated that it would grant the motion to dismiss
for lack of standing based in part on the Court's conclusion that Raleigh and
its affiliate do not have voting rights. Raleigh has filed a motion for
reargument with respect to the Court's ruling and for the issuance of an
injunction pending appeal.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) A Special Committee of the Board of Directors of Managers has been
formed to consider the Prior Offer, this Offer and other offers that have been
or may be made for the Interests (the "Special Committee"). Following the
Partnership's receipt of the Offer, the Special Committee met with its
financial and legal advisors to review and consider the 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 or desire for liquidity beyond that provided by the proposed
$350 per Interest cash distribution made pursuant to the Starwood Financing
discussed below and who expect to retain the Interests through an anticipated
orderly liquidation of the Partnership by October, 2002, the Offer is
inadequate and not in the best interest of such Interestholders. Accordingly,
the Partnership recommends that such Interestholders reject the Offer and not
tender their Interests pursuant to the Offer. With respect to all other
Interestholders, the Special Committee is expressing no opinion and remains
neutral with respect to the Offer.
(b) The Special Committee reached the conclusions set forth in Item 4(a)
after considering a variety of factors, including, but not limited to, the
following:
(i) The opinion of Lehman Brothers Inc. ("Lehman"), whom the Partnership
has retained as financial advisor for the Special Committee, expressed in a
letter, dated October 22, 1996 delivered to the Special Committee, that the
consideration offered in the Offer is inadequate from a financial point of
view to the Interestholders as a class as compared to the Lehman Estimated
Liquidation Value (as defined below). However, because the decision of each
individual Interestholder as to whether to accept the consideration offered
pursuant to the Offer may be based to a significant extent on such holder's
current or anticipated need or desire 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 Offer to any
particular Interestholder who has an immediate or anticipated need or
desire for liquidity beyond that provided by the proposed $350 per Interest
cash distribution made pursuant to the Starwood Financing discussed below.
A copy of such letter is filed as Exhibit (c)(4) hereto.
(ii) Lehman has also prepared an estimate of the present discounted value
(the "Lehman Estimated Liquidation Value") of an Interest based on the
assumption that the Partnership commences a theoretical orderly liquidation
in October 1997 and completes that liquidation by October 2002 (the
"Assumed Liquidation"). The Lehman Estimated Liquidation Value as of
October 1, 1996, which was conveyed in writing to the Special Committee by
the letter dated October 22, 1996, is a range of $610 to $630 per Interest.
The Offer of $500 per Interest is between approximately 79% and 82% of the
high and low end of the range in the Lehman Estimated Liquidation Value.
The Lehman Estimated Liquidation Value represents Lehman's estimate (based
on, among other things, the Partnership's June 1996 Draft Projected Budgets
(defined below)) of the gross cash distributions that an Interestholder
would receive between October 1, 1996 and the completion of the Assumed
Liquidation, discounted to reflect the present value of such distributions.
It should be noted that the Lehman Estimated Liquidation Value does not
represent an estimate by Lehman of the fair market value of an Interest.
(iii) Based upon the estimate of the gross cash distributions to be
received by Interestholders in the Lehman Estimated Liquidation Value,
Managers calculates that an Interestholder would receive total
distributions from October 1996 through the Assumed Liquidation in excess
of $1,000 per Interest.
The Lehman Estimated Liquidation Value is based in part upon certain
estimated cash receipts and disbursements of the Partnership through an
assumed liquidation in October, 2002. As a business planning tool, the
Partnership prepares near and long-term budgets of cash receipts and
disbursements on an annual
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basis for the next succeeding year and the remaining life of the
Partnership. These projected budgets are prepared to estimate the level of
cash flow each asset of the Partnership will produce and the related
expenditures and timing of the expenditures to achieve the potential cash
flow. These projected budgets are utilized as a management tool to
determine the appropriate methods of operating the Partnership's business,
which include, but are not limited to, the amount of invested capital in
assets, appropriate development plans for assets, level of indebtedness for
the Partnership, cash reserves and appropriate distribution levels. In
addition, projected budgets are used in preparing a borrowing base analysis
of the Partnership's indebtedness to the market value of its assets as
required under the Partnership's existing credit facility with its
principal secured lender (the "lender"). The borrowing base analysis is
submitted quarterly to the lender pursuant to the requirements of the
credit facility. Due to the timing of submitting the borrowing base
analysis and the time at which particular projected budgets are finally
completed and approved, there generally are multiple ongoing revisions to
the projected budgets. In addition, the projected budgets may be updated
during any particular year for identified, material projected budget
change(s) to estimated cash receipts and/or disbursements and to comply
with the quarterly borrowing base analysis required by the lender in order
for the borrowing base analysis to be the most current estimate when
submitted.
Changes in projected budgets may occur due to changes in market
conditions (e.g., mortgage interest rates, consumer confidence,
unemployment, population growth and income levels), land use, entitlements,
permitting, costs of materials and labor, operating expenses, rental rates,
price and quantity of home sales, the amount, pricing and timing of the
Partnership's homes, homes built by third party builders in the
Partnership's communities and competing builders and competing communities,
all of which are subject to frequent and material changes. During the life
of the Partnership long-term budgets have changed materially on an annual
basis and in some instances on a more frequent basis. Because a significant
portion of the Partnership's business is related to the sale of undeveloped
or partially developed parcels of land and homesites, and development of
residential properties within its communities, the amount of cash flow
realized by the Partnership may be affected by changes in overall demand
for homes, homesites and other real estate within its communities. In
particular, changes in demand could result from higher interest rates or
the unavailability of mortgage financing on advantageous terms or from
inflation, recessions or other economic conditions that reduce the
utilization of, and demand for, housing, homesites and undeveloped and
partially developed parcels of land. Any rise in interest rates or downturn
in the national or local economy could affect the Partnership's sales and
cash flow. Such factors tend to be cyclical in nature and have been
experienced in the past.
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The Partnership has prepared various sets of long-term budgets of its
cash receipts and disbursements, all on a draft basis, to be reviewed by
various operating personnel for, among other things, appropriateness of
assumptions, timing of expected cash receipts and disbursements, cash
reserves, timing of scheduled bank term loan repayments and levels of cash
flow generally. The draft long-term budgets dated as of June 16, 1996 were
presented to the Special Committee and to Lehman for their review and
consideration as the most current long-term business plan of the
Partnership. The following are the draft long-term budgets dated as of June
16, 1996, as adjusted as of the date hereof to take into account the
Starwood Financing (described below) and certain related changes
anticipated as a result of such financing (the "June 1996 Draft Projected
Budgets"). The June 1996 Draft Projected Budgets were prepared on the basis
of the most current knowledge of the Partnership's operating personnel:
ARVIDA/JMB PARTNERS, L.P.
JUNE 1996 DRAFT PROJECTED BUDGETS
(000'S OMITTED)
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002 TOTAL
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Properties
River Hills............ 66 133 144 4,361 4,704
Sawgrass............... 204 183 2,787 3,174
Weston................. (8,360) (535) 19,790 2,592 (7,932) 33,625 37,693 76,873
Commercial............. (1,052) 38,791 (8,056) (11,458) 3,926 39,778 14,426 76,355
------- ------- ------- ------- ------- ------- ------- -------
Subtotal Operating
Properties............ (9,142) 38,572 14,665 (4,505) (4,006) 73,403 52,119 161,106
Communities
River Hills............ 1,322 4,222 8,348 7,771 1,039 22,702
Sarasota............... 14,461 (1,602) (13,013) 20,548 22,868 43,262
Sawgrass............... 834 859 878 897 917 286 4,671
Jacksonville G &
C.C. ................. 7,194 3,061 4,652 14,907
Broken Sound........... (377) (961) 486 716 595 690 1,305 2,454
Weston................. 26,672 17,557 37,088 42,993 44,113 60,115 159,141 387,679
Commercial............. 5,424 (6,993) 1,421 2,295 4,488 3,966 13,555 24,156
Waters Edge/Dockside... (523) 177 2,023 2,986 2,138 6,801
Cullasaja.............. 1,479 2,160 2,104 2,006 1,465 9,214
California............. 11,772 11,772
Boca Comm/Boca ARSL.... 292 357 364 371 2,002 3,386
Support Services....... (13,930) (13,729) (10,967) (9,249) (8,156) (6,492) (10,918) (73,441)
------- ------- ------- ------- ------- ------- ------- -------
Subtotal Communities... 54,620 5,108 33,384 71,334 71,469 58,565 163,083 457,563
Operating Cash Flow.... 45,478 43,680 48,049 66,829 67,463 131,968 215,202 618,669
------- ------- ------- ------- ------- ------- ------- -------
Project Financing....... (40,446) 12,989 2,715 (7,016) (3,112) (9,118) (47,141) (91,129)
Starwood Financing...... 151,611 (46,008) (40,100) (47,332) (48,680) (28,414) 0 (58,923)
------- ------- ------- ------- ------- ------- ------- -------
Consolidated Total..... 156,643 10,662 10,664 12,481 15,671 94,436 168,061 468,618
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The June 1996 Draft Projected Budgets are based upon a number of factors,
including the following items and assumptions:
. The June 1996 Draft Projected Budgets are generally based on the
Partnership's last three years (i.e., 1993, 1994 and 1995) market
experience, supplemented with market studies prepared periodically by
outside independent market research and economic analysis firms.
. The Starwood Financing (discussed in (iv) and Item 8 below) is
assumed to be obtained according to the terms set forth in the
Commitment.
. Due to costs relating to the tender offers for Interests and to the
Starwood Financing, support services are assumed to remain equal in
1996 and 1997, but are assumed to decrease consistent with the
Assumed Liquidation.
. The interest rate on the $80 million senior tranche of the Starwood
Financing is assumed to be 8.75% per annum.
. The June 1996 Draft Projected Budgets do not include any specific
recessionary period in the market for selling homes. There is a
general assumption that absorption and pricing of the Partnership's
homes will average out in accordance with projected demand and
pricing through October, 2002.
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. Underlying inflation in the home-building/land development industry,
based on particular markets, is assumed to be 2%-3% annually.
. Cash flows for community development and homebuilding are based on
current development plans, permits and entitlements (whether final or
preliminary).
. One of the Partnership's current bank term loans is assumed to be
repaid in full by a portion of the proceeds from the Starwood
Financing, and the other bank term loan is assumed to be refinanced
with the current lender.
. Project specific financing is assumed to be obtained and used to
finance construction costs of certain to-be-built commercial
properties.
. Debt financing is also assumed to be obtained and used to finance the
construction costs of housing units to be built by the Partnership in
certain communities. Such indebtedness is generally assumed to be at
specific loan to value ratios and utilized to fund "hard construction
costs."
. All bank and other financing is assumed to be generally recourse to
the Partnership, but at all times to be less than a percentage of
cost or of the market value of the Partnership's assets.
. Various land parcels are assumed to be sold in bulk while other
parcels are assumed to be sold as developed homesites and remaining
parcels are used for homes to be constructed and sold by the
Partnership.
. Club and amenity assets utilized by the Partnership as enhancements
to various communities and to assist in the marketing of the
Partnership's communities are assumed to be sold at times deemed
appropriate in a community's life-cycle and at assumed market values
based on a normalized income or cash flow projection.
. Various parcels are assumed to be developed by the Partnership and
sold as developed operating properties or residential communities.
. Certain bulk sales of assets are assumed to occur in the year 2002 in
order to liquidate the Partnership's assets by the currently
anticipated date of October, 2002. Accordingly, a more representative
depiction of assumed average annual absorption and sales levels may
be the years 1996-2001. Sales are assumed to have the following
approximate average annual absorptions of units in the following
years:
<TABLE>
<CAPTION>
1996-2001 1996-2002
--------- ---------
<S> <C> <C>
Partnership built homes.............................. 1,171 1,202
Homesites............................................ 301 310
Third party builder homes on homesites sold by the
Partnership......................................... 312 319
</TABLE>
. Land and property, homesites and housing cash flows are assumed based
on the Partnership's experience and assumptions as to the costs and
availability of labor and materials.
. Affordability of mortgage interest rates is assumed to remain at
acceptable levels for home buyers.
. All assets are assumed to be sold by October 2002, the currently
anticipated date for the liquidation of the Partnership. (See Item 7
below.)
The June 1996 Draft Projected Budgets are based on the above and other
assumptions and on other general factors relating to the Partnership's
business or to more general economic conditions. THERE IS NO ASSURANCE THAT
THE JUNE 1996 DRAFT PROJECTED BUDGETS WILL BE ACHIEVED DUE TO, AMONG OTHER
THINGS, CHANGES IN PRICING OR LEVELS OF SALES; CHANGES IN COSTS OF
CONSTRUCTION OR DEVELOPMENT; ADVERSE GENERAL NATIONAL OR LOCAL ECONOMIC
CONDITIONS; CHANGES IN INTEREST RATES OR RESTRICTIONS IN FINANCING FOR
BUYERS OF BULK LAND, HOMESITES OR CONSTRUCTED HOMES; UNANTICIPATED
EXPENDITURES TO BUILD OUT OR DEVELOP IN ACCORDANCE WITH THE PARTNERSHIP'S
CURRENT PLANS OR ANY UNANTICIPATED CHANGES TO THOSE PLANS OR GOVERNMENTAL
REQUIREMENTS TO
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MAINTAIN ENTITLEMENTS OR TO OBTAIN APPROPRIATE PERMITS; CHANGES IN
ENVIRONMENTAL LAWS, REGULATIONS OR CONDITIONS AND UNANTICIPATED
EXPENDITURES FOR ENVIRONMENTAL MATTERS; CHANGES IN BUILDING CODES;
INCREASED COMPETITION; DELAYS IN OBTAINING PERMITS OR APPROVALS FOR
CONSTRUCTION OR DEVELOPMENT AND ADVERSE CHANGES IN LAWS, GOVERNMENTAL RULES
OR FISCAL POLICIES; AND OTHER FACTORS AFFECTING THE DEVELOPMENT OF REAL
ESTATE, THE CONSTRUCTION AND SALE OF HOMES, THE OPERATION OF CLUBS AND
OTHER AMENITIES OR COMMERCIAL PROPERTIES. ACCORDINGLY, THE ACTUAL
OPERATIONS AND CASH FLOWS OF THE PARTNERSHIP ARE LIKELY TO VARY FROM THOSE
INCLUDED IN THE JUNE 1996 DRAFT PROJECTED BUDGETS AND SUCH VARIATIONS MAY
BE MATERIAL. CONSEQUENTLY, SUCH BUDGETED RESULTS OF OPERATIONS AND CASH
FLOWS OF THE PARTNERSHIP, AND THE LEHMAN ESTIMATED LIQUIDATION VALUE, ARE
NOT GUARANTEES OF ACTUAL RESULTS OF OPERATIONS OR CASH FLOWS OF THE
PARTNERSHIP AND SHOULD NOT BE CONSIDERED AS THE ACTUAL RESULTS OF THE
PARTNERSHIP OR THE AMOUNT THAT WILL NECESSARILY BE REALIZED BY AN
INTERESTHOLDER WHO RETAINS AN INTEREST IN THE PARTNERSHIP THROUGH ITS
ACTUAL LIQUIDATION. NO ASSURANCE CAN BE OR IS MADE THAT THE JUNE 1996 DRAFT
PROJECTED BUDGETED RESULTS OF THE PARTNERSHIP'S OPERATIONS AND CASH FLOWS,
OR THE AMOUNT SET FORTH IN THE LEHMAN ESTIMATED LIQUIDATION VALUE, WILL BE
REALIZED IN WHOLE OR PART. NO ASSURANCE CAN BE OR IS MADE AS TO THE ACTUAL
RESULTS THAT WILL BE ACHIEVED BY AN INTERESTHOLDER WHO RETAINS AN INTEREST
IN THE PARTNERSHIP.
(iv) On September 12, 1996, the Partnership entered into the Commitment
with Starwood for the Starwood Financing in connection with a proposed
leveraged recapitalization (the "Proposed Recapitalization"). If completed,
the Partnership expects to use the proceeds from the Starwood Financing to
repay one of the Partnership's existing bank term loans and to make a
nontaxable distribution, including a nontaxable distribution of $350 per
Interest to Interestholders. Pursuant to the terms of the Partnership
Agreement, Managers and the Associate Limited Partners would collectively
receive an aggregate of approximately $7.8 million as their share of any
such distribution. Based upon the June 1996 Draft Projected Budgets, the
Partnership anticipates that the entire Starwood Financing would be repaid
in 2001. The terms of the Starwood Financing are described in Item 8 below.
Managers believes that the Starwood Financing, which, if completed, would
provide significant immediate liquidity to the Interestholders while
permitting current holders to retain their Interests in the Partnership, is
in the best interest of both the Partnership and its Interestholders.
Furthermore, by letter dated September 9, 1996, addressed to the Special
Committee, Lehman expressed its opinion that (i) the financial terms of the
Starwood Financing are commercially reasonable from the standpoint of the
Partnership, and (ii) the consideration to be received by Interestholders
(i.e., the immediate cash distribution of $350 per Interest and their
retained Interests in the Partnership) pursuant to the Proposed
Recapitalization is fair, from a financial point of view, to the
Interestholders as a class.
(v) Raleigh is making its Offer with a view to making a profit. The
Raleigh Offer to Purchase states that "in establishing the Purchase Price,
[Raleigh] was motivated to set the lowest price for the [Interests] which
might be acceptable to [Interestholders] consistent with [Raleigh's]
objectives" (emphasis added). Accordingly, there is a conflict of interest
between its desire to purchase the Interests at a low price and
Interestholders' desire to obtain the highest price for their Interests.
(vi) The Partnership believes that the Interests are a long-term,
illiquid investment and the full value of an investment in the Interests
can only be realized by an Interestholder who retains his/her Interests
through the liquidation of the Partnership. However, consummation of the
Starwood Financing would provide Interestholders with significant near-term
liquidity.
(vii) No active trading market exists for the Interests. Because the
Interests are not listed on an exchange or quoted as reported on Nasdaq,
they are essentially illiquid. Limited private sales and sales
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through certain intermediaries are the only current means for an
Interestholder to liquidate an investment in Interests. The Partnership
believes that trading prices of any such sales do not reflect the values
inherent in the Interests. The Partnership anticipates that, in view of the
absence of a public market for the Interests, once the Offer has expired
the price for Interests through privately negotiated sales and sales
through intermediaries may be substantially less than the purchase price
under the Offer, both as adjusted for the anticipated distribution of $350
per Interest from the Starwood Financing.
(viii) Interestholders should not feel pressured to tender their
Interests because of the assertion by Raleigh in its Offer that it has the
ability to vote its Interests and influence Partnership decisions (see Item
3(b)(2), above). As stated in Item 3(b)(2), Managers believes that Raleigh
does not have the right to vote any of the Interests it holds and will not
gain that right unless admitted to the Partnership as a substitute Limited
Partner with respect to such Interests. Managers has not yet determined the
circumstances, if any, under which it would admit Raleigh as a substitute
Limited Partner with respect to some or all of its Interests. Therefore,
Managers believes that Raleigh's assertion of its ability to control
decisions by voting of Interests should not influence an Interestholder's
decision to tender his/her Interests in the Offer.
(ix) Managers from time to time considers potential means of enhancing
the value of the Interests in the near term, such as the Starwood
Financing. Managers may consider additional potential means of enhancing
the value of the Interests in the near term, although there are no current
plans for any such transaction, and there is no assurance that plans for
any such transaction will be developed, or that any such transaction will
be pursued in the future.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
The Partnership has engaged Lehman as financial advisor to the Special
Committee of the Board of Directors of Managers to prepare the Lehman
Estimated Liquidation Value and to advise the Special Committee of Lehman's
opinion as to the adequacy, from a financial point of view, of the
consideration offered in the Prior Tender Offer, this Offer and other offers
that have been or may be made. The Partnership paid Lehman a fee of $250,000
for preparation of the Lehman Estimated Liquidation Value and a fee of $50,000
upon delivery of its adequacy opinion in connection with the Prior Tender
Offer. The Partnership has also agreed that (i) in the event of a Transaction
(as hereinafter defined), other than a tender offer for Interests, it will pay
Lehman a fee of 1% of the Consideration (as hereinafter defined) involved in
such Transaction (including the Starwood Financing) for its assistance in
developing financial strategies and providing general financial advisory
services, and (ii) upon consummation of certain tender offers for Interests,
including the Offer, it will pay Lehman a fee equal to 2.5% of any Incremental
Value (as hereinafter defined) created in respect of a tender offer with a
purchase price equal to or less than $441 per Interest, plus 5% of any
additional Incremental Value thereafter, subject to a maximum additional fee
in respect of Incremental Value of $300,000. The Partnership has paid Lehman
approximately $122,000 in respect of the Incremental Value relating to the
Prior Tender Offer. The Partnership also has agreed to reimburse Lehman for
its reasonable out-of-pocket costs, and to indemnify it against certain
expenses and liabilities if incurred in connection with its engagement,
including liabilities under the federal securities laws. Lehman's engagement
is for a period of two years. Lehman has been previously engaged by the
Partnership, including in connection with an unsolicited preliminary proposal
for the purchase of the Partnership's assets received in March 1994. For
purposes of this paragraph, "Transaction" means any transaction or series or
combination of transactions, other than in the ordinary course of business,
whereby (i) control of a material amount of the Partnership's businesses or
assets is transferred for consideration, (ii) any payment or distribution of
cash, securities or other property is made to the partners of, or to the
holders of debt securities of or other claims against, the Partnership as to
which Lehman completes analyses or represents the Partnership in discussions
with third parties, and (iii) Interests in the Partnership are transferred in
connection with a tender offer that is subject to the requirements of Sections
14(d) and 14(e) of the Exchange Act; "Consideration" means the gross value of
all cash, securities and other property paid directly or indirectly by the
acquiror to the seller(s) (or contributed by the parties in the case of a
joint venture), as well as the aggregate principal amount of any of the
seller's indebtedness, unfunded pension liabilities, and/or guarantees assumed
by the acquiror; and "Incremental Value" means the product of the excess of
the tender offer price over $420 per Interest multiplied by the number of
Interests tendered at such price.
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The Partnership has also retained D.F. King & Co., Inc. ("D.F. King") to act
as Information Agent for the Partnership in connection with the Prior Tender
Offer, the Offer and any other such offers that may be made. The Partnership
will pay D.F. King reasonable and customary compensation for its services,
plus reimbursement for certain reasonable out-of-pocket expenses.
Except as described above, neither the Partnership nor any person acting on
its behalf has employed, retained, or compensated or intends to employ,
retain, or compensate any other person or class of persons to make
solicitations or recommendations to holders of Interests on its behalf
concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as described in Item 3, neither the Partnership nor Managers has
effected any transactions in the Interests during the past 60 days. Except as
described in Item 3, Managers is not aware of any transactions in the
Interests during the past 60 days by any of its executive officers, directors,
affiliates, or subsidiaries.
(b) Neither Managers nor, to the knowledge of Managers, any of its executive
officers, directors, affiliates, or subsidiaries intends to tender Interests
owned by them in the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) The following negotiations and transactions by the Partnership have
occurred since the Partnership's last amendment to its Schedule 14D-9 (dated
August 7, 1996), which it filed in response to the Prior Tender Offer.
Raleigh
According to the Raleigh Offer to Purchase, on August 1, 1996, Raleigh
acquired 79,696 Interests at a purchase price of $461 per Interest pursuant to
the Prior Tender Offer.
On August 15, 1996, representatives of Raleigh met with Managers at the
offices of the Partnership in Chicago, Illinois to inquire as to the terms of
the proposed Starwood Financing. At the meeting, Raleigh's representatives
stated their objection to the terms of the Starwood Financing as described to
them at such meeting and offered to use Raleigh's best efforts to obtain
superior financing proposals for the benefit of the Partnership and its
Interestholders. Raleigh offered to provide to the Partnership financing
substantially identical to the Starwood Financing in the event superior
financing were not available. On the next day, August 16, 1996, Raleigh sent a
letter to Managers purporting to confirm the discussions held at the August 15
meeting (as described above).
On August 19, 1996, Managers sent a letter to Raleigh stating that the
Partnership had entered into a letter agreement with Starwood pursuant to
which the Partnership had agreed not to pursue or negotiate any other offers
for financing similar to the Starwood Financing for a specified period of
time, and that the Partnership intended to honor this agreement. On August 19,
1996, Raleigh sent another letter to Managers in connection with its proposed
replacement financing in lieu of the Starwood Financing suggesting a proposed
offer of $500 per Interest (less the amount of distributions to
Interestholders from Raleigh's replacement financing proposal), to the extent
permitted by the Partnership Agreement. However, Raleigh's replacement
financing proposal was not conditioned upon acceptance of the proposed offer
of $500 per Interest. By letter dated August 27, 1996, the Partnership
responded to Raleigh's replacement financing proposal by reiterating that the
Partnership had agreed with Starwood not to pursue or negotiate any offers for
financing similar to the Starwood Financing for a forty-five day period. In
that same letter the Partnership also stated that Raleigh was free to make an
offer for Interests at $500 per Interest (or any other price determined by
Raleigh), subject to its compliance with applicable law, including federal
securities laws. The letter further stated that such an offer by Raleigh in no
way depended upon the consent or approval of the Partnership or Managers.
On September 12, 1996, the Partnership entered into the Commitment for the
Starwood Financing. On the morning of September 13, 1996, representatives of
Managers phoned representatives of Raleigh and informed
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them that the Partnership had entered into the Commitment the previous
evening. Later that day, Raleigh sent a letter to Managers repeating its
objection to the terms of the Starwood Financing and proposing that the
Partnership enter into an agreement with Raleigh pursuant to which the
Partnership and an affiliate of Raleigh would combine and Interestholders
would have the choice of receiving either (i) $500 per Interest in cash or
(ii) at least $525 per Interest, composed of $400 per Interest in cash plus a
security of the surviving entity that would be valued at not less than $125
per Interest. Raleigh's letter proposal expired by its terms on September 18,
1996. By letter dated September 17, 1996, the Partnership responded by stating
that although the terms of the Raleigh proposal were very general in nature
and lacked specifics, it was clear that Raleigh valued the business of the
Partnership at significantly less than the Partnership believes it is worth,
particularly when the Starwood Financing is taken into account. Accordingly,
the Partnership responded that it had no interest in the proposal and that its
business was not for sale. By letter dated September 19, 1996, Raleigh stated
its disappointment that Managers did not understand the terms of its merger
proposal and did not contact Raleigh for clarification. In addition, Raleigh
questioned Managers' position.
On October 1, 1996, Raleigh sent a letter to Managers requesting a list of
the names and addresses of, and the number of Interests owned by,
Interestholders. On October 11, 1996, Raleigh commenced an action in the
Delaware Chancery Court, New Castle County, captioned Raleigh Capital
Associates, L.P. v. Arvida/JMB Managers, Inc. and Arvida/JMB Partners, L.P.,
in which it sought to compel the Partnership and Managers to provide Raleigh
with a list of Interestholders. The Delaware Chancery Court has not yet ruled
in that action. (See Item 8).
Starwood Financing
Reference is made to Item 8 for a description of the Starwood Financing.
Smithtown Offer
In September 1996 Smithtown Bay, LLC ("Smithtown") made an unsolicited offer
for up to 4.9% of the total outstanding Interests at a purchase price of $480
per Interest. Smithtown's offer expired on September 30, 1996. Smithtown
acquired less than 0.4% of the total outstanding Interests pursuant to such
offer. Based on its analysis and its consultation with its advisors, the
Special Committee determined that, with respect to Interestholders who have
the expectation of retaining their Interests through an anticipated orderly
liquidation of the Partnership's assets by October 2002 and who have no
current or anticipated need for liquidity, the Smithtown offer was inadequate
and not in the best interest of such Interestholders. The Special Committee
recommended to such Interestholders that they reject the Smithtown offer. With
respect to all other Interestholders, the Special Committee expressed no
opinion and remained neutral with respect to the Smithtown offer.
General
Managers has, from time to time, received inquires from other parties which
may consider making offers for the Interests of the Partnership. These
inquiries have been preliminary in nature and, accordingly, there can be no
assurance that any such offers will be made or, if made, will receive the
favorable recommendation of the Partnership or be consummated.
Under the 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 on or
prior to October 31, 1997; (ii) to purchase, or cause JMB or its affiliates to
purchase, on October 31, 1997, all of the Interests of the Interestholders at
their then appraised fair market value (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
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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. The Special Committee directed that Lehman be informed of the
members' position in reaching an opinion with regard to the adequacy of the
Prior Tender Offer, and Lehman has taken into account such position in
reaching an opinion with regard to the adequacy of the Offer. 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.
(b) None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
General
Pursuant to the Partnership Agreement, no transfer or assignment of
Interests which, when considered with all other transfers or assignments
during the twelve-month period ending with such transfer or assignment, would,
in the opinion of counsel to the Partnership, cause a termination of the
Partnership for federal income tax purposes (which termination may occur when
50% or more of the total Interests in the Partnership capital and profits is
transferred by sale or exchange in a twelve-month period) shall be effective.
Depending upon the number of Interests tendered pursuant to the Offer, sales
of Interests on the secondary market for the twelve-month period following
completion of the Offer may be limited. The Partnership will not process any
requests for transfers of Interests during such twelve-month period which the
Partnership believes would cause a tax termination. For the period from
October 1, 1995 to September 30, 1996, approximately 100,000 (approximately
24.8%) of the Interests were transferred, including, for this purpose, the
approximately 19.7% of the Interests acquired by Raleigh pursuant to the Prior
Tender Offer. The aggregate number of Interests being sought pursuant to the
Offer equals approximately 24.8% of the Interests. Depending on the number of
Interests transferred within the twelve months preceding the completion of the
Offer, it is possible that less than 24.8% of the Interests can be purchased
pursuant to the Offer because of certain tax-related transfer restrictions.
An Interestholder may recognize gain or loss on the sale of Interests
pursuant to the Offer depending on the specific circumstances of the
Interestholder. In addition, the ability of an Interestholder to fully utilize
losses may depend on whether the Interestholder sells all or less than all of
his or her Interests pursuant to the Offer. The Partnership does not
anticipate that an Interestholder who does not tender his or her Interests
under the Offer will realize any material tax consequences as a result of the
election not to tender his or her Interests. Each Interestholder should
consult his, her or its own tax advisor as to the particular tax consequences
to such Interestholder of selling or not selling Interests pursuant to the
Offer.
Secondary market sales activity for the Interests, including privately
negotiated sales, has been limited and sporadic. The Partnership's Annual
Report on Form 10-K for the year ended December 31, 1995 states that "there is
no public market for Interests, and it is not anticipated that a public market
for Interests will develop." Privately negotiated sales and sales through
intermediaries (e.g., through the matching services for buyers and sellers of
Interests operated by Merrill Lynch) currently are the only means available to
an Interestholder to liquidate an investment in Interests (other than offers
to purchase, including the Offer) because the Interests are not listed or
traded on any exchange or quoted on any Nasdaq list or system. High and low
sales prices of Interests may be obtained through certain entities such as
Partnership Spectrum, an independent, third-party source which reports such
information; however, the gross sales prices reported by Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of
Interests, which typically are reduced by commissions and other secondary
market transaction costs to amounts less than the reported prices. The
Partnership anticipates that, in view of the absence of an established market
for the Interests, once the Offer has expired, the price for Interests through
privately negotiated sales and sales through intermediaries may be
substantially less than the purchase price under the Offer.
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Starwood Financing
The Starwood Financing consists of an $80 million secured senior tranche and
an $80 million secured mezzanine tranche. Under the terms of the commitment,
the senior tranche will have an interest rate, at the Partnership's option, of
the London Inter-Bank Offering Rate (LIBOR) plus 3.25% per annum or the Chase
Manhattan Bank's prime rate (or, if greater, the federal funds rate plus
.625%) plus 1.25% per annum. Interest calculated based on LIBOR shall be
payable at the end of each LIBOR period but no less frequently than quarterly.
Interest calculated based on Chase Manhattan Bank's prime rate (or the federal
funds rate) shall be payable monthly. Scheduled annual principal payments of
$10 million (subject to reduction under certain circumstances) plus additional
principal payments depending upon the net cash flow of the Partnership will be
required under the senior tranche prior to maturity. The mezzanine tranche
will bear interest at a rate of 15% per annum, payable quarterly in arrears.
No principal payments will be required on the mezzanine tranche prior to
maturity.
The Starwood Financing will be secured by recorded mortgages on the
Partnership's real property assets as well as assignments of other Partnership
assets, including equity memberships, joint venture interests or joint venture
proceeds (to the extent permitted under the applicable joint venture
agreements) and unrestricted cash balances. Under the Starwood Financing, the
Partnership will be required to maintain a certain net worth as well as to
comply with a specified debt service coverage ratio. The Starwood Financing
will also include certain restrictions on the Partnership's incurrence of
additional indebtedness and will be cross-defaulted with other indebtedness of
the Partnership outstanding from time to time. The Starwood Financing limits
distributions to Interestholders to a maximum of $26.39 per Interest in 1997
and 1998 and to a maximum of $47.50 per Interest in each year thereafter
during the term of the financing. The Starwood Financing will be prepayable in
whole or in part, subject to a prepayment premium of 1%, except that
prepayments (whether voluntary or by acceleration of maturity) of amounts
under the mezzanine tranche during the first three years of the Starwood
Financing generally will require the payment of a yield maintenance premium on
the amount prepaid for that three year period. The maturity date for the
Starwood Financing will be June 30, 2002.
The Starwood Financing will allow up to $50 million of financing that is
senior to the Starwood Financing, including $20 million of project financing
for Weston. The Starwood Financing will not restrict any transfers of general
or limited partnership interests in the Partnership. However, Starwood will
have the right to consent or not consent to any transfer of Managers' interest
in the Partnership to an entity not controlled by, controlling or under common
control with Managers, a corporate restructuring, merger or change of control
of either the Partnership or Managers, or a termination of the existing
Management, Advisory and Supervisory Agreement between the Partnership and
Arvida Company, provided that Starwood's consent shall not be unreasonably
withheld. If Starwood withholds its consent to any of the foregoing, Starwood
shall have the right to accelerate the maturity date of the Starwood
Financing. If Starwood consents to any of the foregoing events, it would be
entitled to be paid an amount equal to 1% of the then outstanding principal.
Any new manager or management agreement will be subject to Starwood's prior
reasonable approval.
The Partnership will be required to pay Starwood a loan fee of $1.6 million
upon closing of the Starwood Financing. The Partnership will also be obligated
to pay various other expenses in connection with the Starwood Financing,
including Starwood's costs incurred in connection with the Starwood Financing
up to a specified maximum amount. Under the terms of the Commitment, the
Partnership has agreed not to pursue or negotiate any other offers with a
third party for a financing similar in size or purpose as the Starwood
Financing, and, except under certain limited circumstances, in the event the
Partnership were to enter into an agreement with a third party on or before
December 1, 1996 (subject to extension under certain circumstances) for
similar financing, the Partnership would be obligated to pay Starwood a break-
up fee between $2.4 and $4.4 million plus certain expenses. The closing of the
Starwood Financing is subject to the satisfaction (or waiver) of various
conditions, and if such conditions are met the closing is expected to occur
during the fourth quarter of 1996. However, there is no assurance that such
conditions will be satisfied or that the Starwood Financing will be closed.
The foregoing description of the Starwood Financing is based on the provisions
of the Commitment and are subject to possible change during the negotiation of
loan documents.
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By letter dated September 9, 1996, addressed to the Special Committee,
Lehman expressed its opinion that (i) the financial terms of the Starwood
Financing are commercially reasonable from the standpoint of the Partnership,
and (ii) the consideration to be received by Interestholders (i.e., the
immediate cash distribution of $350 per Interest and their retained Interests
in the Partnership) pursuant to the Proposed Recapitalization is fair, from a
financial point of view, to the Interestholders as a class.
Litigation
On June 24, 1996, Irvin Weiss v Arvida/JMB Managers, Inc., Neil G. Bluhm,
Lehman Brothers Inc. and Arvida/JMB Partners, L.P. (Case No. 96CH 6627) (the
"Weiss Complaint") was filed in the Chancery Division of the Circuit Court of
Cook County Illinois. The Weiss Complaint was a purported class action
complaint on behalf of Irvin Weiss and all other Interestholders 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. The Weiss Complaint alleged, inter alia,
that Managers and Mr. Bluhm breached their fiduciary duty owed plaintiff and
members of the purported class by chilling tender offers for Interests by non-
affiliates, failing to provide non-affiliated offerors with information and
stifling competition for such Interests, and that Lehman participated in such
breaches of fiduciary duty by colluding with them. In addition to seeking the
relief described above, plaintiff sought such other and further relief as the
Court deemed just and proper and the award of attorneys' fees and costs.
A complaint was filed in the 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. 96CH6892) (the "Carlstrom Complaint"). The Carlstrom
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 Carlstrom 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.
The Weiss Complaint and the Carlstrom Complaint were consolidated on August
8, 1996, and the plaintiffs filed an amended and consolidated complaint on
August 29, 1996 (the "Consolidated Complaint"). The Consolidated Complaint
includes the same allegations asserted in the individual complaints, but also
asserts that Managers and its individual directors breached their fiduciary
duty owed plaintiffs and the purported class members by agreeing to negotiate
a debt recapitalization exclusively with Starwood, and by refusing to
negotiate an alternative refinancing deal with Raleigh.
On September 25, 1996, the court granted the plaintiffs' motion to
voluntarily dismiss the Weiss Complaint. Also on September 25, 1996, the court
granted a motion by the remaining Carlstrom plaintiffs, permitting them to
file a second amended complaint by October 23, 1996. On October 16, 1996, the
remaining Carlstrom plaintiffs were granted an unspecified additional amount
of time to file their second amended complaint.
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On October 24, 1996, the remaining Carlstrom plaintiffs filed a Second
Amended Class Action and Verified Complaint (the "Second Amended Complaint").
The Second Amended Complaint names the same defendants as were named in the
Consolidated Complaint and adds as defendants Starwood Capital Group I, L.P.,
Starwood/Florida Funding, L.L.C., Starwood Opportunity Fund IV, L.P., BSS
Capital II, L.L.C. and Barry Sternlicht. The Second Amended Complaint includes
the same allegations asserted in the Consolidated Complaint and adds the claim
that Managers and its directors entered into a burdensome recapitalization with
the Starwood defendants in order to entrench themselves and thwart attempts at
control. Managers for itself and acting for the Partnership believes this
action is groundless and has no merit, and intends to vigorously defend this
lawsuit.
On September 27, 1996, Vanderbilt and Raleigh commenced an action for
declaratory and injunctive relief in the Delaware Chancery Court, New Castle
County, captioned Vanderbilt Income and Growth Associates, L.L.C., et al. v.
Arvida/JMB Managers, Inc., et al. (C.A. No. 15238). Managers, its directors,
Judd D. Malkin, Neil G. Bluhm, Burton E. Glazov, Stuart C. Nathan, A. Lee Sacks
and John G. Schreiber, as well as Starwood's principal, Barry Sternlicht, the
Starwood Financing lender and certain of its affiliates, were named as
defendants. The action seeks, among other things, to enjoin the Starwood
Financing (the terms of which are described above). It alleges that as a result
of having entered into an agreement for the Starwood Financing the defendants
are engaged in a scheme to cause the Partnership unnecessarily to incur
approximately $160 million in secured debt on unfavorable terms, including an
interest rate which would be higher than that which presently is available in
the market for similar financings. The action further alleges that the purpose
of the Starwood Financing is to entrench the position of Managers and is thus
wholly improper and that the defendants thereby wrongfully have breached,
and/or aided and abetted, participated in and/or induced the wrongful breach of
fiduciary duties owed by Managers to the Partnership. Chancery Court, in a
ruling on the defendants' motion to dismiss that action, stated that it would
grant the motion to dismiss for lack of standing based in part on the Court's
conclusion that Raleigh and an affiliate also party to the action do not have
voting rights. Raleigh has filed a motion for reargument with respect to the
Court's ruling and for an issuance of an injunction pending appeal.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Letter dated October 28, 1996, from Arvida/JMB Partners, L.P. to its
Interestholders.
(c)(1) Amended and Restated Agreement of Limited Partnership of Arvida/JMB
Partners, L.P., made and entered into to be effective as of September
10, 1987, by and between Managers and the Limited Partners (previously
filed with the Securities and Exchange Commission as Exhibit 3 to the
Partnership's Form 10-K Report (File No. 0-16976) filed on March 27,
1990 and hereby incorporated herein by reference).
(c)(2) Partnership's Schedule 14D-9 with respect to Raleigh's Prior Tender
Offer (which was initially filed with the Securities and Exchange
Commission and mailed to Interestholders on or about July 3, 1996 as
amended by Amendments No. 1, 2, 3, 4 and 5 thereto dated July 12, 1996,
July 24, 1996, July 30, 1996, July 30, 1996 and August 7, 1996,
respectively).
(c)(3) Management, Advisory and Supervisory Agreement (previously filed with
the Securities and Exchange Commission as Exhibit 10.2 to the
Partnership's Form 10-K Report (File No. 0-16976) filed on March 27,
1991 and hereby incorporated herein by reference).
(c)(4) Letter, dated October 22, 1996, from Lehman Brothers, Inc. addressed to
the Special Committee.
(c)(5) Letter, dated September 9, 1996, from Lehman Brothers, Inc. addressed to
the Special Committee.
16
<PAGE>
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: October 28, 1996
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
(a)(1) Letter dated October 28, 1996, from Arvida/JMB Partners, L.P.
to its Interestholders.
(c)(1) Amended and Restated Agreement of Limited Partnership of
Arvida/JMB Partners, L.P., made and entered into to be
effective as of September 10, 1987, by and between Managers and
the Limited Partners (previously filed with the Securities and
Exchange Commission as Exhibit 3 to the Partnership's Form 10-K
Report (File No. 0-16976) filed on March 27, 1990 and hereby
incorporated herein by reference).
(c)(2) Partnership's Schedule 14D-9 with respect to Raleigh's Prior
Tender Offer (which was initially filed with the Securities and
Exchange Commission and mailed to Interestholders on or about
July 3, 1996 as amended by Amendments No. 1, 2, 3, 4 and 5
thereto dated July 12, 1996, July 24, 1996, July 30, 1996,
July 30, 1996 and August 7, 1996, respectively).
(c)(3) Management, Advisory and Supervisory Agreement (previously
filed with the Securities and Exchange Commission as Exhibit
10.2 to the Partnership's Form 10-K Report (File No.
0-16976) filed on March 27, 1991 and hereby incorporated herein
by reference).
(c)(4) Letter, dated October 22, 1996, from Lehman Brothers, Inc.
addressed to the Special Committee.
(c)(5) Letter, dated September 9, 1996, from Lehman Brothers, Inc.
addressed to the Special Committee.
</TABLE>
18
<PAGE>
ARVIDA/JMB PARTNERS, L.P.
900 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
312-440-4800
Exhibit (a)(1)
October 28, 1996
Dear Interestholders:
Raleigh Capital Associates, L.P. and certain of its affiliates ("Raleigh")
have commenced another unsolicited offer to acquire up to 100,000 limited
partnership interests and assignee interests therein ("Interests"), which
represents approximately 24.8% of the outstanding Interests, in Arvida/JMB
Partners, L.P. (the "Partnership") at a purchase price of $500 per Interest,
net to the seller in cash (the "Offer"). As was communicated to
Interestholders in July, 1996, with respect to a prior unsolicited offer by
Raleigh, the Board of Directors of Arvida/JMB Managers, Inc., the general
partner of the Partnership ("Managers"), has established a special committee
(the "Special Committee") to review and consider offers for Interests,
including the Offer.
To assist it in its consideration of offers, 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 Interestholders as a class, of the consideration offered in any
offer to acquire Interests, as compared to the Lehman Estimated Liquidation
Value.
BASED UPON ITS CONSULTATION WITH LEHMAN, THE PROPOSED DISTRIBUTION OF $350
PER INTEREST TO BE MADE PURSUANT TO THE PROPOSED LEVERAGED RECAPITALIZATION OF
THE PARTNERSHIP DISCUSSED BELOW, AND A NUMBER OF OTHER BUSINESS, FINANCIAL AND
OTHER FACTORS, THE SPECIAL COMMITTEE HAS DETERMINED THAT THE OFFER IS
INADEQUATE AND NOT IN THE BEST INTEREST OF INTERESTHOLDERS WHO HAVE THE
EXPECTATION OF RETAINING THEIR INTERESTS THROUGH THE ASSUMED LIQUIDATION, AND
WHO HAVE NO CURRENT OR ANTICIPATED NEED OR DESIRE FOR LIQUIDITY BEYOND THAT
PROVIDED BY THE PROPOSED LEVERAGED RECAPITALIZATION. ACCORDINGLY, THE SPECIAL
COMMITTEE RECOMMENDS THAT SUCH INTERESTHOLDERS REJECT THE OFFER AND NOT TENDER
THEIR INTERESTS PURSUANT TO THE OFFER.
The Special Committee does not express any opinion and remains neutral as to
the Offer with respect to any other Interestholders.
The Special Committee based its recommendation on a variety of factors,
including, but not limited to, the following:
. BY LETTER DATED OCTOBER 22, 1996, LEHMAN ADVISED THE SPECIAL COMMITTEE
THAT THE LEHMAN ESTIMATED LIQUIDATION VALUE AS OF OCTOBER 1, 1996, WAS A
RANGE OF $610 TO $630 PER INTEREST. Such value represents Lehman's
estimate of the gross cash distributions that an Interestholder would
receive through the Assumed Liquidation period, discounted to reflect the
present value in October 1996 of such distributions. BASED UPON THE
ESTIMATE OF THE GROSS CASH DISTRIBUTIONS TO BE RECEIVED, MANAGERS
CALCULATES THAT AN INTERESTHOLDER WOULD RECEIVE TOTAL DISTRIBUTIONS FROM
OCTOBER 1996 THROUGH OCTOBER 2002 IN EXCESS OF $1,000 PER INTEREST.
LEHMAN EXPRESSED ITS OPINION THAT THE CONSIDERATION OFFERED IN THE 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, Lehman's opinion
does not address the adequacy of the Offer with respect to
Interestholders who have a present or anticipated need or desire for
liquidity beyond that provided by the proposed distribution of $350 per
Interest to be made pursuant to the proposed leveraged recapitalization
of the Partnership. 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.
<PAGE>
. The Lehman Estimated Liquidation Value assumes, among other things, that
the Partnership obtains a loan from Starwood Florida Funding L.L.C.
(and/or one or more affiliates or co-investors, collectively, "Starwood")
in the amount of $160 million (the "Starwood Financing") in order to
effect a leveraged recapitalization (the "Proposed Recapitalization") of
the Partnership by December 31, 1996, pursuant to which, among other
things, INTERESTHOLDERS WOULD RECEIVE AN IMMEDIATE NONTAXABLE CASH
DISTRIBUTION OF APPROXIMATELY $350 PER INTEREST AND RETAIN THEIR
INTERESTS so as to participate in future cash distributions. By letter
dated September 9, 1996, addressed to the Special Committee, LEHMAN
EXPRESSED ITS OPINION THAT (I) THE FINANCIAL TERMS OF THE STARWOOD
FINANCING ARE COMMERCIALLY REASONABLE FROM THE STANDPOINT OF THE
PARTNERSHIP, AND (II) THE CONSIDERATION TO BE RECEIVED BY INTERESTHOLDERS
(i.e., the immediate cash distribution of $350 per Interest and their
retained Interests in the Partnership) PURSUANT TO THE PROPOSED
RECAPITALIZATION IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO THE
INTERESTHOLDERS AS A CLASS.
. Raleigh's tender offer materials state that "in establishing the Purchase
Price, [Raleigh] was motivated to set the LOWEST PRICE for the
[Interests] which might be acceptable to [Interestholders] consistent
with [Raleigh's] objectives." (emphasis added). RALEIGH'S ANTICIPATED
RETURN FROM ITS PURCHASE OF INTERESTS PURSUANT TO ITS OFFER WOULD BE IN
EXCESS OF 29% COMPOUNDED ANNUALLY (based upon the projected budgets of
the Partnership as adjusted by Lehman in connection with its
determination of the Lehman Estimated Liquidation Value). Moreover,
Raleigh's statement in its tender offer materials that "[n]o independent
person has been retained to evaluate or render any opinion with respect
to the fairness of [Raleigh's] Purchase Price" is not true. Lehman has
rendered its opinion as to the inadequacy of the consideration offered by
Raleigh, as discussed above. Raleigh made its initial offer for Interests
at $411 per Interest, and is still trying to purchase Interests at an
inadequate price. RALEIGH CAPITAL ASSOCIATES, L.P. IS AFFILIATED WITH
CARL C. ICAHN AND LEON BLACK, TWO WELL-KNOWN "VULTURE INVESTORS."
. Raleigh has conditioned the Offer on the occurrence of certain events,
which makes a closing of the Offer uncertain at best.
. Because there is no established market for the Interests, once the Offer
has expired, the price for Interests through privately negotiated sales
and sales through intermediaries may be substantially less than the
purchase price under the Offer.
YOU SHOULD CONSULT WITH YOUR PERSONAL TAX ADVISOR AND FINANCIAL CONSULTANT
PRIOR TO ACCEPTING THE OFFER AND TENDING YOUR INTERESTS.
Under the terms of the Offer, Raleigh cannot, until November 14, 1996,
purchase and pay for any Interests tendered prior to such time, and you may
withdraw Interests tendered to Raleigh at any time prior to 12:00 midnight on
November 14, 1996. IF YOU WISH TO RETAIN YOUR INTERESTS AND YOU HAVE NOT
ALREADY TENDERED YOUR INTERESTS PURSUANT TO THE OFFER, YOU NEED NOT TAKE ANY
ACTION REGARDING THE OFFER.
As discussed above and in more detail in the enclosed Schedule 14D-9 filed
with the Securities and Exchange Commission, the Special Committee gave careful
consideration to a number of business, financial and other factors in arriving
at its recommendation. The opinion letters of Lehman dated September 9, 1996,
and October 22, 1996, are enclosed with the Schedule 14D-9. INTERESTHOLDERS ARE
URGED TO READ CAREFULLY THE SCHEDULE 14D-9.
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
2
<PAGE>
Exhibit (c)(2)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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)
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
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY
The subject company is Arvida/JMB Partners, L.P., a Delaware limited
partnership (the "Partnership"). The address of the principal executive offices
of the Partnership and Arvida/JMB Managers, Inc., a Delaware corporation and the
general partner of the Partnership ("Managers"), is 900 North Michigan Avenue,
Chicago, Illinois 60611. The title of the class of equity securities to which
this statement relates is the outstanding limited partnership interests and
assignee interests therein (the "Interests") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER
This statement (the "Statement") relates to (a) the offer by Raleigh
Capital Associates L.P. ("Raleigh") disclosed on a Tender Offer Statement on
Schedule 14D-1 dated June 19, 1996, as amended by Amendment No. 1 dated June 28,
1996 (the "Raleigh Schedule 14D-1"), to purchase from the holders of Interests
(hereinafter sometimes referred to as "Interestholders") up to 185,000
Interests, representing approximately 46% of the total Interests outstanding as
of March 31, 1996, at a purchase price of $421 per Interest, net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated June 19, 1996, as amended (the "Raleigh
Offer to Purchase"), and the related Letter of Transmittal (collectively with
the Raleigh Offer to Purchase, the "Raleigh Offer"), copies of which are
attached to the Raleigh Schedule 14D-1; and (b) the offer by Walton Street
Capital Acquisition Co. III, L.L.C., a Delaware limited liability company
("Walton"), disclosed on a Tender Offer Statement on Schedule 14D-1 dated June
27, 1996 (the "Walton Schedule 14D-1") to purchase from the Interestholders up
to 185,840 Interests, representing 46% of the total Interests outstanding as of
March 31, 1996, at a purchase price of $420 per Interest, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated June 27, 1996 (the "Walton Offer to Purchase"),
and the related Letter of Transmittal (collectively with the Walton Offer to
Purchase, the "Walton Offer"), copies of which are attached to the Walton
Schedule 14D-1. Raleigh and Walton are herein collectively the "Purchasers" and
individually a "Purchaser," and the Raleigh Offer and the Walton Offer are
herein collectively the "Offers" and individually an "Offer."
The address of Raleigh's principal executive office is 100 Jericho
Quadrangle, Suite 214, Jericho, New York, 11735-2717. The address of Walton's
principal executive office is 900 North Michigan Avenue, Chicago, Illinois
60611.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Partnership, which is the
person filing this statement, are set forth in Item 1 above.
2
<PAGE>
(b)(1) Pursuant to the Partnership's Amended and Restated Agreement
of Limited Partnership (the "Partnership Agreement", filed as Exhibit (c)(1)
hereto), Managers is the sole general partner of the Partnership. All of the
outstanding shares of Managers are owned by Northbrook Corporation, a Delaware
corporation ("Northbrook"), and substantially all of the outstanding shares of
Northbrook are owned by JMB Realty Corporation, a Delaware corporation ("JMB"),
and certain of JMB's officers, directors, members of their families and their
affiliates. Managers has responsibility for all aspects of the Partnership's
operations. Arvida/JMB Associates, an Illinois general partnership, of which
certain officers, directors and affiliates of JMB are partners, and Arvida/JMB
Limited Partnership, an Illinois limited partnership, of which Arvida/JMB
Associates is the general partner and ML Real Estate Associates II, an affiliate
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), is the
limited partner, are the Associate Limited Partners of the Partnership. Except
as described below, there are no material contracts, agreements, arrangements or
understandings or any actual or potential material conflicts of interest between
Managers or its affiliates, on the one hand, and the Partnership, its executive
officers, directors or affiliates, on the other hand. Capitalized terms not
otherwise defined herein are used as defined in the Partnership Agreement.
The Partnership Agreement for the Partnership contains the financial
arrangement between Managers and the Associate Limited Partners, on the one
hand, and the Interestholders, on the other. For each fiscal quarter, subject
to certain limitations contained in the Partnership Agreement, the Partnership
distributes all Cash Flow (which includes sales proceeds) (i) 90% to the holders
of Interests and 10% to Managers and the Associate Limited Partners
(collectively) until the holders of Interests have received a cumulative, non-
compounded, 10% per annum return on their Adjusted Capital Investments plus the
return of their Capital Investments; and (ii) thereafter, all Cash Flow is
distributed 85% to the holders of Interests and 15% to Managers and the
Associate Limited Partners (collectively); provided, however, that Managers and
the Associate Limited Partners (collectively) are entitled to receive
distributions of amounts otherwise distributable to the holders of Interests as
described in clause (ii) to the extent such additional amounts do not exceed the
lesser of (A) 2% of the total cumulative selling price of all interests in real
property of the Partnership which have been sold or otherwise disposed of
subsequent to the First Admission Date and (B) 13% of the cumulative amount
distributed under clause (ii) to all Persons. Certain executive officers of
Arvida Company, some of whom are also officers of Managers, share in a portion
of the Cash Flow distributable to Managers and the Associate Limited Partners.
The Partnership Agreement contains certain limitations on the above described
distribution of 10% of all Cash Flow to Managers and the Associate Limited
Partners (collectively), including the deferral, subject to certain limitations,
of 4.7369% of total Cash Flow distributable under clause (i) above until the
holders of the Interests have received aggregate Cash Flow distributions equal
to their Capital Investments. Such amount is currently being deferred.
3
<PAGE>
The officers and directors of Managers receive no direct remuneration
in such capacities from the Partnership. The directors of Managers, including
Mr. Neil G. Bluhm, one of the managing members of Walton, are also partners in
Arvida/JMB Associates, which is one of the Associate Limited Partners and the
general partner of the other Associate Limited Partner. Managers and the
Associate Limited Partners (collectively) received a distribution of Cash Flow
in 1995 of $302,689. Under certain circumstances, they will be entitled to
approximately $1,588,000 which has been deferred through March 31, 1996. Payment
of such amount, which does not bear interest, is subject to certain restrictions
contained in the Partnership Agreement and the Partnership's credit facility.
Because the timing and amount of Cash Flow and profits or losses of
the Partnership received by, or allocated to, Managers and the Associate Limited
Partners may be affected by various determinations by Managers under the
Partnership Agreement, including whether or not to refinance or sell any
property and the timing of any such sale or refinancing, the establishment and
maintenance of reasonable reserves, the level of amortization of indebtedness
and other matters, Managers may have a conflict of interest with respect to such
determinations. Managers may have an interest in retaining, rather than selling,
properties if Managers is receiving Cash Flow, or if the sales proceeds
realizable at the time in question would not be large enough to provide any
distribution to Managers or if a liquidation or termination of the Partnership
resulting from a sale of all or substantially all of the properties would
obligate Managers, the Associate Limited Partners and ML Real Estate Associates
II to make payments to the Interestholders.
Pursuant to the terms of the Partnership Agreement, if upon completion
of a liquidation and termination of the Partnership and final distribution of
all Partnership funds, the aggregate capital contributions with respect to all
Interests (other than those held by ML Real Estate Associates II) exceed the sum
of the distributions of Cash Flow to holders of such Interests over the life of
the Partnership plus any distributions upon the liquidation (such difference,
the "Excess Amount"), then Managers, the Associate Limited Partners and ML Real
Estate Associates II must make aggregate payments to holders of Interests (other
than ML Real Estate Associates II) in an amount equal to the lesser of the
Excess Amount or the aggregate amount of certain distributions of Cash Flow
received by Managers, the Associate Limited Partners and ML Real Estate
Associates II (to be made in proportion to such distributions of the Cash Flow
received by each of them, respectively) over the life of the Partnership. For a
complete description of these provisions and certain defined terms used therein,
see Section 4.1 of the Partnership Agreement which is filed as Exhibit (c)(1)
hereto.
If Managers is removed or ceases to be a general partner because of
bankruptcy or dissolution, the Partnership Agreement provides that the
Partnership will purchase Managers' interest (as well as the interests of the
Associate Limited Partners) in the Partnership for fair market value, as such
value is determined pursuant to the Partnership Agreement. Payment of such
amount must be made by the delivery of promissory notes bearing interest at the
lesser of 10% per annum or the reference rate established by Bank of America
Illinois plus 2% per annum with all principal and accrued interest subject to
mandatory payment from time to time from all Cash Flow realized by the
Partnership. The unpaid balance of such promissory notes will be due in equal
installments over a period of not less than five years. Any replacement or
successor general partner of the Partnership will be obligated to purchase from
the Partnership such interests of Managers and the Associate Limited Partners,
generally on the same terms as the Partnership paid for such interests with such
payment secured by such replacement or successor general partner's interest in
all of its future distributions of Cash Flow.
4
<PAGE>
The Partnership is permitted to engage in various transactions
involving Managers and its affiliates, as more fully described in the
Partnership Agreement.
The Partnership reimburses Managers or its affiliates for (i) the
actual cost to Managers or its affiliates of goods, materials and services used
for or by the Partnership and obtained from entities which are not affiliated
with Managers; (ii) salaries and related salary expenses for administrative
services which could be performed directly for the Partnership by independent
parties, such as legal, accounting, transfer agent, data processing, duplicating
and other such services; (iii) Partnership reports and communications to
investors; (iv) other administrative services, provided that such services are
necessary to the prudent operation of the Partnership; and (v) reimbursements to
Arvida Company in connection with its carrying out the duties described in the
Management Agreement described below; provided, however, that no reimbursement
under clauses (ii) through (v) above is permitted for services for which
Managers or its affiliates receive a separate fee and the amount of such
expenses may not exceed the lesser of (a) the actual cost of such services or
(b) 90% of the amount which the Partnership would be required to pay to
independent third parties for comparable services. For 1995, Managers or its
affiliates, other than Arvida Company, were reimbursed for direct or other
administrative and out-of-pocket expenses in the amount of approximately
$277,600.
The Partnership does not employ its own senior and supervisory
development and management employees. Instead, Arvida Company, an Illinois
corporation, the outstanding stock of which is owned by certain officers and
directors of JMB (including Mr. Bluhm) or their family members, employs all of
the senior and supervisory development and management personnel for the projects
and for the operation of the Partnership's developments and properties pursuant
to a Management, Advisory and Supervisory Agreement (as filed as Exhibit (c)(2)
hereto, the "Management Agreement"), who also act in such capacities for
Arvida/JMB Partners, L.P. - II and other Arvida Company real estate projects.
Arvida Company receives no fee for such services, but is reimbursed fully for
all of its out-of-pocket expenditures (including salary and salary-related
expenses) incurred in connection therewith, subject to the limitation that such
reimbursement may not exceed 5% of the aggregate gross revenues from the
business of the Partnership. In 1995, such expenses were approximately
$6,233,600. In addition, the Partnership has agreed to indemnify Arvida Company
and its directors, officers and employees for liability arising out of their
activities under the Management Agreement, except for fraud, bad faith or
negligence.
The Partnership and Arvida/JMB Partners, L.P. - II (a publicly-held
limited partnership affiliated with Arvida Company) each employ project-related
and administrative personnel who perform services on behalf of both
partnerships. In addition, certain out-of-pocket expenditures related to such
services and other general and administrative expenses are incurred and
allocated to each partnership as appropriate. The Partnership receives
reimbursements from or reimburses Arvida/JMB Partners, L.P. - II for such costs
(including salary and salary-related expenses). The Partnership received
approximately $1,021,800 from Arvida/JMB Partners, L.P. - II for such costs
incurred for the year ended December 31, 1995. In addition, the Partnership was
obligated to reimburse Arvida/JMB Partners, L.P. - II approximately $245,100 for
the year ended December 31, 1995.
The Partnership is also entitled to receive reimbursements from
affiliates of Arvida Company for certain general and administrative expenses
including, without limitation, salary and salary-related expenses relating to
work performed by employees of the Partnership and certain out-of-pocket
expenditures incurred on behalf of such affiliates. For the year ended December
31, 1995, such costs totaled approximately $509,000. Approximately $222,100 was
unpaid as of March 31, 1996. The Partnership periodically incurs salary and
salary-related costs on behalf of an affiliate of Managers. The Partnership was
entitled to receive approximately $31,400 for such costs for the year ended
December 31, 1995, all of which was outstanding as of March 31, 1996.
5
<PAGE>
Urban Retail Properties Co., an affiliate of Managers, provides
property management services at certain of the Partnership's retail properties.
For 1995, Urban Retail Properties Co. earned and received property management
fees of approximately $62,900 for providing such services.
JMB Insurance Agency, Inc., an affiliate of Managers, earned and
received insurance brokerage commissions for 1995 of approximately $272,300 in
connection with providing insurance coverage for certain of the properties of
the Partnership and for general liability, workers' compensation and certain
other miscellaneous insurance. Such commissions are at rates set by insurance
companies for the classes of coverage provided.
The Partnership Agreement exculpates Managers, its officers, directors
and affiliates from liabilities to the Partnership and indemnifies Managers, its
officers, directors and affiliates against liability to third parties resulting
from its or their acts or omissions, except in the event such liabilities or
losses resulted from misconduct or negligence (gross or ordinary). As a result
of the exculpation and indemnification provisions, a Limited Partner may be
entitled to a more limited right of action than he or she would otherwise have
if such provisions were not included in the Partnership Agreement.
Managers entered into Indemnification Agreements, effective June 1,
1996, with each of the members of the Special Committee formed by the Board of
Directors of Managers to consider offers for Interests (each such member,
individually, an "Indemnitee"), which provide that subject to certain provisions
of the Indemnification Agreements, in the event an Indemnitee is, or becomes a
party to, or witness or other participant in, or is threatened to be made a
party to, or witness or other participant in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
investigative or other (a "Proceeding") by reason of (or arising in part out of)
an Indemnifiable Event (as hereinafter defined), Managers will indemnify such
Indemnitee from and against any and all expenses, judgments, fines, penalties
and amounts paid in settlement incurred or suffered by the Indemnitee to the
fullest extent permitted by law. The rights to receive indemnification and the
advancement of expenses under the Indemnification Agreement are not exclusive of
any other rights to which any Indemnitee may be entitled under any statute, the
Partnership Agreement or otherwise. "Indemnifiable Event," as used in the
Indemnification Agreements, means any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee or agent of Managers, or
is or was serving at the request of Managers as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise or by reason of anything done
or not done by Indemnitee in any such capacity.
The obligation of Managers to make indemnification payments is subject
to the condition that Independent Legal Counsel (as hereinafter defined) shall
not have determined in a
6
<PAGE>
written opinion that Indemnitee is not permitted to be indemnified under
applicable law. If the Independent Legal Counsel determines that Indemnitee
substantively would not be entitled to indemnification under applicable law,
Indemnitee has the right to commence arbitration proceedings to determine his
right to indemnification. Otherwise any determination by such Counsel shall be
conclusive and binding on Managers and the Indemnitee. "Independent Legal
Counsel" is defined as an attorney or firm of attorneys selected by Indemnitee
and approved by Managers who shall not have otherwise performed services for
Managers or Indemnitee within the last five years. The fees of any Independent
Legal Counsel are to be borne by Managers.
The Indemnification Agreement provides that if requested by
Indemnitee, Managers shall advance within two business days any and all expenses
of Indemnitee. If and to the extent that Independent Legal Counsel determines
that Indemnitee is not permitted to be indemnified under applicable law,
Managers shall be entitled to be reimbursed, provided that if Indemnitee
exercises his right to have such issue determined by arbitration or other legal
proceedings his obligation to reimburse Managers shall be deferred pending the
outcome of such arbitration or proceedings.
Each of the Indemnitees has also entered into similar Indemnification
Agreements with Northbrook and JMB, affiliates of Managers. The by-laws of each
of Managers, Northbrook and JMB also provide that their respective officers,
directors, employees and other agents shall be indemnified by the respective
corporations to the fullest extent permitted under Delaware law, whether acting
in their capacities as officers, directors, employees or other agents of such
corporation or serving, at the request of such corporation, as a director,
officer, employee, fiduciary or other agent of another corporation, partnership
or other entity.
Certain senior executives of Arvida Company, which provides
development, construction, management and other personnel and services to the
Partnership, have entered into employment contracts with Arvida Company to
secure their continued service on behalf of the Partnership under the Management
Agreement. These contracts are generally for a one-to-three year term and
provide for severance of one year's base salary (in addition to any unpaid base
salary and accrued and unpaid bonus amounts for the remainder of the contract
term and the acceleration of payment of certain vested deferred compensation
amounts) either in the event of termination of employment without cause or in
the event of such termination after a change of control of the Partnership which
results in the termination of the Management Agreement or, in one instance, one
year's total compensation if the executive officer remains employed by Arvida
Company (or two years' total compensation if he does not remain so employed) in
the event of a change in control of the Partnership which results in the
termination of the Management Agreement. The amounts payable under these
employment contracts are primarily attributable to the services of these
executives performed on behalf of the Partnership, and are reimbursable under
the terms of the Management Agreement.
(b)(2) Except as described below, to the knowledge of Managers, there
are no material contracts, agreements, arrangements or understandings or any
actual or potential material conflicts of interest between the Partnership,
Managers or its affiliates, on the one hand, and the Purchasers, or their
respective executive officers, directors or affiliates, on the other hand.
7
<PAGE>
Raleigh
-------
On June 24, 1996, Raleigh requested a confidentiality agreement with
the Partnership pursuant to which Raleigh would be entitled, among other things,
to review certain non-public information concerning the Partnership, and, in
return, Raleigh would agree, among other things, to treat such information as
confidential in accordance with the terms of such agreement. The Partnership
has provided Raleigh with a confidentiality agreement having terms no less
favorable to Raleigh than those received by Walton. To date Raleigh has not
executed such confidentiality agreement with the Partnership.
During 1993 and 1994, Apollo Real Estate Advisors, L.P. ("AREA"), an
affiliate of Raleigh, either itself or through its affiliates, has invested, on
a negotiated basis, approximately $50,000,000 in real estate assets with
affiliates of JMB.
Walton
------
Managers has a conflict of interest with respect to the Walton Offer
as a result of the affiliation of certain of the managing members of Walton with
Managers and certain of its affiliates. See discussion under Item 3(b)(1) above
regarding certain material contracts, agreements, arrangements and
understandings and certain actual or potential material conflicts of interests
involving Managers, its affiliates and the Partnership, in which such managing
members of Walton, as a result of their affiliation with Managers and certain of
its affiliates, have an interest.
Walton was formed in December 1994 to be the exclusive investment
vehicle through which Mr. Bluhm and the other principals of Walton would make
opportunistic purchases of equity and/or debt interests in real estate assets
and real estate companies in the United States and Canada. Mr. Bluhm and Mr.
Ira J. Schulman, two of the managing members of Walton, are also the President
and a Vice President, respectively, of Managers in addition to owning interests
in Managers and Arvida/JMB Associates. Mr. Bluhm also serves as President of,
and is a significant shareholder in, JMB and is also an officer, director and/or
shareholder of certain of its affiliates, including Arvida Company. JMB and its
affiliates are principally engaged, directly and indirectly, in real estate
development and investment, including through Managers and Arvida Company.
Subsequent to the formation of Walton, Mr. Bluhm has remained involved in the
operation of JMB and certain of its affiliates, including Managers and Arvida
Company, while Mr. Schulman has remained involved in the operation of Managers
and Arvida Company. As such, Mr. Bluhm and Mr. Schulman received or had access
to confidential information, including draft projected budgets concerning the
Partnership's future operations. Since expressing an interest in making the
Walton Offer, neither Mr. Bluhm nor Mr. Schulman has been involved in Managers'
board or special committee meetings and neither has any current involvement in
decisions being made with regard to the Partnership. Neither Managers nor
Arvida Company owns any interests in Walton.
As discussed under Item 3(b)(1) above in regard to Managers and the
Associate Limited Partners, since a liquidation or sale of the Partnership's
assets other than in the ordinary course of business may result in a decrease or
elimination of certain payments payable to
8
<PAGE>
Managers, the Associate Limited Partners and their affiliates and its affiliates
or could give rise to an obligation of Managers and the Associate Limited
Partners to make certain payments to Interestholders, Walton will have
conflicting interests in deciding how to vote on future extraordinary
transactions affecting the Partnership. In addition, as discussed under Item
3(b)(1), because the timing and amount of Cash Flow and profits and losses in
the Partnership received by, or allocated to, Managers and the Associate Limited
Partners may be affected by various determinations by Managers, Messrs. Bluhm
and Schulman, as a result of their interests in Managers and the Associate
Limited Partners, may have a conflict of interest in participating in such
determinations by Managers and/or may have an interest in retaining rather than
selling properties under certain circumstances.
On June 17, 1996, Walton signed a confidentiality agreement with the
Partnership pursuant to which Walton is entitled, among other things, to review
certain non-public information concerning the Partnership and, in return, Walton
agreed, among other things, to treat such information as confidential in
accordance with the terms of such agreement, and to take or abstain from taking
certain actions, including agreeing that for a period of two years from the date
of such agreement not to acquire any Interests other than pursuant to an offer
made in compliance with the requirements of Regulations 14D and 14E of the
Securities Exchange Act of 1934 (the "Exchange Act"), all as set forth in such
agreement. Walton also agreed to provide Managers with advance notice of its
offer and to a minimum period that its offer would be required to remain open,
subject to certain conditions.
Walton has disclosed in the Walton Offer that it has entered into an
agreement (the "Financing Agreement") with Whitehall Street Real Estate Limited
Partnership VII ("Whitehall") pursuant to which, among other things, Whitehall
has agreed, subject to the terms and conditions of such agreement, to finance a
portion of the Walton Offer by purchasing approximately 80% of the Interests
tendered pursuant to the Walton Offer at the purchase price under the Walton
Offer. Whitehall and certain of its affiliates, including Goldman, Sachs & Co.,
as part of their investment banking and financial advisory business, are
continually engaged in the valuation of properties, businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. In that capacity, Whitehall and certain of its affiliates,
including Goldman, Sachs & Co., have provided financial advisory, asset
management, investment banking, underwriting, financing and similar services to
certain affiliates of Managers and the Partnership, including JMB, and are
anticipated to continue to provide such services in the future to such parties.
A director of Managers, who is also a member of the Special Committee
of its board of directors, is affiliated with Blackstone Real Estate Advisors,
L.P. ("Blackstone"). Whitehall and certain of its affiliates, including Goldman
Sachs & Co., have made investments with, and have provided financial advisory,
investment banking, financing and similar services to, Blackstone and its
affiliates, and are anticipated to continue to engage in investments with, and
to provide such services to, such parties in the future.
Mr. Bluhm and certain other principals and affiliates of Walton have
invested, directly or indirectly, in various community developments in which
Arvida Company has invested and/or acted as the project manager and may in the
future invest in additional community developments in which Arvida Company
and/or its affiliates invest and/or act as project manager.
9
<PAGE>
General
-------
In the event that one or both of the Offers is consummated, the
Purchaser under either Offer may be in a position to significantly influence
future Partnership decisions on which Interestholders and/or Limited Partners
may vote. As a substitute Limited Partner, the Purchaser under either Offer
would have the right to vote each Interest it purchases pursuant to its Offer.
Depending on the number of Interests it purchases pursuant to its Offer, the
Purchaser under either Offer could be in a position to influence significantly
all voting decisions with respect to the Partnership. Accordingly, a Purchaser
could (1) prevent non-tendering Interestholders from taking action they desire
but that such Purchaser opposes, and (ii) take action desired by such Purchaser
but opposed by non-tendering Interestholders. Under the Partnership Agreement,
holders of 10% or more of the Interests are entitled to call a meeting of
holders, and holders holding a majority of the Interests are entitled to take
action with respect to a variety of matters, including: removal of Managers as
the general partner of the Partnership; election of a successor general partner;
dissolution of the Partnership; the sale of all or substantially all of the
Partnership's properties (other than in the ordinary course of the Partnership's
business); and most types of amendments to the Partnership Agreement. When
voting on such matters, the Purchaser under either Offer may be expected to vote
Interests owned and acquired by it in its interest, which may not be in the
interest of other Interestholders or Managers. As discussed under "Walton"
above, as a result of the affiliation of certain of the managing members of
Walton with Managers and certain of its affiliates, such managing members of
Walton in deciding how to vote any Interests acquired by Walton will have
conflicting interests arising out of such affiliation.
The Partnership is prepared to provide confidential information to any
other responsible parties who express a bona fide interest in considering making
a tender offer for Interests in the Partnership pursuant to the requirements of
the federal securities laws. While it is possible that additional offers for
Interests in the Partnership on more favorable terms than the Offers may be
forthcoming, there can be no assurance as to whether any such offer will be
made, the terms thereof, or, if made, whether any such offer will be
subsequently amended or with drawn. In anticipation of the Walton Offer and
possible other offers, the Board of Directors of Managers formed a special
committee (the "Special Committee") consisting of those directors not affiliated
with Walton to consider any offers for Interests that may be received, including
the Offers. In addition to being directors of Managers, all of the members of
the Special Committee are directors or officers of, or are significant
shareholders (directly or indirectly) in, JMB, Northbrook, and certain of their
affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Following the Partnership's receipt of the Offers, the Special
Committee of the Board of Directors of Managers met with its financial and legal
advisors to review and consider the Offers and to explore various possible
alternative courses of action which might be available in response to the
Offers. 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
10
<PAGE>
, the Offers are inadequate and not in the best interests of such
Interestholders. Accordingly, the Partnership recommends that such
Interestholders reject the Offers and not tender their Interests pursuant to
either of the Offers. With respect to all other Interestholders, the Special
Committee is expressing no opinion and remains neutral with respect to the
Offers.
(b) The Special Committee reached the conclusions set forth in Item
4(a) after considering a variety of factors, including, but not limited to, the
following:
(i) The opinion of Lehman Brothers Inc. ("Lehman"), whom the
Partnership has retained as financial advisor for the Special Committee,
expressed in a letter dated July 2, 1996 delivered to the Special Committee,
that the consideration offered in the Offers is inadequate from a financial
point of view to the Interestholders as a class as compared to the Lehman
Estimated Liquidation Value (as defined below). However, because the decision of
each individual Interestholder as to whether to accept the consideration offered
pursuant to either of the Offers 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 each of the Offers 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. A copy of such letter is filed as Exhibit (c)(5) hereto.
(ii) Lehman has also prepared an estimate of the present discounted
value (the "Lehman Estimated Liquidation Value") of an Interest based on the
assumption that the Partnership commences a theoretical orderly liquidation in
October 1997 and completes that liquidation by October 2002 (the "Assumed
Liquidation"). The Lehman Estimated Liquidation Value as of July 2, 1996, which
was conveyed in writing to the Special Committee on July 2, 1996, is a range of
$565 to $610 per Interest. The Lehman Estimated Liquidation Value represents
Lehman's estimate (based on, among other things, the Partnership's June 1996
Draft Projected Budgets (defined below)) of the gross cash distributions that an
Interestholder would receive between June 30, 1996 and the completion of the
Assumed Liquidation, discounted to reflect the present value of such
distributions. It should be noted that the Lehman Estimated Liquidation Value
does not represent an estimate by Lehman of the fair market value of an
Interest.
The Lehman Estimated Liquidation Value is based in part upon certain
estimated cash receipts and disbursements of the Partnership through an assumed
liquidation in October, 2002. As a business planning tool, the Partnership
prepares near and long-term budgets of cash receipts and disbursements on an
annual basis for the next succeeding year and the remaining life of the
Partnership. These projected budgets are prepared to estimate the level of cash
flow each asset of the Partnership will produce and the related expenditures and
timing of the expenditures to achieve the potential cash flow. These projected
budgets are utilized as a management tool to determine the appropriate methods
of operating the Partnership's business, which include, but are not limited to,
the amount of invested capital in assets, appropriate development plans for
assets, level of indebtedness for the Partnership, cash reserves and appropriate
distribution levels. In addition, projected budgets are used in preparing a
borrowing base analysis of the Partnership's indebtedness to the market value of
its assets as required under the Partnership's credit facility with its
11
<PAGE>
principal secured lender (the "lender"). The borrowing base analysis is
submitted quarterly to the lender pursuant to the requirements of the credit
facility. Due to the timing of submitting the borrowing base analysis and the
time at which particular projected budgets are finally completed and approved,
there generally are multiple ongoing revisions to the projected budgets. In
addition, the projected budgets may be updated during any particular year for
identified, material projected budgets change(s) to estimated cash receipts
and/or disbursements and to comply with the quarterly borrowing base analysis
required by the lender in order for the borrowing base analysis to be the most
current estimate when submitted.
Changes in projected budgets may occur due to changes in market
conditions (e.g., mortgage interest rates, consumer confidence, unemployment,
population growth and income levels), land use, entitlements, permitting, costs
of materials and labor, operating expenses, rental rates, price and quantity of
home sales, the amount, pricing and timing of the Partnership's homes, homes
built by third party builders in the Partnership's communities and competing
builders and competing communities, all of which are subject to frequent and
material changes. During the life of the Partnership long-term budgets have
changed materially on an annual basis and in some instances on a more frequent
basis. Because a significant portion of the Partnership's business is related to
the sale of undeveloped or partially developed parcels of land and homesites,
and development of residential properties within its communities, the amount of
cash flow realized by the Partnership may be affected by changes in overall
demand for homes, homesites and other real estate within its communities. In
particular, changes in demand could result from higher interest rates or the
unavailability of mortgage financing on advantageous terms or from inflation,
recessions or other economic conditions that reduce the utilization of, and
demand for, housing, homesites and undeveloped and partially developed parcels
of land. Any rise in interest rates or downturn in the national or local economy
could affect the Partnership's sales and cash flow. Such factors tend to be
cyclical in nature and have been experienced in the past.
Partnership has prepared various sets of long-term budgets of its
cash receipts and disbursements, all on a draft basis, to be reviewed by various
operating personnel for, among other things, appropriateness of assumptions,
timing of expected cash receipts and disbursements, cash reserves, timing of
scheduled bank term loan repayments and levels of cash flow generally. The draft
long-term budgets dated as of June 16, 1996 (the "June 1996 Draft Projected
Budgets"), were presented to the Special Committee and to Lehman for their
review and consideration as the most current long-term business plan of the
Partnership. The following are the June 1996 Draft Projected Budgets, which have
been prepared on the basis of the most current knowledge of the Partnership's
operating personnel:
<TABLE>
<CAPTION>
ARVIDA/JMB PARTNERS, L.P.
June 1996 Draft Projected Budgets
1996 1997 1998 1999 2000 2001 2002 Total
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
- --------------------
RIVER HILLS 66 133 144 4,361 4,703
SAWGRASS 204 183 2,787 3,174
WESTON (8,360) (535) 19,790 2,592 (7,932) 33,625 37,693 76,872
COMMERCIAL (1,052) 38,791 (8,056) (11,458) 3,926 39,778 14,426 76,354
------- ------- ------- ------- ------ ------- ------- --------
SUBTOTAL OPERATING PROPERTIES (9,142) 38,571 14,665 (4,506) (4,007) 73,402 52,119 161,103
COMMUNITIES
- -----------
RIVER HILLS 1,322 4,222 8,348 7,771 1,039 22,701
SARASOTA 14,461 (1,602) (13,013) 20,548 22,868 43,261
SAWGRASS 834 859 878 897 917 286 4,670
JACKSONVILLE G & C.C. 7,194 3,061 4,652 14,907
BROKEN SOUND (377) (961) 486 716 595 690 1,305 2,454
WESTON 26,672 17,557 37,088 42,993 44,113 60,115 159,141 387,679
COMMERCIAL 5,424 (6,993) 1,421 2,295 4,488 3,966 13,555 24,157
WATERS EDGE/DOCKSIDE (523) 177 2,023 2,986 2,138 6,802
CULLASAJA 1,479 2,160 2,104 2,006 1,465 9,215
CALIFORNIA 11,772 11,772
BOCA COMM/BOCA ARSL 292 357 364 371 2,002 3,387
SUPPORT SERVICES (13,930) (13,729) (10,967) (9,249) (8,156) (6,492) (10,918) (73,441)
PROJECT FINANCING (35,331) 13,340 26,308 (6,917) 481 (35,207) (73,280) (110,606)
------- ------- ------- ------- ------ ------- ------- --------
SUBTOTAL COMMUNITIES 19,289 18,449 59,690 64,418 71,951 23,359 89,803 346,958
CONSOLIDATED TOTAL 10,147 57,020 74,355 59,912 67,944 96,761 141,922 508,061
------- ------- ------- ------- ------ ------- ------- --------
</TABLE>
The June 1996 Draft Projected Budgets are based upon a number of
factors, including the following items and assumptions:
. The June 1996 Draft Projected Budgets are generally based on the
Partnership's last three years (i.e., 1993, 1994 and 1995) market
experience, supplemented with market studies prepared periodically
by outside independent market research and economic analysis firms.
. The June 1996 Draft Projected Budgets do not include any specific
recessionary period in the market for selling homes. There is a
general assumption that absorption and pricing of the Partnership's
homes will average out in accordance with projected demand and
pricing through October, 2002.
. Underlying inflation in the home-building/land development
industry, based on particular markets, is assumed to be 2% - 3%
annually.
12
<PAGE>
. Cash flows for community development and homebuilding are based on
current development plans, permits and entitlements (whether final
or preliminary).
. The Partnership's current bank term loan is assumed to be repaid in
full by the end of the first quarter of 1997.
. Project specific financing is assumed to be obtained and used to
finance construction costs of certain to-be-built commercial
properties.
. Debt financing is also assumed to be obtained and used to finance
the construction costs of housing units to be built by the
Partnership in certain communities. Such indebtedness is generally
assumed to be at specific loan to value ratios and utilized to fund
"hard construction costs."
. All bank and other financing is assumed to be generally recourse to
the Partnership, but at all times to be less than a percentage of
cost or of the market value of the Partnership's assets.
. Various land parcels are assumed to be sold in bulk while other
parcels are assumed to be sold as developed homesites and remaining
parcels are used for homes to be constructed and sold by the
Partnership.
. Club and amenity assets utilized by the Partnership as enhancements
to various communities and to assist in the marketing of the
Partnership's communities are assumed to be sold at times deemed
appropriate in a community's life-cycle and at assumed market
values based on a normal ized income or cash flow projection.
. Various parcels are assumed to be developed by the Partnership and
sold as developed operating properties or residential communities.
13
<PAGE>
. Certain bulk sales of assets are assumed to occur in the year 2002
in order to liquidate the Partnership's assets by the currently
anticipated date of October, 2002. Accordingly, a more
representative depiction of assumed average annual absorption and
sales levels may be the years 1996-2001. Sales are assumed to have
the following approximate average annual absorptions of units in
the following years:
<TABLE>
<CAPTION>
1996-2001 1996-2002
--------- ---------
<S> <C> <C>
Partnership built homes 1171 1202
Homesites 301 310
Third party builder
homes on homesites sold 312 319
by the Partnership
</TABLE>
. Land and property, homesites and housing cash flows are assumed
based on the Partnership's experience and assumptions as to the
costs and availability of labor and materials.
. Affordability of mortgage interest rates is assumed to remain at
acceptable levels for home buyers.
. All assets are assumed to be sold by October 2002, the currently
anticipated date for the liquidation of the Partnership. (See Item
7 below.)
The June 1996 Draft Projected Budgets are based on the above and
other assumptions and on other general factors relating to the
Partnership's business or to more general economic conditions. THERE
IS NO ASSURANCE THAT THE JUNE 1996 DRAFT PROJECTED BUDGETS WILL BE
ACHIEVED DUE TO, AMONG OTHER THINGS, CHANGES IN PRICING OR LEVELS OF
SALES; CHANGES IN COSTS OF CONSTRUCTION OR DEVELOPMENT; ADVERSE
GENERAL NATIONAL OR LOCAL ECONOMIC CONDITIONS; CHANGES IN INTEREST
RATES OR RESTRICTIONS IN FINANCING FOR BUYERS OF BULK LAND, HOMESITES
OR CONSTRUCTED HOMES; UNANTICIPATED EXPENDITURES TO BUILD OUT OR
DEVELOP IN ACCORDANCE WITH THE PARTNERSHIP'S CURRENT PLANS OR ANY
UNANTICIPATED CHANGES TO THOSE PLANS OR GOVERNMENTAL REQUIREMENTS TO
MAINTAIN ENTITLEMENTS OR TO OBTAIN APPROPRIATE PERMITS; CHANGES IN
ENVIRONMENTAL LAWS, REGULATIONS OR CONDITIONS AND UNANTICIPATED
EXPENDITURES FOR ENVIRONMENTAL MATTERS; CHANGES IN BUILDING CODES;
INCREASED COMPETITION; DELAYS IN OBTAINING PERMITS OR APPROVALS FOR
CONSTRUCTION OR DEVELOPMENT AND ADVERSE CHANGES IN LAWS, GOVERNMENTAL
RULES OR FISCAL POLICIES; AND OTHER FACTORS AFFECTING THE DEVELOPMENT
OF REAL ESTATE, THE CONSTRUCTION AND
14
<PAGE>
SALE OF HOMES, THE OPERATION OF CLUBS AND OTHER AMENITIES OR
COMMERCIAL PROPERTIES.
ACCORDINGLY, THE ACTUAL OPERATIONS AND CASH FLOWS OF THE
PARTNERSHIP ARE LIKELY TO VARY FROM THOSE INCLUDED IN THE JUNE 1996
DRAFT PROJECTED BUDGETS AND SUCH VARIATIONS MAY BE MATERIAL.
CONSEQUENTLY, SUCH BUDGETED RESULTS OF OPERATIONS AND CASH FLOWS
OF THE PARTNERSHIP, AND THE LEHMAN ESTIMATED LIQUIDATION VALUE,
ARE NOT GUARANTEES OF ACTUAL RESULTS OF OPERATIONS OR CASH FLOWS OF
THE PARTNERSHIP AND SHOULD NOT BE CONSIDERED AS THE ACTUAL RESULTS OF
THE PARTNERSHIP OR THE AMOUNT THAT WILL NECESSARILY BE REALIZED BY AN
INTERESTHOLDER WHO RETAINS AN INTEREST IN THE PARTNERSHIP THROUGH ITS
ACTUAL LIQUIDATION.
NO ASSURANCE CAN OR IS MADE THAT THE JUNE 1996 DRAFT PROJECTED
BUDGETED RESULTS OF THE PARTNERSHIP'S OPERATIONS AND CASH FLOWS, OR
THE AMOUNT SET FORTH IN THE LEHMAN ESTIMATED LIQUIDATION VALUE,
WILL BE REALIZED IN WHOLE OR PART. NO ASSURANCE CAN OR IS MADE AS TO
THE ACTUAL RESULTS THAT WILL BE ACHIEVED BY AN INTERESTHOLDER WHO
RETAINS AN INTEREST IN THE PARTNERSHIP.
(iii) The Raleigh Offer of $421 per Interest and the Walton Offer
of $420 per Interest are between approximately 69% and 75% of the high and low
end of the range in the Lehman Estimated Liquidation Value.
(iv) Over the past three years (i.e., 1993, 1994 and 1995), the
Partnership has generated net cash flow after operating expenses and before debt
service ("net operating cash flow") in an aggregate amount of approximately
$157,000,000. As required, under the terms of the Partnership's existing credit
facility and in order to repay the Partnership's acquisition and other certain
indebtedness, 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 in the aggregate amounts of
approximately $19,300,000, $35,800,000 and $46,100,000 for the years 1993, 1994
and 1995, respectively, and was otherwise severely restricted with respect to
the amount of distributions that could be made to the partners. The Partnership
currently anticipates that it will have fully repaid its existing term loan by
the end of the first quarter of 1997 and is currently seeking a refinancing of
its income property term loan. The Partnership also currently has certain
project-specific financing and expects to obtain additional project-specific
financing in the future as well as a revolving line of credit for working
capital purposes. Given its current strong financial condition, the Partnership
does not believe that the terms of any such financing will impose substantial
restrictions on the Partnership's ability to make distributions to its partners
out of its net operating cash flow commencing in the second half of 1997.
(v) The Partnership believes that the Interests are a long-term,
illiquid investment and the full value of an investment in the Interests can
only be realized by an
15
<PAGE>
Interestholder who retains his/her Interests through the liquidation of the
Partnership. On the other hand, the Offers provide Interestholders who desire
immediate cash with the opportunity to immediately liquidate their investment in
the Partnership.
(vi) No active trading market exists for the Interests. Because the
Interests are not listed on an exchange or quoted as reported on NASDAQ, they
are essentially illiquid. Limited private sales and sales through certain
intermediaries are the only current means for an Interestholder to liquidate an
investment in Interests. The Partnership believes that trading prices of any
such sales do not reflect the values inherent in the Interests. The Partnership
anticipates that, in view of the absence of a public 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.
(vii) Each of Raleigh and Walton is making its respective Offer
with a view to making a profit. Accordingly, there is a conflict of interest
between their desire to purchase the Interests at a low price and
Interestholders' desire to obtain the maximum cash return for his/her Interests.
The Walton Offer itself concedes that Walton's own estimate of the net asset
value of the Interests is $559 per Interest, assuming the Partnership's assets
are developed and sold in the ordinary course of business.
(viii) The Partnership has, from time to time, received inquiries
from other parties that may be considering making tender offers for the
Interests. In anticipation of the Walton Offer, the Special Committee has
determined to make confidential information available to responsible parties who
express a bona fide interest in considering making a tender offer for Interests
in the Partnership pursuant to the requirements of the federal securities laws.
While it is possible that additional offers for Interests in the Partnership on
more favorable terms than either the Raleigh Offer or the Walton Offer may be
forthcoming, there can be no assurance as to whether any such offer will be
made, the terms thereof, or, if made, whether any such offer will be
subsequently amended or withdrawn.
(ix) As stated in the Raleigh Offer to Purchase, if the Raleigh
Offer is successful, Raleigh could "be in a position to significantly influence
all Partnership decisions on which Interestholders may vote, including decisions
regarding removal of the General Partner, merger, sales of assets and
liquidation." In considering the possibility of Raleigh influencing voting
decisions with respect to the Partnership and whether Raleigh or one of its
affiliates would replace Managers and be suitable in such a role, the
Partnership further considered the following:
(A) The terms of the Partnership's credit facility agreements
provide that in the event that the interest of Managers in the
Partnership is transferred to a person that is not an affiliate
of JMB the lender will have the right to accelerate the
Partnership's outstanding indebtedness under its term loan,
16
<PAGE>
income property term loan, revolving line of credit and letter
of credit facility. In such event, there could be a substantial
adverse effect on the Partnership's liquidity and ability to
continue its current operations.
(B) Under the terms of the Management Agreement, in the event of
the removal of Managers as the general partner of the
Partnership, Arvida Company will have the right to terminate
the Management Agreement upon 60 days' prior written notice.
Alternatively, a successor general partner of the Partnership
could terminate the Management Agreement upon 60 days' prior
written notice. In either such event, the Partnership would
lose (1) the knowledge and experience of Arvida Company in
developing and selling the Partnership's remaining interests
its communities and other assets and (2) the right to use the
"Arvida" name on its communities.
(x) Each of the Offers is conditioned upon Managers' consenting to
the admission of Raleigh or Walton, as the case may be, as a substitute limited
partner of the Partnership. Managers has not determined whether or not to admit
Raleigh or Walton as a substitute limited partner. Any such determination will
be made depending on a number of factors, including the effect on such admission
on the tax status of the Partnership.
(xi) Managers from time to time considers potential means of
enhancing the value of the Interests in the near term, such as a financing of
Partnership assets followed by a distribution of financing proceeds to the
partners or a "rollup" transaction. There are no current plans for any such
transaction, and there is no assurance that plans for any such transaction will
be developed, or that any such transaction will be pursued, in the future.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
The Partnership has engaged Lehman as financial advisor to the Special
Committee of the Board of Directors of Managers to prepare the Lehman Estimated
Liquidation Value and to advise the Special Committee of Lehman's opinion as to
the adequacy, from a financial point of view, of the consideration offered in
the Offers to Interestholders as a class as compared to the Lehman Estimated
Liquidation Value. Pursuant to the engagement agreement between the Partnership
and Lehman, the Partnership has paid Lehman a retainer of $125,000. In addition,
the Partnership has agreed to pay Lehman a fee of $250,000 for preparation of
the Lehman Estimated Liquidation Value and a fee of $50,000 upon delivery of its
adequacy opinion described above (with the $125,000 retainer to be credited
against such amounts). The Partnership has also agreed that (i) in the event of
a Transaction (as hereinafter defined), other than a tender offer for Interests,
it will pay Lehman a fee of 1% of the Consideration (as hereinafter defined)
involved in such Transaction for its assistance in developing financial
strategies and providing general financial advisory services, and (ii) upon
consummation of certain tender offers for Interests, including the Offers, it
will pay Lehman a fee equal to 2.5% of any Incremental Value (as hereinafter
defined) created
17
<PAGE>
in respect of a tender offer with a purchase price equal to or less than $441
per Interest, plus 5% of any additional Incremental Value thereafter, subject to
a maximum additional fee in respect of Incremental Value of $300,000. The
Partnership also has agreed to reimburse Lehman for its reasonable out-of-pocket
costs, and to indemnify it against certain expenses and liabilities if incurred
in connection with its engagement, including liabilities under the federal
securities laws. Lehman's engagement is for a period of two years. Lehman has
been previously engaged by the Partnership, including in connection with the
unsolicited preliminary proposal for the purchase of the Partnership's assets
received in March 1994 discussed in Item 7 below. For purposes of this
paragraph, "Transaction" means any transaction or series or combination of
transactions, other than in the ordinary course of business, whereby (i) control
of a material amount of the Partnership's businesses or assets is transferred
for consideration, (ii) any payment or distribution of cash, securities or other
property is made to the partners of, or to the holders of debt securities of or
other claims against, the Partnership as to which Lehman completes analyses or
represents the Partnership in discussions with third parties, and (iii)
Interests in the Partnership are transferred in connection with a tender offer
that is subject to the requirements of Sections 14(d) and 14(e) of the
Exchange Act; "Consideration" means the gross value of all cash, securities and
other property paid directly or indirectly by the acquiror to the seller(s) (or
contributed by the parties in the case of a joint venture), as well as the
aggregate principal amount of any of the seller's indebtedness, unfunded pension
liabilities, and/or guarantees assumed by the acquiror; and "Incremental Value"
means the product of the excess of the tender offer price over $420 per Interest
multiplied by the number of Interests tendered at such price.
Except as described above, neither the Partnership nor any person
acting on its behalf has employed, retained, or compensated or intends to
employ, retain, or compensate any other person or class of persons to make
solicitations or recommendations to holders of Interests on its behalf
concerning the Offers.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as described in Item 3, neither the Partnership nor
Managers has effected any transactions in the Interests during the past 60 days.
Except as described in Item 3, Managers is not aware of any transactions in the
Interests during the past 60 days by any of its executive officers, directors,
affiliates, or subsidiaries.
(b) Neither Managers nor, to the knowledge of Managers, any of its
executive officers, directors, affiliates, or subsidiaries intends to tender
Interests owned by them in the Offers.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) In December 1994, Managers was contacted by an unaffiliated third
party investor group (which included Bankers Trust New York Corporation, Widock
Partners, Ltd., which was comprised of certain former officers of Arvida
Company, Managers and one of its
18
<PAGE>
affiliates, and Apollo Real Estate Advisors, L.P. ("AREA"), an affiliate of
Raleigh), to discuss a possible transaction involving the acquisition of the
Partnership and/or Managers' interest in the Partnership. The former officers
included a Vice President of Managers who was also the Chief Financial Officer
of Arvida Company and who resigned from both such positions in May 1994, and the
Director of Acquisitions of Arvida Company, who resigned in April, 1994. The
Partnership does not know what non-public information about the Partnership, if
any, such former officers may have provided to the investor group in connection
with its possible acquisition. Managers advised the investor group that it was
not interested in selling its interest in the Partnership and that the
Partnership was not interested in selling its assets. In March 1995, Managers
received a preliminary written unsolicited proposal from this investor group,
which proposal did not identify AREA as being a member of the investor group at
that time, seeking to acquire the business of the Partnership. Such proposal was
very preliminary in nature and was subject to a number of contingencies and
conditions, including the completion of satisfactory business and legal due
diligence and the negotiation and execution of an acquisition agreement.
Pursuant to the proposal, the investor group would acquire the business of the
Partnership for an aggregate purchase price of $240,000,000 plus the assumption
of certain liabilities, excluding approximately $102,000,000 of the
Partnership's indebtedness. In addition, the investor group would only assume,
among other things, certain liabilities reflected on the balance sheet as of
September 30, 1994. The investor group would not assume any liabilities relating
to litigation, except litigation covered by insurance and other litigation
incurred in the ordinary course of business and not, in the aggregate, material
to the business. Representatives of Managers and representatives of the investor
group held several phone calls to clarify certain aspects of the proposal since
the financial result to the Partnership was not fully determinable under the
proposal. In response to this unsolicited proposal, the Partnership retained
Lehman to evaluate the adequacy of the unsolicited proposal. In April 1995,
Lehman delivered its written and oral opinion to the Partnership that, from a
financial point of view, the consideration offered by the investor group was
inadequate and the Partnership therefore rejected the proposal. No further
significant correspondence was received from this third party.
Managers received a letter dated May 1, 1996, on behalf of Merced
Partners ("Merced"), an unaffiliated third party and an existing Interestholder,
notifying Managers that it was interested in making a tender offer for up to 4.9
% of the Interests and requesting certain information from the Partnership,
including the list of Interestholders. Managers furnished a list of
Interestholders to Merced, but is not aware that Merced has begun an offer.
On May 15, 1996, at a meeting of the board of directors of Managers,
Mr. Bluhm informed the board that Walton, or one of its affiliates, was
considering making an offer for some of the Interests. The board decided that it
would be in the best interests of the Partnership if Mr. Bluhm and Mr. Schulman,
two of the managing members of Walton, participated neither in the Partnership's
management and affairs nor in Managers' consideration of any offers during such
time as Walton is exploring an offer or until such time as the Walton Offer is
completed. In addition, Managers created a Special Committee (consisting of
directors not affiliated with Walton), which retained independent counsel to
advise it in connection with any potential offers from third parties, including
any potential offer from Walton, involving the Interests. By a press release
dated June 21, 1996, the Partnership, among other things, announced that it had
hired
19
<PAGE>
Lehman to assist it in evaluating any offers from third parties that may be made
for Interests in the Partnership. Since May 15, 1996, neither Mr. Bluhm nor Mr.
Schulman has been involved in any of the Special Committee meetings nor have
they had any involvement in decisions being made with regard to the Partnership.
During May and June of 1996, certain members of Walton met with
representatives of Managers. The purpose of these meetings was to (i) reiterate
to the representatives that Walton was considering making an offer to the
Interestholders to purchase Interests in the Partnership, (ii) to request
information on the Partnership's projects, (iii) to request a list of names and
addresses of all of the Interestholders and (iv) to discuss certain procedural
issues in connection with the making of the Walton Offer and the transferring of
Interests pursuant to the Walton Offer, as well as to negotiate the terms of the
confidentiality agreement discussed below.
By an offer to purchase dated June 12, 1996, Equity Resources Bay Fund
("Equity"), an unaffiliated third party, began a tender offer for up to 12,000
Interests at a price of $100 per Interest. This offer is scheduled to expire on
July 12, 1996. Equity had previously requested a list of Interestholders, which
it received in April, 1996.
On June 12, Managers received a request from the Secondary Market
Fund L.P. ("SMF"), an unaffiliated third party, seeking a list of
Interestholders in order to facilitate a tender offer for less than five percent
of the Interests in the Partnership. On June 13, 1996, Managers entered into an
agreement with SMF to provide such list.
On June 17, 1996, Walton (i) signed a confidentiality agreement with
the Partnership pursuant to which Walton is entitled, among other things, to
receive certain non-public information concerning the Partnership and, in
return, Walton agreed, among other things, to treat such information as
confidential in accordance with the terms of such agreement, and to take or
abstain from taking certain actions including agreeing that for a period of two
years from the date of such agreement not to acquire any Interest other than
pursuant to an offer made in compliance with the requirements of Regulations 14D
and 14E of the Exchange Act, all as set forth in that agreement and (ii) gave
prior notice of at least five business days, as required by the confidentiality
agreement, that it intended to commence a tender offer in the near future.
On June 19, 1996, Raleigh commenced its Offer for up to 185,000
Interests at a price of $411 per Interest. The Raleigh Offer is scheduled to
expire on July 17, 1996.
On June 20, 1996, Walton and Whitehall met with senior management of
Arvida Company, three of whom are also officers of Managers, to discuss the
business and projects of the Partnership. As part of these meetings, Walton and
Whitehall received drafts of the Partnership's long-term budgets through the
year 2002.
On June 21, 1996, the Partnership issued a press release relating to
the Raleigh Offer, the announced intention of an affiliate of a director and
officer of Managers (such affiliate being Walton) to make an unsolicited tender
offer for the Interests in the Partnership, and an unsolicited offer and a
potential unsolicited offer from unaffiliated third parties for less than five
percent of the Interests (a copy of which press release is filed herewith as
Exhibit (c)(3)). On the same date the Partnership also mailed a letter to all
Interestholders informing them of these offers and potential offers (a copy of
which is filed as Exhibit (c)(4) hereto).
20
<PAGE>
On June 21, 1996, Managers received a request from Longacre Corp.
("Longacre"), an unaffiliated third party, requesting a list of Interestholders
in order to facilitate a tender offer for Interests in the Partnership by an
affiliate of Longacre. On June 27, 1996, Managers entered into an agreement
with Longacre to provide such list on the condition that it be used solely to
make a tender offer for the Interests in compliance with the requirements of the
Exchange Act.
On June 24, 1996, Raleigh requested a confidentiality agreement with
the Partnership pursuant to which Raleigh would be entitled, among other things,
to review certain non-public information concerning the Partnership, and, in
return, Raleigh would agree, among other things, to treat such information as
confidential in accordance with the terms of such agreement. The Partnership
has provided Raleigh with a confidentiality agreement having terms no less
favorable to Raleigh than those received by Walton. To date Raleigh has not
executed such confidentiality agreement with the Partnership.
On June 28, 1996, Walton commenced its Offer for up to 185,840
Interests at a price of $420 per Interest. The Offer is scheduled to expire on
July 26, 1996.
On June 28, 1996, Raleigh amended its Offer to increase the price to
$421 per Interest.
Managers has, from time to time, received inquires from other parties
which may consider making offers for the Interests of the Partnership. These
inquiries were preliminary in nature and, accordingly, there can be no assurance
that any such offers will be made or, if made,
21
<PAGE>
will be consummated. There can be no assurance that any of the foregoing will
result in any transaction being recommended to the Partnership or that any
transaction that may be recommended, will be authorized or consummated, or that
a transaction other than those described herein will be proposed, authorized or
consummated.
Under the 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 on or prior
to October 31, 1997; (ii) to purchase, or cause JMB or its affiliates to
purchase, on October 31, 1997 all of the Interests of the Interestholders at
their then appraised fair market value (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. The Special
Committee directed that Lehman be informed of the members' position in reaching
an opinion with regard to the adequacy of the Offers. 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.
(b) None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Pursuant to the Partnership Agreement, no transfer or assignment of
Interests which, when considered with all other transfers or assignments during
the twelve-month period ending with such transfer or assignment, would, in the
opinion of counsel to the Partnership, cause a termination of the Partnership
for federal income tax purposes (which termination may occur when 50% or more of
the total interest in the Partnership capital and profits is transferred by sale
or exchange in a twelve-month period) shall be effective. Depending upon the
number of Interests tendered pursuant to the Offers, sales of Interests on the
secondary market for the twelve-month period following completion of the Offers
may be limited. The Partnership will not process any requests for transfers of
Interests during such twelve-month period which the Partnership believes would
cause a tax termination. For the period from July 1, 1995 to June 30, 1996
approximately 17,465.5 (approximately 4.3%) of the Interests were transferred.
The aggregate number of Interests being sought pursuant to each of the Offers
equals approximately 46% of the Interests and together equal approximately 92%
of the Interests. However, because of the tax-related transfer restrictions, in
no event will an aggregate of 50% or more of the Interests be acquired pursuant
to the Offers (reduced to the extent of any prior transfers of Interests within
the preceding twelve months unless such previously transfered Interests can be
traced to Interests accepted for purchase under the Offers). Thus, depending on
the number of Interests acquired in the Offer which closes first, it is possible
that only a limited number of Interests could be purchased pursuant to the
later-closing Offer.
An Interestholder may recognize gain or loss on the sale of
Interests pursuant to the Offers depending on the specific circumstances of the
Interestholder. In addition, the ability of an Interestholder to fully utilize
losses may depend on whether the Interestholder sells all or less than all of
his or her Interests pursuant to the Offers. The Partnership does not
anticipate that an Interestholder who does not tender his or her Interests under
the Offers will realize any material tax consequences as a result of the
election not to tender his or her Interests. Each Interestholder should consult
his, her or its own tax advisor as to the particular tax consequences to such
Interestholder of selling or not selling Interests pursuant to the Offers.
Secondary market sales activity for the Interests, including privately
negotiated sales, has been limited and sporadic. The Partnership's Annual Report
on Form 10-K for the year ended December 31, 1995 states that "there is no
public market for Interests, and it is not anticipated that a public market for
Interests will develop." Privately negotiated sales and sales through
intermediaries (e.g., through the matching services for buyers and sellers of
Interests operated by Merrill, Lynch) currently are the only means available to
an Interestholder to liquidate an investment in Interests (other than offers to
purchase, including the Offers) because the Interests are not listed or traded
on any exchange or quoted on any Nasdaq list or system. High and low sales
prices of Interests may be obtained through certain entities such as Partnership
Spectrum, an independent, third-party source which reports such information;
however, the gross sales prices reported by Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Interests,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The Partnership
anticipates that, in view of the absence of an 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.
22
<PAGE>
On June 24, 1996, Irvin Weiss v Arvida/JMB Managers, Inc., Neil G.
Bluhm, Lehman Brothers Inc. and Arvida/JMB Partners, L.P. (Case No. 96CH 6627)
was filed in the County Department, Chancery Division of the Circuit Court of
Cook County Illinois. This complaint is a purported class action complaint on
behalf of Irvin Weiss and all other holders of Interests 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. The complaint alleges, inter alia, that Managers and
Mr. Bluhm breached their fiduciary duty owed plaintiff and members of the
purported class by chilling tender offers for Interests by non-affiliates,
failing to provide non-affiliated offerors with information and stifling
competition for such Interests, and that Lehman participated in such breaches of
fiduciary duty by colluding with them. In addition to seeking the relief
described above, plaintiff seeks 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.
23
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------
<S> <C>
(a)(1) Letter dated July 3, 1996, from Arvida/JMB Partners, L.P. to its
Limited Partners.
(c)(1) Amended and Restated Agreement of Limited Partnership of Arvida/JMB
Partners, L.P., made and entered into to be effective as of
September 10, 1987, by and between Managers and the Limited Partners
(previously filed with the Securities and Exchange Commission as
Exhibit 3 to the Partnership's Form 10-K Report (File No. 0-16976)
filed on March 27, 1990 and hereby incorporated herein by reference).
(c)(2) Management, Advisory and Supervisory Agreement (previously filed with
the Securities and Exchange Commission as Exhibit 10.2 to the
Partnership's Form 10-K Report (File No. 0-16976) filed on March 27,
1991 and hereby incorporated herein by reference).
(c)(3) Press Release of Partnership, dated June 21, 1996 (previously filed
with the Securities and Exchange Commission as Exhibit 20.1 to the
Partnership's Form 8-K Report (File No. 0-16976) filed on June 26,
1996 and hereby incorporated herein by reference).
(c)(4) Letter, dated June 21, 1996, from Arvida/JMB Partners, L.P. to its
Limited Partners.
(c)(5) Letter, dated July 2, 1996, from Lehman Brothers addressed to
the Special Committee.
</TABLE>
24
<PAGE>
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.
Dated: July 3, 1996
ARVIDA/JMB PARTNERS, L.P.
By: ARVIDA/JMB MANAGERS, INC.,
General Partner of the Partnership
By: /s/ Judd D. Malkin
---------------------------
Name: Judd D. Malkin
Title: Chairman
25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>
(a)(1) Letter, dated July 3, 1996, from Arvida/JMB Partners, L.P. to 27
its Limited Partners.
(c)(1) Amended and Restated Agreement of Limited Partnership of
Arvida/JMB Partners, L.P., made and entered into to be
effective as of September 10, 1987, by and between Managers
and the Limited Partners (previously filed with the Securities
and Exchange Commission as Exhibit 3 to the Partnership's Form
10-K Report (File No. 0-16976) filed on March 27, 1990 and
hereby incorporated herein by reference).
(c)(2) Management, Advisory and Supervisory Agreement (previously
filed with the Securities and Exchange Commission as Exhibit
10.2 to the Partnership's Form 10-K Report (File No. 0-16976)
filed on March 27, 1991 and hereby incorporated herein by
reference).
(c)(3) Press Release of Partnership, dated June 21, 1996 (previously
filed with the Securities and Exchange Commission as Exhibit
20.1 to the Partnership's Form 8-K Report (File No. 0-16976)
filed on June 26, 1996 and hereby incorporated herein by
reference).
(c)(4) Letter, dated June 21, 1996, from Arvida/JMB Partners, L.P. to 29
its Limited Partners.
(c)(5) Letter, dated July 2, 1996, from Lehman Brothers addressed to 30
the Special Committee.
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
(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)
----------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
<PAGE>
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
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page No.
- -------------- ----------- --------
<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>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------------
(AMENDMENT NO. 2)
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)
----------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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, as previously amended by Amendment No. 1
filed on July 12, 1996. Unless otherwise indicated, capitalized terms used
herein have the same meanings as set forth in the originally filed Statement, as
previously amended.
ITEM 2. TENDER OFFER OF THE BIDDER
Item 2 of the Statement is amended to add the following information:
Raleigh, by Amendment Nos. 4, 5, 6 and 7 to the Raleigh Schedule 14D-
1, dated July 16, 1996, July 17, 1996, July 19, 1996 and July 23, 1996,
respectively, amended the Raleigh Offer (as so amended, the "Amended Raleigh
Offer") to, among other things, add Raleigh GP Corp., Rockland Partners, Inc.
("Rockland") and Zephyr Partners ("Zephyr") as co-bidders and to increase the
purchase price under the Raleigh Offer to $461 per Interest, net to the seller
in cash, without interest, upon the terms and conditions set forth in the
Amended Raleigh Offer. By press release dated July 19, 1996, Raleigh extended
the expiration date under the Amended Raleigh Offer to 12:00 Midnight, New York
City time, on August 1, 1996.
ITEM 3. IDENTITY AND BACKGROUND
Item 3(b)(2) of the Statement is amended to add the following
information under the heading "Raleigh":
Raleigh
-------
The Amended Raleigh Offer adds Raleigh GP Corp., a general partner of
Raleigh, and Rockland, which was admitted as a general partner of Raleigh, as a
co-bidders. Reference is made to the Statement as amended by Amendment No. 1
for a description of material contracts, agreements, arrangements and
understandings and actual or potential material conflicts of interest between
the Partnership, Managers and their respective affiliates, on the one hand, and
Rockland and its respective affiliates, on the other hand.
The Amended Raleigh Offer also adds Zephyr, which was admitted on July
23, 1996 as a general partner of Raleigh, as a co-bidder. In addition to
admitting Zephyr as a general partner, Raleigh also admitted an affiliate of
Zephyr, Boreas Partners, L.P. ("Boreas"), as a limited partner of Raleigh. The
Amended Raleigh Offer describes Zephyr as a newly-formed general partnership,
the general partners of which are GP Aeolus Inc. and AREHGP Inc. It further
describes Carl C. Ichan as the controlling shareholder of both GP Aeolus Inc.
and American Property Investors Inc., which is the general partner of a limited
partnership which owns all of the stock of AREHGP Inc.
Boreas, on July 18, 1996, had previously commenced a tender offer to
purchase up to 185,000 Interests in the Partnership at a price of $460 per
Interest (the "Boreas Offer"). Boreas terminated and withdrew the Boreas Offer
on July 23, 1996 in conjunction with Zephyr and Boreas joining the Raleigh Offer
by becoming a general partner and a limited partner, respectively, of Raleigh.
Reference is made to Item 7 below regarding certain letter agreements
between the Partnership and each of Raleigh and an affiliate of Zephyr and
Boreas regarding the furnishing of lists of Interestholders.
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, the
Special Committee of the Board of Directors of Managers met with its financial
and legal advisors to review and consider such 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 such Offer and not
tender their Interests. With respect to all other Interestholders, the Special
Committee is expressing no opinion and remains neutral.
1
<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, as previously amended by Amendment
No. 1 filed on July 12, 1996. Unless otherwise indicated, capitalized terms
used herein have the same meanings as set forth in the originally filed
Statement, as previously amended.
ITEM 2. TENDER OFFER OF THE BIDDER
Item 2 of the Statement is amended to add the following information:
Raleigh, by Amendment Nos. 4, 5, 6 and 7 to the Raleigh Schedule 14D-1,
dated July 16, 1996, July 17, 1996, July 19, 1996 and July 23, 1996,
respectively, amended the Raleigh Offer (as so amended, the "Amended
Raleigh Offer") to, among other things, add Raleigh GP Corp., Rockland
Partners, Inc. ("Rockland") and Zephyr Partners ("Zephyr") as co-bidders
and to increase the purchase price under the Raleigh Offer to $461 per
Interest, net to the seller in cash, without interest, upon the terms and
conditions set forth in the Amended Raleigh Offer. By press release dated
July 19, 1996, Raleigh extended the expiration date under the Amended
Raleigh Offer to 12:00 Midnight, New York City time, on August 1, 1996.
ITEM 3. IDENTITY AND BACKGROUND
Item 3(b)(2) of the Statement is amended to add the following information
under the heading "Raleigh":
Raleigh
The Amended Raleigh Offer adds Raleigh GP Corp., a general partner of
Raleigh, and Rockland, which was admitted as a general partner of Raleigh,
as co-bidders. Reference is made to the Statement as amended by Amendment
No. 1 for a description of material contracts, agreements, arrangements and
understandings and actual or potential material conflicts of interest
between the Partnership, Managers and their respective affiliates, on the
one hand, and Rockland and its respective affiliates, on the other hand.
The Amended Raleigh Offer also adds Zephyr, which was admitted on July
23, 1996 as a general partner of Raleigh, as a co-bidder. In addition to
admitting Zephyr as a general partner, Raleigh also admitted an affiliate
of Zephyr, Boreas Partners, L.P. ("Boreas"), as a limited partner of
Raleigh. The Amended Raleigh Offer describes Zephyr as a newly-formed
general partnership, the general partners of which are GP Aeolus Inc. and
AREHGP Inc. It further describes Carl C. Ichan as the controlling
shareholder of both GP Aeolus Inc. and American Property Investors Inc.,
which is the general partner of a limited partnership which owns all of the
stock of AREHGP Inc.
Boreas, on July 18, 1996, had previously commenced a tender offer to
purchase up to 185,000 Interests in the Partnership at a price of $460 per
Interest (the "Boreas Offer"). Boreas terminated and withdrew the Boreas
Offer on July 23, 1996 in conjunction with Zephyr and Boreas joining the
Raleigh Offer by becoming a general partner and a limited partner,
respectively, of Raleigh.
Reference is made to Item 7 below regarding certain letter agreements
between the Partnership and each of Raleigh and an affiliate of Zephyr and
Boreas regarding the furnishing of lists of Interestholders.
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, the
Special Committee of the Board of Directors of Managers met with its
financial and legal advisors to review and consider such 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
2
<PAGE>
is inadequate and not in the best interests of such Interestholders.
Accordingly, the Partnership recommends that such Interestholders reject
such 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 22, 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)(7) hereto.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
Item 7 of the Statement is amended to add the following information:
On July 18, 1996, BSS Capital II, L.L.C. ("BSS") an unaffiliated third
party, signed a confidentiality agreement with the Partnership pursuant to
which BSS is entitled, among other things, to receive certain non-public
information concerning the Partnership and, in return, BSS agreed, among
other things, to treat such information as confidential in accordance with
the terms of such agreement, and to take or abstain from taking certain
actions including agreeing that for a period of two years from the date of
such agreement not to acquire any Interests other than pursuant to offers
made in compliance with the requirements of Regulations 14D and 14E of the
Exchange Act. In addition, the Partnership, at the request of two other
unaffiliated third parties, furnished a form of confidentiality agreement
to such parties, but to date the Partnership has not received back a signed
agreement from either of such parties.
Managers has, from time to time, received expressions of interest from
certain parties (including BSS) regarding possible transactions, such as a
refinancing, sale-leaseback or recapitalization, as well as potential
offers to acquire Interests in the Partnership. These expressions of
interest have been preliminary in nature and, accordingly, there can be no
assurance that any such offers or transactions will be made or consummated.
In a letter dated July 17, 1996, from Raleigh to the Partnership, Raleigh
expressed its belief that the Partnership is not permitted under applicable
federal securities laws and its duties to Interestholders to recommend
against acceptance of the Raleigh Offer in the case of Interestholders
having no present or anticipated need for liquidity while making no
recommendation as to other Interestholders, and requested that the
Partnership require Lehman to provide a valuation of the Interests on a
current fair market value basis (rather than a liquidation value basis) and
that the Partnership take a position with respect to Interestholders
desiring liquidity. In a letter to Raleigh dated July 19, 1996, the
Partnership responded that it disagreed with Raleigh's views regarding the
federal securities laws and the Partnership's responsibilities, noting that
the Interests were not designed as, and have never been represented by the
Partnership to be, a liquid investment and that to value the Interests on a
different basis would result in a misleading assessment of what the
Interests are really worth. In a letter to the Partnership dated July 22,
1996, Raleigh reiterated its position expressed in its earlier letter.
In a letter to the Partnership dated July 16, 1996, an affiliate of
Raleigh demanded that the Partnership furnish it with a list of
Interestholders. In connection with furnishing such list to Raleigh, the
Partnership entered into an agreement, dated July 18, 1996, with Raleigh
pursuant to which Raleigh agreed that such list would be used solely for
the purpose of making a tender offer for Interests in compliance with the
requirements of the Exchange Act ("the Specified Purpose") and would not be
furnished to any person
3
<PAGE>
other than affiliates and representatives of Raleigh for use solely for the
Specified Purpose. Longacre Corp., an affiliate of Zephyr and Boreas, had
previously requested and received a list of Interestholders in connection
with which it entered into a similar agreement with the Partnership, as
described in the Partnership's originally filed Statement.
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)(3) Letter, dated July 24, 1996, from Arvida/JMB Partners, L.P.
to its Limited Partners
(c)(7) Letter, dated July 22, 1996, from Lehman Brothers Inc.
addressed to the Special Committee
(c)(8) Letter, dated July 17, 1996, from Raleigh Capital
Associates, L.P. to the Partnership
(c)(9) Letter, dated July 19, 1996, from the Partnership to Raleigh
Capital Associates, L.P.
(c)(10) Letter, dated July 22, 1996, from Raleigh Capital
Associates, L.P. to the Partnership
(c)(11) Letter, dated July 16, 1996, from Vanderbilt Income & Growth
Associates, L.L.C., an affiliate of Raleigh Capital
Associates L.P., to the Partnership demanding a list of
Interestholders
(c)(12) Letter, dated July 18, 1996, from the Partnership to Raleigh
Capital Associates, L.P. regarding furnishing a list of
Interestholders to Raleigh
(c)(13) Letter, dated June 21, 1996, from Longacre Corp. to the
Partnership demanding a list of Interestholders
(c)(14) Letter, dated June 27, 1996, from the Partnership to
Longacre Corp. regarding furnishing a list of
Interestholders to Longacre Corp.
</TABLE>
4
<PAGE>
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 24, 1996
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page No.
- -------------- ----------- --------
<C> <S> <C>
(a)(3) Letter, dated July 24, 1996, from Arvida/JMB Partners, L.P. to its
Limited Partners
(c)(7) Letter, dated July 22, 1996, from Lehman Brothers Inc. addressed to
the Special Committee
(c)(8) Letter, dated July 17, 1996, from Raleigh Capital Associates, L.P. to
the Partnership
(c)(9) Letter, dated July 19, 1996, from the Partnership to Raleigh Capital
Associates, L.P.
(c)(10) Letter, dated July 22, 1996, from Raleigh Capital Associates, L.P. to
the Partnership
(c)(11) Letter, dated July 16, 1996, from Vanderbilt Income & Growth
Associates, L.L.C., an affiliate of Raleigh Capital Associates L.P., to
the Partnership demanding a list of Interestholders
(c)(12) Letter, dated July 18, 1996, from the Partnership to Raleigh Capital
Associates, L.P. regarding furnishing a list of Interestholders to
Raleigh
(c)(13) Letter, dated June 21, 1996, from Longacre Corp. to the Partnership
demanding a list of Interestholders
(c)(14) Letter, dated June 27, 1996, from the Partnership to Longacre Corp.
regarding furnishing a list of Interestholders to Longacre Corp.
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
(AMENDMENT NO. 3)
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)
----------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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, as previously amended by Amendment
No. 1 filed on July 12, 1996 and Amendment No. 2 filed on July 24, 1996.
Unless otherwise indicated, capitalized terms used herein have the same
meanings as set forth in the originally filed Statement, as previously
amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
Item 7 of the Statement is amended to add the following information:
Possible $160 Million Financing
On July 16, 1996, BSS Capital II, L.L.C. ("BSS"), an affiliate of Starwood
Capital Group, L.P. ("Starwood"), sent the Partnership a letter in which it
indicated an interest in exploring the possibility of a recapitalization of
the Partnership.
As described in Amendment No. 2 to the Statement, on July 18, 1996 the
Partnership entered into a confidentiality agreement with BSS pursuant to
which the Partnership furnished certain confidential information to BSS for
use in connection with its consideration of making a tender offer for
Interests and representatives of the Partnership met with BSS to review such
information.
On July 19, 1996, BSS in a letter to the Partnership reiterated its interest
in pursuing a recapitalization of the Partnership and offered to pursue
discussions for a recapitalization, subject to reaching agreement on an
exclusivity arrangement.
On July 23, 1996, representatives of BSS met with representatives of the
Partnership. At such meeting, BSS proposed on a preliminary basis for the
consideration of the Partnership a debt recapitalization of the Partnership
(the "Financing") which, if accomplished, would enable the Partnership to make
a substantial distribution to Interestholders. BSS advised the Partnership
that it would be willing to develop a proposal for such a Financing only on
the condition that the Partnership agree to an exclusive period during which
the Partnership would not pursue or negotiate a financing substantially
similar in amount or purpose as the Financing with any other person.
On July 24, 1996, the Special Committee of Managers met to consider BSS's
preliminary proposal for a Financing and its requirement of exclusivity as a
condition for developing such proposal. Following review of the proposal with
its financial and legal advisors, the Special Committee directed its
representatives to negotiate an agreement with BSS under which it would have
an exclusive period to develop a detailed commitment for and otherwise to
pursue a Financing to be presented to Managers for its consideration on behalf
of the Partnership.
On July 29, 1996, the Partnership entered into a letter agreement with BSS
pursuant to which the Partnership and BSS agreed to negotiate within ten
business days a commitment setting forth the principal terms, covenants and
conditions (including requisite approvals and consents) for a Financing of
approximately $160 million, consisting of secured senior and secured mezzanine
tranches. The Financing, if accomplished, would achieve, among other things, a
refinancing of the Partnership's term, revolving, letter of credit and other
existing financing arrangements (other than certain project related financing)
and, together with certain additional project financing, would enable the
Partnership to make a distribution to Interestholders of between $350 to $400
per Interest. However, the letter agreement provides that BSS is under no
obligation to issue a commitment, and that the Partnership is under no
obligation to accept one. The Partnership agreed that for a period of 45 days
from the date of the agreement it would not pursue or negotiate any other
offers for portfolio financings or debt recapitalizations of a similar size or
purpose as the Financing and agreed, subject to certain conditions, to pay BSS
a break-up fee of between $2,400,000 and $4,400,000, together with certain of
BSS's out-of-pocket costs and expenses, in the event the Partnership enters
into one or more agreements for portfolio financings or debt recapitalizations
of similar size or purpose as the Financing with any third party within 90
days from the date of
2
<PAGE>
the agreement. The Partnership also agreed to indemnify BSS and its affiliates
and representatives against expenses and liabilities in respect of certain
third party claims as a result of or in connection with the letter agreement
or the transactions contemplated by the letter agreement.
No decision has been made by the Partnership to implement a Financing. Any
such decision will necessarily be dependent upon an analysis of the terms,
covenants and conditions of any commitment for a Financing issued by BSS.
There can be no assurance that BSS will issue a commitment for a Financing, or
that any Financing commitment which BSS may issue will be acceptable to the
Partnership. Even if a commitment for a Financing were to be acceptable to the
Partnership, there can be no assurance that such a Financing transaction will
be accomplished.
Barry Sternlicht, one of the principals of Starwood and BSS, was formerly an
officer of various affiliates of the Partnership and as such was actively
involved in the original acquisition by the Partnership of its business and
properties and in the management and operation of such business and
properties. In addition, certain other officers of BSS and its affiliates were
formerly officers or employees of affiliates of the Partnership. In June 1996
Starwood Opportunity Fund IV L.P. ("SOF-IV"), an affiliate of BSS, had
discussions with an affiliate of the Partnership to purchase a large
undeveloped tract of land. Subsequent to these discussions, SOF-IV, as well as
certain other parties unaffiliated with BSS, have submitted separate binding
letters of intent for the purchase of such land. The affiliate of the
Partnership is reviewing the letters of intent and expects to make a decision
as to which specific proposal to accept after review and approval by its
secured lender. An affiliate of a director of Managers is a controlling
partner, indirectly through another partnership, in a joint venture owning a
portfolio of hotel properties that also has an affiliate of BSS as a
controlling partner. In addition, another director of Managers has invested in
a real estate fund sponsored by an affiliate of BSS.
Other
The Partnership entered into confidentiality agreements with Nova Capital
Corporation ("Nova") and Pulte Corporation ("Pulte") on July 26, 1996, and
July 29, 1996, respectively, pursuant to which each of Nova and Pulte is
entitled, among other things, to receive certain non-public information
concerning the Partnership for use in connection with its consideration of
making a tender offer for Interests and, in return, each of Nova and Pulte
agreed, among other things, to treat such information as confidential in
accordance with the terms of such agreement, and to take or abstain from
taking certain actions including agreeing that for a period of two years from
the date of such agreement not to acquire any Interests other than pursuant to
offers made in compliance with the requirements of Regulations 14D and 14E of
the Exchange Act.
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>
(a)(4) Letter, dated July 30, 1996, from Arvida/JMB Partners, L.P. to
its Limited Partners
(a)(5) Press Release of Partnership, dated July 30, 1996
(c)(15) Letter, dated July 29, 1996, from BSS Capital II, L.L.C. to the
Partnership
</TABLE>
3
<PAGE>
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.
By: Arvida/JMB Managers, Inc.,
----------------------------------
General Partner of the
Partnership
By: /s/ Judd D. Malkin
----------------------------------
Name: Judd D. Malkin
Title: Chairman
Dated: July 30, 1996
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
(a)(4) Letter, dated July 30, 1996, from Arvida/JMB Partners, L.P.
to its Limited Partners
(a)(5) Press Release of Partnership, dated July 30, 1996
(c)(15) Letter, dated July 29, 1996, from BSS Capital II, L.L.C. to
the Partnership
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
(AMENDMENT NO. 4)
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)
----------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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, as previously amended by Amendment
No. 1 filed on July 12, 1996, Amendment No. 2 filed on July 24, 1996 and
Amendment No. 3 filed on July 30, 1996. Unless otherwise indicated, capitalized
terms used herein have the same meanings as set forth in the originally filed
Statement, as previously amended.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Item 5 of the Statement is amended to add the following information:
The Partnership has retained D. F. King & Co., Inc. to act as Information
Agent for the Partnership in connection with the Offers. The Partnership will
pay D. F. King & Co., Inc. reasonable and customary compensation for its
services, plus reimbursement for certain reasonable out-of-pocket expenses.
<PAGE>
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>
(b)(1) Notice of Withdrawal of Previously Tendered Units
(Raleigh Offer)
(b)(2) Notice of Withdrawal of Previously Tendered Units
(Walton Offer)
</TABLE>
3
<PAGE>
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.
By: Arvida/JMB Managers, Inc.,
----------------------------------
General Partner of the Partnership
By: /s/ Judd D. Malkin
----------------------------------
Name: Judd D. Malkin
Title: Chairman
Dated: July 30, 1996
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
(b)(1) Notice of Withdrawal of Previously Tendered Units
(Raleigh Offer)
(b)(2) Notice of Withdrawal of Previously Tendered Units
(Walton Offer)
</TABLE>
5
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------
(AMENDMENT NO. 5)
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)
--------------------------------------
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
================================================================================
<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, as previously amended by Amendment Nos. 1,
2, 3 and 4 filed on July 12, 1996, July 24, 1996, July 30, 1996 and July 31,
1996, respectively. Unless otherwise indicated, capitalized terms used herein
have the same meanings as set forth in the originally filed Statement, as
previously amended.
ITEM 2. TENDER OFFER OF THE BIDDER
Item 2 of the Statement is amended to add the following information:
Raleigh filed a final Amendment, dated August 6, 1996, to the Raleigh
Schedule 14D-1 stating that the Raleigh Offer expired at 12:00 midnight, New
York City time on August 1, 1996, and that Raleigh had accepted for payment
79,696 Interests pursuant to the Raleigh Offer, constituting approximately 19.7%
of the outstanding Interests.
Walton, by Amendment No. 2, dated August 2, 1996, amended the Walton
Offer (as so amended, the "Amended Walton Offer") to increase the purchase price
under the Amended Walton Offer to $461 per Interest, net to the seller in cash,
without interest upon the terms and conditions set forth in the Amended Walton
Offer, and to extend the expiration date under the Amended Walton Offer until
12:00 midnight, Eastern Time on August 15, 1996.
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 Walton Offer, the
Special Committee of the Board of Directors of Managers met with its financial
and legal advisors to review and consider such 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 Walton Offer is
inadequate and not in the best interests of such Interestholders. Accordingly,
the Partnership recommends that such Interestholders reject such 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 22, 1996 from Lehman Brothers
Inc. in which Lehman reaffirmed the Lehman Estimated Liquidation Value and
expressed its opinion that the $461 per Interest cash consideration then
being offered in the Raleigh Offer was 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
such 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 such 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.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
Item 7 of the Statement is amended to add the following information:
The Secondary Market Fund, L.P., on July 26, 1996, commenced an offer
to buy, on a "first-received, first-buy" basis, 2,000 Interests at $500 per
Interest. Such offer expires on August 16, 1996.
The Partnership continues its negotiations with BSS Capital II, L.L.C.
("BSS") for a commitment setting forth the principal terms, covenants and
conditions (including requisite approvals and consents) for a debt
recapitalization (the "Financing") of the Partnership of approximately $160
million, consisting of secured senior and secured mezzanine tranches. In
connection with such negotiations, the Partnership and BSS have agreed to extend
the original ten business
1
<PAGE>
day period for negotiating such commitment by an additional five business days.
BSS is under no obligation to issue a commitment, and the Partnership is under
no obligation to accept one.
Item 9. Material to be Filed as Exhibits
Item 9 of the Statement is amended to add the following Exhibits:
<TABLE>
Exhibit Number Description
- -------------- -----------
<S> <C>
(a)(6) Letter, dated August 7, 1996, from Arvida/JMB Partners,
L.P. to its Limited Partners
(c)(16) Letter, dated August 7, 1996, from BSS Capital II,
L.L.C. to the Partnership
</TABLE>
2
<PAGE>
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.
Dated: August 7, 1996
ARVIDA/JMB PARTNERS, L.P.
By: Arvida/JMB Managers, Inc.,
-------------------------------------
General Partner of the Partnership
By: /s/ Judd D. Malkin
-------------------------------------
Name: Judd D. Malkin
Title: Chairman
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page No.
- -------------- ----------- --------
<S> <C> <C>
(a)(6) Letter, dated August 7, 1996, from Arvida/JMB
Partners, L.P. to its Limited Partners
(c)(16) Letter, dated August 7, 1996, from BSS Capital
II, L.L.C. to the Partnership
</TABLE>
4
<PAGE>
LEHMAN BROTHERS
Exhibit (c)(4)
October 22, 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 Raleigh Capital Associates, L.P. ("Raleigh") has commenced a
tender offer to purchase up to 100,000 units of limited partnership interest
("Units")(25% of the outstanding Units) in Arvida/JMB Partners, L.P. (the
"Partnership") at a cash purchase price of $500 per Unit (the "Raleigh Offer").
The terms and conditions of the Raleigh Offer are set forth in more detail in
the Offer to Purchase relating thereto dated October 17, 1996 (the "Raleigh
Offer to Purchase"). We further understand that Raleigh acquired 79,696 Units on
August 1, 1996 at a cash purchase price of $461 per Unit pursuant to its June
19, 1996 offer to purchase up to 185,000 Units, as such offer was amended.
We also understand that the Partnership is considering obtaining a loan
(the "Proposed Loan") from Starwood/Florida Funding L.L.C. and/or one or more
affiliates or co-investors (individually and collectively "Starwood") in the
amount of $160 million in order to effect a leveraged recapitalization of the
Partnership (the "Proposed Recapitalization"), pursuant to which, among other
things, the holders of Units would receive an immediate distribution of
approximately $350 per Unit and retain their Units so as to participate in
future cash distributions pursuant to the Partnership's business plan, which
contemplates an orderly liquidation of the Partnership's assets commencing in
October 1997 and being completed by 2002 (the "Subsequent Liquidation").
We have been requested by the special committee of the Board of Directors (the
"Special Committee") of Arvida/JMB Mangers, 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 as of October 1, 1996 based on the assumption that the Partnership
completes the Proposed Recapitalization on or about December 31, 1996 and
commences the Subsequent Liquidation of the Partnership's assets in October 1997
and completes that liquidation by the year 2002; 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
<PAGE>
Arvida/JMB Managers, Inc.
October 22, 1996
Page 2
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 has an immediate or anticipated need or desire for liquidity beyond
that provided by the proposed $350 per Unit initial cash distribution made
pursuant to the Proposed Recapitalization.
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, which is conditioned upon the rejection of the Proposed
Loan by the Partnership or the issuance of an injunction enjoining the
Proposed Loan;
(ii) the terms of the Proposed Loan;
(iii) the terms of the Proposed Recapitalization, including the expected cash
distributions (both current and future) to holders of Units as a result
thereof;
(iv) publicly available information regarding the Partnership set forth in
the Partnership's Form 10-Q for the quarter ended June 30, 1996 and Form 10-K
for the year ended December 31, 1995;
(v) financial and operating information with respect to the business,
operations and prospects of the Partnership furnished to us by the
Partnership;
(vi) 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;
(vii) 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;
(viii) information regarding secondary market trading volumes and prices of
the Units; and
(ix) information relating to other recent third-party tender offers to
purchase the Units.
<PAGE>
Arvida/JMB Managers, Inc.
October 22, 1996
Page 3
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 reviewed
existing independent appraisals and market studies of certain of the assets of
the Partnership. In addition, in arriving at our opinion you have not authorized
us to solicit, and we have not solicited, any indications of interest from any
third party with respect to the purchase of all or a part of the Partnership's
business or assets or the making of any loan to, or participating in a
recapitalization 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, in arriving at our opinion, 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 Proposed Recapitalization and subsequent
Liquidation as set forth in such projections. 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. Our opinion is based on
the projections and assumptions referred to above with respect to the cash
distributions that are projected to be made to the holders of the Units pursuant
to the Subsequent Liquidation, and had you provided us with projections and
assumptions which were materially different with respect to such cash
distributions, our conclusion may have been different. Based solely on this
limited
<PAGE>
Arvida/JMB Managers, Inc.
October 22, 1996
Page 4
valuation methodology, we have estimated a Hypothetical Liquidation Value as of
October 1, 1996 of $610 to $630 per Unit assuming the completion of the Proposed
Recapitalization and the Subsequent Liquidation.
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 or
anticipated need or desire for liquidity beyond that provided by the proposed
$350 per Unit initial cash distribution made pursuant to the Proposed
Recapitalization.
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 the Proposed Recapitalization 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, and a portion of which is contingent upon
the consummation of the Proposed Recapitalization. In addition, the Partnership
has agreed to indemnify us for certain liabilities that might arise out of the
rendering of this opinion. We have also performed various investment banking
services for affiliates of the Partnership and the General Partner and for
affiliates of Starwood in the past and have received customary fees for such
services.
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/ Robert C. Lieber
- ------------------------
Managing Director
<PAGE>
LEHMAN BROTHERS
Exhibit (c)(5)
September 9, 1996
Special Committee of the Board of Directors
Arvida/JMB Managers, Inc.
900 North Michigan Avenue
Chicago, Illinois 60611
Members of the Special Committee:
We understand that Arvida/JMB Partners, L.P. (the "Partnership") is considering
obtaining a loan (the "Proposed Loan") from Starwood/Florida Funding L.L.C.
and/or one or more affiliates or co-investors (individually and collectively
"Starwood") in the amount of $160 million in order to effect a leveraged
recapitalization of the Partnership (the "Proposed Recapitalization"), pursuant
to which, among other things, the holders of units of limited partnership
interest ("Units") in the Partnership would receive an immediate distribution of
approximately $350 per Unit and retain their Units so as to participate in
future cash distributions pursuant to the Partnership's business plan, which
contemplates an orderly liquidation of the Partnership's assets commencing in
October 1997 and being completed by 2002 (the "Subsequent Liquidation"). Such
immediate cash distribution and retained interest are together hereinafter
referred to as the "Consideration."
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 our opinion as to:
(i) the commercial reasonableness to the Partnership of the financial terms of
the Proposed Loan; and (ii) the fairness, from a financial point of view, to the
holders of the Units as a class, of the Consideration to be received by such
holders pursuant to the Proposed Recapitalization. We have not been requested to
opine as to, and our opinion does not in any manner address, the Partnership's
underlying business decision to proceed with or effect the Proposed
Recapitalization or the Subsequent Liquidation.
In arriving at our opinions, we reviewed and analyzed:
(i) the terms of the Proposed Loan;
(ii) the terms of the Proposed Recapitalization, including the expected
cash distributions (both current and future) to holders of Units as
a result thereof;
<PAGE>
(iii) publicly available information regarding the Partnership set
forth in the Partnership's Form 10-Q for the quarter ended June
30, 1996 and Form 10-K for the year ended December 31, 1995;
(iv) financial and operating information with respect to the
business, operations and prospects of the Partnership furnished
to us by the Partnership;
(v) 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;
(vi) a comparison of the financial terms of the Proposed Loan and the
Proposed Recapitalization with the financial terms of certain
other lending transactions and recapitalizations that we deemed
relevant;
(vii) information regarding secondary market trading volumes and
prices of the Units; and
(viii) information relating to recent third-party tender offers to
purchase the Units.
In addition, we have had discussions with the management of the Partnership and
the General Partner concerning the Partnership's business, operations, assets,
liabilities, 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 opinions 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, upon advice of the General Partner
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 the 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 reviewed existing independent appraisals and market studies of
certain of the assets of the Partnership. In addition, in arriving at our
opinions you have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the making of any
loan to, or participating in a recapitalization of, the Partnership. Our
opinions are necessarily based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this letter.
2
<PAGE>
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, in arriving at our opinion, we have performed a discounted cash
flow analysis applied to the cash distributions to be received by holders of
the Units based on the financial projections referred to above and the
assumption that the Partnership commences and completes the Proposed
Recapitalization and Subsequent Liquidation as set forth in such projections.
The projected cash distributions to the holders of the Units 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. Our
opinion is based on the projections and assumptions referred to above with
respect to the cash distributions that are projected to be made to the holders
of the Units pursuant to the Subsequent Liquidation, and had you provided us
with projections and assumptions which were materially different with respect to
such cash distributions, our conclusion may have been different.
Subject to and based upon the foregoing, we are of the opinion that, as of the
date hereof: (i) the financial terms of the Proposed Loan are commercially
reasonable from the standpoint of the Partnership; and (ii) the Consideration
to be received by the holders of the Units pursuant to the Proposed
Recapitalization is fair, from a financial point of view, to the holders of the
Units as a class.
We have acted as financial advisor to the Partnership in connection with the
Proposed Recapitalization and will receive a fee for our services which is
contingent upon the consummation of the Proposed Recapitalization. In addition,
the Partnership has agreed to indemnify us for certain liabilities that might
arise out of the rendering of this opinion. We have also performed various
investment banking services for affiliates of the Partnership and the General
Partner and for affiliates of Starwood in the past and have received customary
fees for such services.
This opinion is solely for the use and benefit of the Special Committee and
shall not be disclosed publicly or made available to, or relied upon by, any
third party without our prior approval.
Very truly yours,
LEHMAN BROTHERS
/s/ Robert C. Lieber
- ------------------------
Managing Director
3
