<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
Rule 14a-6 (e) (2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interests
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
1,632,510.487 Units of Limited Partnership Interests
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Based upon the aggregate cash to be paid for the Registrant's assets
($12,489,100) which are the subject of this Schedule 14A, the Registrant
is paying a filing fee of $2,497.82 (one-fiftieth of one percent of this
aggregate of the cash and the value of securities (other
<PAGE>
than its own) and other property to be received by the Registrant in the
subject transaction.)
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$12,489,100
-------------------------------------------------------------------------
(5) Total fee paid:
$2,497.82
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$2,497.82
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 14A
-------------------------------------------------------------------------
(3) Filing Party:
Brauvin Corporate Lease Program IV L.P.
-------------------------------------------------------------------------
(4) Date Filed:
May 29, 1996
-------------------------------------------------------------------------
<PAGE>
First Revised Prelimnary Proxy Materials
----------------------------------------
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
150 SOUTH WACKER DRIVE
SUITE 3200
CHICAGO, ILLINOIS 60606
July __, 1996
To the Limited Partners of
Brauvin Corporate Lease Program IV L.P.:
We are pleased to inform you that Brauvin Corporate Lease Program IV L.P.
(the "Partnership") has entered into an agreement through which the Partnership
has agreed to sell substantially all of its assets for a purchase price of
$12,489,100 in cash. This price is the fair market value of the assets as
determined by an independent appraiser and the Partnership has also received an
opinion from such entity that this transaction is fair to the Limited Partners
from a financial point of view. The sale is subject to your approval. Limited
Partners holding a majority of the units of limited partnership interest of the
Partnership (the "Units") must approve the transaction by voting "FOR" on the
enclosed proxy card in order for the Partnership to accept this all cash offer.
If the sale is approved by the Limited Partners and certain other conditions are
met, the Partnership will be liquidated and dissolved and the cash proceeds from
the sale of the assets, together with all remaining cash of the Partnership,
after payment of expenses and other Partnership liabilities, will be distributed
to you. We anticipate this cash distribution to be $6.95 to $7.50 per Unit for
Class A Limited Partners (those who are tax-exempt or seeking passive income to
offset passive
<PAGE>
losses) and $8.44 to $8.73 per Unit for Class B Limited Partners (those not in
need of passive income), based upon the time such Limited Partners invested in
the Partnership.
The General Partners will not receive any fees from the Partnership in
connection with the Transaction and will receive only a de minimis liquidating
distribution of less than $17,000 in the aggregate, in accordance with the terms
of the Partnership Agreement. The Transaction is subject to certain additional
conflicts of interest as described in the enclosed Proxy Statement, including
the fact that the purchaser of the assets is affiliated with Mr. Jerome J.
Brault and Brauvin Realty Advisors IV, Inc., two of the General Partners of the
Partnership, due to the minority ownership interest of Mr. Brault (who is also
an executive officer and the director of Brauvin Realty Advisors IV, Inc.) and
his son, James L. Brault (who is an executive officer of Brauvin Realty Advisors
IV, Inc.) in such purchaser.
The Partnership is soliciting your proxy in connection with the sale,
liquidation and dissolution. Included with this letter is a Notice of Special
Meeting of the Limited Partners to be held August __, 1996, at __:00 a.m., local
time, at the offices of the Partnership, 150 South Wacker Drive, Chicago,
Illinois 60606, for the purpose of considering and voting on the sale,
liquidation and dissolution. Also enclosed herewith is a Proxy Statement dated
July __, 1996, which contains information relating to the proposed transaction,
together with a proxy card which authorizes Jerome J. Brault, the Managing
General Partner, to vote your Units with respect to the sale, liquidation and
dissolution at the special meeting of the Limited Partners and any adjournment
thereof. The Limited Partners who hold Units of record on the books of the
Partnership at the close of business on ________, 1996, are entitled to notice
of, and to vote at, the special meeting or any adjournments thereof. There are
no quorum requirements with respect to the special meeting of the Limited
Partners (the "Special Meeting"), however, if Limited Partners holding a
majority of the Units do not submit a proxy or vote in person at the Special
Meeting the sale cannot be approved.
Regardless of whether you expect to be present in person at the Special
Meeting, please complete and promptly return the enclosed proxy card in the
enclosed, postage-prepaid envelope or by facsimile to (214) 999-9323 or (214)
999-9348 so that your Units may be represented and voted. A proxy may be
revoked at any time prior to its exercise by submitting a revocation or a later-
dated proxy to the Partnership's Information Agent, The Herman Group, Inc., or
by attending the Special Meeting and voting in person. Proxies properly
executed and returned, and not revoked, will be voted in accordance with
instructions as indicated thereon.
As the sale, liquidation and dissolution require the approval of the
Limited Partners holding a majority of the Units, failure to return a proxy card
in a timely manner or to vote at
<PAGE>
the Special Meeting will have the same effect as a vote "AGAINST" the sale,
liquidation and dissolution. Likewise, abstentions and broker non-votes will
have the same effect as a vote "AGAINST" the sale, liquidation and dissolution.
Any proxy cards which are returned and on which a choice is not indicated will
be voted "FOR" the sale, liquidation and dissolution. In view of the importance
of the Special Meeting, it is requested that you sign, mark and return the
enclosed proxy card in the enclosed, postage-prepaid envelope or by facsimile to
(214) 999-9323 or (214) 999-9348 no later than July __, 1996. When voting your
proxy by facsimile, both sides of the proxy card must be transmitted.
The transaction is one of a series of related transactions whereby the
purchaser seeks to acquire the assets of the Partnership and the assets of
certain affiliates of the Partnership. The approval of the limited partners
holding a majority in interest of each such limited partnership is a condition
to the effectiveness of the sale, which condition may be waived by the
purchaser.
Cezar M. Froelich, one of the general partners of the Partnership, gave
notice of his intent to resign as an individual General Partner of the
Partnership on May 23, 1996. Pursuant to the terms of the Partnership
Agreement, Mr. Froelich's resignation will become effective on the 90th day
following notice to the Limited Partners, which notice was dated June 20, 1996.
Questions and requests for assistance may be directed to the Partnership's
Information Agent, The Herman Group, Inc. at (800) 992-6145.
Very truly yours,
BRAUVIN REALTY ADVISORS IV, INC., Corporate
General Partner
By:________________________________
Title:_____________________________
___________________________________
Jerome J. Brault, Managing General Partner
JEROME J. BRAULT, THE MANAGING GENERAL PARTNER OF THE PARTNERSHIP AND
BRAUVIN REALTY ADVISORS IV, INC., THE CORPORATE GENERAL PARTNER OF THE
PARTNERSHIP, WHICH IS CONTROLLED BY MR. BRAULT, HAVE DETERMINED THAT THE
TRANSACTION IS FAIR AND REASONABLE TO THE LIMITED PARTNERS AND, THEREFORE,
RECOMMEND THAT THE LIMITED PARTNERS VOTE "FOR" THE TRANSACTION. HOWEVER, SUCH
GENERAL PARTNERS ARE SUBJECT TO CERTAIN CONFLICTS OF INTEREST WITH RESPECT TO
THE TRANSACTION. CEZAR M. FROELICH, ONE OF THE INDIVIDUAL GENERAL PARTNERS, IS
NOT RECOMMENDING THE TRANSACTION FOR THE REASONS STATED IN THE ENCLOSED PROXY
STATEMENT.
<PAGE>
NOTICE OF SPECIAL MEETING OF THE LIMITED PARTNERS OF
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
To be Held August __, 1996
To the Limited Partners of
Brauvin Corporate Lease Program IV L.P.:
NOTICE IS HEREBY GIVEN, that a special meeting (the "Special Meeting") of
the Limited Partners of Brauvin Corporate Lease Program IV L.P., a Delaware
limited partnership (the "Partnership") will be held at the offices of the
Partnership, 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606 on
Monday, August __, 1996, at __:00 a.m. local time, for the following purposes:
1. To approve the sale for $12,489,100 in cash, which is $7.65 per Unit,
of substantially all of the properties of the Partnership to Brauvin
Real Estate Funds L.L.C., a Delaware limited liability company (the
"Purchaser") and the subsequent liquidation and dissolution of the
Partnership. The Purchaser is affiliated with Mr. Jerome J. Brault
and Brauvin Realty Advisors IV, Inc., two of the general partners of
the Partnership. Because the sale will result in a transfer of the
Partnership's assets to an affiliate of these general partners, by
approving the transaction, the Limited Partners are automatically
approving an amendment of the Partnership's Restated Limited
Partnership Agreement, as amended, allowing the Partnership to sell
property to affiliates. Promptly upon approval and consummation of
the sale, liquidation and dissolution, the Class A Limited Partners
will receive a liquidating distribution of approximately $6.95 to
$7.50 per Unit in cash and the Class B Limited Partners will receive a
liquidating distribution of approximately $8.44 to $8.73 per Unit in
cash, based upon the time such Limited Partners invested in the
Partnership.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Information regarding the matters to be acted upon at the Special Meeting
is set forth in the accompanying Proxy Statement.
JEROME J. BRAULT, THE MANAGING GENERAL PARTNER OF THE PARTNERSHIP (THE
"MANAGING GENERAL PARTNER"), AND BRAUVIN REALTY ADVISORS IV, INC., THE CORPORATE
GENERAL PARTNER OF THE
<PAGE>
PARTNERSHIP (THE "CORPORATE GENERAL PARTNER" AND WITH THE MANAGING GENERAL
PARTNER, THE "OPERATING GENERAL PARTNERS"), WHICH IS CONTROLLED BY MR. BRAULT,
HAVE DETERMINED THAT THE TRANSACTION IS FAIR TO THE LIMITED PARTNERS AND,
THEREFORE, RECOMMEND THAT THE LIMITED PARTNERS VOTE "FOR" THE TRANSACTION.
HOWEVER, THE OPERATING GENERAL PARTNERS ARE SUBJECT TO CERTAIN CONFLICTS OF
INTEREST WITH RESPECT TO THE TRANSACTION. CEZAR M. FROELICH, THE OTHER
INDIVIDUAL GENERAL PARTNER, IS NOT RECOMMENDING THE TRANSACTION FOR THE REASONS
STATED ELSEWHERE IN THE ENCLOSED PROXY STATEMENT.
You are invited to attend the Special Meeting. Even if you intend to
attend the Special Meeting, you are requested to sign and date the accompanying
proxy card and return it promptly in the enclosed, postage-prepaid envelope or
by facsimile to (214) 999-9323 or (214) 999-9348. When voting your proxy by
facsimile, both sides of the proxy card must be transmitted. If you attend the
Special Meeting, you may, if you wish, vote in person regardless of whether you
have given your proxy. In any event, a proxy may be revoked at any time before
it is exercised.
The close of business on _________, 1996, has been fixed as the record date
for determination of the Limited Partners entitled to notice of and to vote at
the Special Meeting. There are no quorum requirements with respect to the
Special Meeting, however, if Limited Partners holding a majority of the Units do
not submit a proxy or vote in person at the Special Meeting the sale,
liquidation and dissolution cannot be approved.
BRAUVIN REALTY ADVISORS IV, INC., Corporate
General Partner
By: ___________________________
Title:________________________
______________________________
Jerome J. Brault, Managing
General Partner
Chicago, Illinois
July __, 1996
YOUR VOTE IS VERY IMPORTANT. IN ORDER TO ENSURE THAT YOUR INTERESTS WILL
BE REPRESENTED, WHETHER YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING OR NOT,
PLEASE SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PREPAID
<PAGE>
ENVELOPE OR BY FACSIMILE TO (214) 999-9323 OR (214) 993-9348. WHEN VOTING YOUR
PROXY BY FACSIMILE, BOTH SIDES OF THE PROXY CARD MUST BE TRANSMITTED. FAILURE
TO RETURN A PROXY CARD, ABSTENTION FROM VOTING AND BROKER NON-VOTES WILL EACH BE
THE SAME AS A VOTE "AGAINST" THE TRANSACTION. ANY PROXY CARDS ON WHICH A CHOICE
IS NOT INDICATED WILL BE VOTED "FOR" THE TRANSACTION.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................ 3
The Transaction................................... 4
Related Transactions.............................. 4
The Special Meeting; Vote Required................ 5
Purpose of and Reasons for the Transaction........ 5
Effects of the Transaction........................ 5
Valuation of the Assets; Fairness Opinion......... 6
Recommendations of the General Partners........... 7
Conflicts of Interest............................. 8
SPECIAL MEETING OF THE LIMITED PARTNERS................ 8
Special Meeting; Record Date...................... 8
Procedures for Completing Proxies................. 9
Vote Required..................................... 10
Solicitation Procedures........................... 11
Revocation of Proxies............................. 11
TERMS OF THE TRANSACTION............................... 12
The Acquisition Agreement......................... 12
Representations and Warranties of the Parties..... 12
Additional Agreements............................. 14
Conditions to Closing the Transaction............. 14
Dissolution and Liquidation of the Partnership.... 17
Determination of Cash Available for Distribution.. 18
Termination of the Acquisition Agreement.......... 19
Amendment of the Acquisition Agreement............ 20
Amendment of Partnership Agreement................ 20
Related Transactions.............................. 20
ACCOUNTING ISSUES AND INCOME TAX CONSEQUENCES OF THE
TRANSACTION....................................... 21
Accounting Issues................................. 21
Income Tax Consequences of the Transaction........ 21
SPECIAL FACTORS........................................ 24
Purpose of and Reasons for the Transaction........ 24
Alternatives to the Transaction................... 29
Effects of the Transaction........................ 31
Valuation of the Assets; Fairness Opinion......... 33
Recommendations of the General Partners........... 38
............................................. 42
Appraisal Rights.................................. 42
Costs Associated with the Transaction............. 42
CONFLICTS OF INTEREST.................................. 43
Interests in the Purchaser........................ 43
Purchaser Fees.................................... 43
Indemnification under the Partnership Agreement... 43
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Indemnification by the Purchaser.................. 44
CERTAIN INFORMATION ABOUT THE PARTNERSHIP,
ITS GENERAL PARTNERS AND THEIR AFFILIATES............ 45
The Partnership................................... 45
The General Partners.............................. 46
Description of the Assets......................... 47
Distributions..................................... 53
Ownership of Units................................ 54
Market for the Units.............................. 54
Legal Proceedings................................. 55
Independent Certified Public Accountants.......... 56
Available Information............................. 56
CERTAIN INFORMATION CONCERNING THE PURCHASER........... 56
SELECTED FINANCIAL DATA................................ 57
INCORPORATION BY REFERENCE............................. 57
</TABLE>
ANNEX I - VALUATION
ANNEX II - FAIRNESS OPINION
ii
<PAGE>
<TABLE>
Brauvin Corporate Lease Program IV
<CAPTION>
UNIT PROPERTY PROPERTY FOOT STREET
NO. TYPE NAME NOTES CITY ADDRESS ST.
<S> <C> <C> <C> <C> <C> <C>
21 RETAIL PAYLESS SHOESOURCE BLAINE 439 PEACE PORTAL DRIVE WA
7 RETAIL COMPUSA (11) DULUTH 3825 VENTURE DRIVE GA
18 SIT-DOWN EAST SIDE MARIO'S COPLEY 85 WEST MONTROSE AVENUE OH
14 SIT-DOWN STEAK 'N SHAKE PEERLESS PARK 76 SOUTH HIGHWAY DRIVE MO
13 RETAIL BLOCKBUSTER VIDEO EAGAN 2075 CLIFF ROAD MN
5 RETAIL WALDEN BOOKS MIAMI 11190 KENDAL DRIVE FL
6 SIT-DOWN MRS WINNER'S OAKWOOD 3465 MUNDY MILL ROAD GA
710 DAY-CARE CHILDREN'S WORLD (3) ARLINGTON 1235 WEST SUBLETT ROAD TX
22 SIT-DOWN SHOWBIZ ASHWAUBENSON 1273 LOMBARDI ACCESS ROAD WI
10 RETAIL SOFRO FABRICS JOLIET 2900 COLORADO AVENUE IL
17 SIT-DOWN SHOWBIZ SPRINGFIELD 2345 VALLEY LOOP ROAD OH
</TABLE>
iii
<PAGE>
<TABLE>
Brauvin Corporate Lease Program IV
<CAPTION>
UNIT PROPERTY PROPERTY FOOT BLG. LAND YEAR CUSHMAN AND WAKEFIELD VALUATION INDICATORS
NO. TYPE NAME NOTES SF SF BUILT C&W VALUE YR 1 $NOI OAR IRR OUT-OAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
21 RETAIL PAYLESS SHOESOURCE 10,900 16,950 1955 $1,280,000 $ 162,161 12.67% 11.00% 11.00%
7 RETAIL COMPUSA (11) 26,150 105,919 1992 $2,050,000 $ 228,603 11.15% 12.00% 11.00%
18 SIT-DOWN EAST SIDE MARIO'S 6,240 76,783 1993 $1,480,000 $ 150,170 10.15% 12.25% 11.50%
14 SIT-DOWN STEAK 'N SHAKE 3,722 39,900 1990 $1,150,000 $ 122,479 10.65% 12.25% 11.50%
13 RETAIL BLOCKBUSTER VIDEO 7,028 37,364 1993 $ 940,000 $ 100,908 10.73% 12.00% 11.00%
5 RETAIL WALDEN BOOKS 8,477 32,344 1987 $1,380,000 $ 157,848 11.44% 12.00% 11.00%
6 SIT-DOWN MRS WINNER'S 2,436 25,700 1983 $ 780,000 $ 79,726 10.22% 12.25% 11.50%
710 DAY-CARE CHILDREN'S WORLD (3) 4,950 27,207 1984 $ 470,000 $ 46,800 9.96% 11.25% 11.50%
22 SIT-DOWN SHOWBIZ 10,172 85,063 1983 $1,080,000 $ 130,932 12.12% 12.50% 11.50%
10 RETAIL SOFRO FABRICS 20,000 79,192 1993 $1,570,000 ($38,800) -2.47% 12.50% 11.50%
17 SIT-DOWN SHOWBIZ 10,183 120,618 1983 $ 920,000 $ 112,534 12.23% 12.50% 11.50%
</TABLE>
FOOTNOTES:
(1) CURRENTLY BEING REMODELED FOR A CHINESE RESTAURANT.
(4) ON HOLD UNTIL FURTHER NOTICE.
(5) WAS A PONDEROSA. CURRENTLY CLOSED.
(6) SUBLEASED BY PONDEROSA.
(7) SUBLEASED BY PONDEROSA.
(8) SUBLEASED
(11) BRAUVIN HIGH-YIELD FUND L.P. OWNS 23.5%, BRAUVIN INCOME PLUS III L.P. OWNS
6.3% AND BRAUVIN CORPORATE LEASE PROGRAM IV L.P. OWNS 70.2%.
iv
<PAGE>
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
150 SOUTH WACKER DRIVE
SUITE 3200
CHICAGO, ILLINOIS 60606
PROXY STATEMENT
FOR THE SPECIAL MEETING OF THE LIMITED PARTNERS
TO BE HELD AUGUST __, 1996
This proxy statement (the "Proxy Statement") and the enclosed proxy card
are being first mailed to the limited partners (the "Limited Partners") of
Brauvin Corporate Lease Program IV L.P., a Delaware limited partnership (the
"Partnership") on or about July __, 1996 by the Partnership to solicit proxies
for use at a special meeting of the Limited Partners (the "Special Meeting") to
be held at the offices of the Partnership, 150 South Wacker Drive, Chicago,
Illinois 60606 on ______, August __, 1996 at _:00 a.m., local time, or at such
other place and time to which the Special Meeting may be adjourned.
The purpose of the Special Meeting is to consider the approval of a sale
(the "Sale"), for $12,489,100 in cash, which is $7.65 per Unit (as hereinafter
defined), of substantially all of the Partnership's properties (the "Assets").
The purchase price is the fair market value of the Assets as determined by an
independent appraiser. The purchaser of the Assets is Brauvin Real Estate Funds
L.L.C., a Delaware limited liability company (the "Purchaser") that is
affiliated with the Operating General Partners, as hereinafter defined. Because
the Sale will result in a transfer of the Partnership's assets to an affiliate
of these general partners of the Partnership, by approving the Sale, the Limited
Partners are automatically approving an amendment of the Partnership Agreement,
as hereinafter defined, allowing the Partnership to sell or lease property to
affiliates (this amendment, together with the Sale shall be referred to herein
as the "Transaction"). The terms of the Sale are set forth in an Agreement for
Purchase and Sale of Assets dated June 14, 1996 by and between the Purchaser and
the Partnership (the "Acquisition Agreement"). If the Transaction is approved
and certain other conditions met, the Partnership will be liquidated and
dissolved (the "Liquidation") and the Limited Partners who entered the
Partnership as Class A Investors (those who are tax-exempt or seeking passive
income to offset passive losses) (the
- --------------------------------------------------------------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
1
<PAGE>
"Class A Limited Partners") will receive a liquidating distribution of
approximately $6.95 to $7.50 per Unit in cash based upon the time such Class A
Limited Partners invested in the Partnership and the Limited Partners who
entered the Partnership as Class B Investors (those not in need of passive
income) (the "Class B Limited Partners") will receive a liquidating distribution
of approximately $8.44 to $8.73 per Unit in cash based upon the time such Class
B Limited Partners invested in the Partnership. The actual liquidating
distribution will be based upon the cash proceeds from the Sale, plus all
remaining cash of the Partnership (including earnings through July 31, 1996)
after paying or providing for payment of the Partnership's actual costs incurred
and accrued through the effective time of the Sale (the "Effective Time"),
including reasonable reserves in connection with: (i) the proxy solicitation;
(ii) the Sale (as detailed in the Acquisition Agreement); and (iii) winding up
of the Partnership, including preparation of the final audit, tax return and K-
1s (collectively, the "Transaction Costs") and all other outstanding Partnership
liabilities. The general partners of the Partnership (the "General Partners")
will not receive any fees from the Partnership in connection with the
Transaction and will receive only a de minimis liquidating distribution of less
than $17,000 in the aggregate, in accordance with the terms of the Partnership
Agreement. The Transaction is subject to certain additional conflicts of
interest, as described herein, including the fact that Mr. Jerome J. Brault, the
Managing General Partner of the Partnership (the "Managing General Partner") and
his son, James L. Brault, an executive officer of Brauvin Realty Advisors IV,
Inc., the Corporate General Partner of the Partnership (the "Corporate General
Partner"), have a minority ownership interest in the Purchaser. Cezar M.
Froelich, the other individual General Partner, has no affiliation with the
Purchaser.
The affirmative vote of the Limited Partners holding a majority of the
issued and outstanding units (in excess of 50%) of limited partnership interest
of the Partnership (each, a "Unit" and collectively, the "Units") is necessary
to approve the Transaction. The approval of the General Partners is not required
to approve the Transaction. There are no quorum requirements with respect to the
Special Meeting, however, if the Limited Partners holding a majority of the
Units do not submit a proxy or vote in person at the meeting the Transaction
cannot be approved. Neither Delaware law nor the Partnership's Restated Limited
Partnership Agreement, as amended (the "Partnership Agreement") provide the
Limited Partners not voting in favor of the Transaction with dissenters'
appraisal rights.
The close of business on ________________, 1996 has been established as the
record date (the "Record Date") for determining the Limited Partners entitled to
notice of, and to direct the vote of the Units at the Special Meeting. As of
the Record Date, the Partnership had outstanding and entitled to vote
2
<PAGE>
1,632,510.487 Units, held of record by 885 Limited Partners. Each Unit entitles
the holder to one vote on each matter submitted to a vote of the Limited
Partners.
All duly executed proxy cards received from the Limited Partners prior to
the Special Meeting will be voted in accordance with the choices specified
thereon. If a duly executed proxy card does not specify a choice, the Units
represented thereby will be voted "FOR" the Transaction. A Limited Partner who
gives a proxy may revoke it at any time before it is voted at the Special
Meeting, as described herein.
The accompanying proxy is solicited on behalf of the Partnership to be
voted at the Special Meeting. The Partnership's principal executive offices are
located at 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606 and its
telephone number is (312) 443-0922. The Partnership has engaged The Herman
Group, Inc. to act as Information Agent in connection with the proxy
solicitation process. In addition to the original solicitation by mail, proxies
may be solicited by telephone, telegraph or in person. All expenses of this
solicitation, including the cost of preparing and mailing this Proxy Statement,
will be borne by the Partnership.
The Partnership is a Delaware limited partnership formed on August 7, 1991.
The Partnership's Commission file number is 0-21536. The General Partners are
the Corporate General Partner, the Managing General Partner and Cezar M.
Froelich. Mr. Froelich gave notice of his intent to resign as an individual
General Partner of the Partnership on May 23, 1996. Pursuant to the terms of
the Partnership Agreement, Mr. Froelich's resignation will become effective on
the 90th day following notice to the Limited Partners, which notice was dated
June 20, 1996. The Corporate General Partner and the Managing General Partner
are collectively referred to herein as the "Operating General Partners."
SUMMARY
Set forth below is a summary of certain information contained elsewhere in
this Proxy Statement. It is not intended to be a complete description of those
matters which it covers and much of the information contained in this Proxy
Statement is not covered by this Summary. The information contained in this
Summary is qualified by the more complete information contained elsewhere in
this Proxy Statement or incorporated by reference into this Proxy Statement. All
Limited Partners are urged to read this Proxy Statement in its entirety.
3
<PAGE>
THE TRANSACTION
The Sale
Pursuant to the terms of the Acquisition Agreement, the Partnership
proposes to sell substantially all of the Assets to the Purchaser for a purchase
price of $12,489,100 in cash, which is $7.65 per Unit. This price is the fair
market value of the Assets, as of April 1, 1996 as determined by an independent
appraiser and the Partnership has also received an opinion from such entity that
the transaction is fair to the Limited Partners from a financial point of view.
See "Terms of the Transaction - The Acquisition Agreement."
Dissolution and Liquidation
If the Transaction is approved and the Sale consummated, the Partnership
will have sold the Assets and, pursuant to the terms of the Partnership
Agreement, will be liquidated and dissolved. Promptly thereafter, each Class A
Limited Partner will receive a liquidating distribution of approximately $6.95
to $7.50 per Unit in cash and each Class B Limited Partner will receive a
liquidating distribution of approximately $8.44 to $8.73 per Unit in cash, based
upon the time such Limited Partners invested in the Partnership. The actual
liquidating distribution will be based upon cash proceeds from the Sale, plus
all remaining cash of the Partnership (excluding earnings after July 31, 1996)
after paying or providing for payment of the Transaction Costs and other
outstanding Partnership liabilities. See "Terms of the Transaction -
Dissolution and Liquidation of the Partnership" and "Terms of the Transaction -
Determination of Cash Available for Distribution." The General Partners will
not receive any fees from the Partnership in connection with the Transaction and
will receive only a de minimis liquidating distribution of less than $17,000 in
the aggregate, in accordance with the terms of the Partnership Agreement. The
Transaction is subject to certain additional conflicts of interest as described
herein, including the fact that the Managing General Partner and his son, James
L. Brault (collectively, the "Braults") have a minority ownership interest in
the Purchaser. Mr. Froelich has no affiliation with the Purchaser. See "Terms
of the Transaction - The Acquisition Agreement," "Terms of the Transaction -
Determination of Cash Available for Distribution" and "Conflicts of Interest."
RELATED TRANSACTIONS
The Transaction is one of a series of related transactions whereby the
Purchaser seeks to acquire the Assets of the Partnership and the assets, through
purchase or merger, of the Affiliated Limited Partnerships (as hereinafter
defined). The approval of a majority in interest of the limited partners of each
of the Affiliated Limited Partnerships to their respective
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Affiliated Transactions, as hereinafter defined, is a condition to the
effectiveness of the Transaction, which condition may be waived by the
Purchaser. See "Terms of the Transaction - Related Transactions."
THE SPECIAL MEETING; VOTE REQUIRED
A Special Meeting of the Limited Partners will be held on August __, 1996,
to consider and vote upon the Transaction. It is a condition to the closing of
the Sale that the Limited Partners holding a majority of the Units (in excess of
50%) approve the Transaction. The Partnership is soliciting proxies from the
Limited Partners to be used at the Special Meeting and any adjournments thereof.
The approval of the General Partners is not required to approve the Transaction.
See "Special Meeting of the Limited Partners."
PURPOSE OF AND REASONS FOR THE TRANSACTION
The principal purpose of the Transaction is to cause the transfer of the
Assets to the Purchaser in return for cash proceeds which, upon Liquidation will
be distributed to the Limited Partners. The sale of the Assets to the Purchaser
will result in the Partnership receiving the fair market value for the Assets
from a buyer that has the ability to quickly consummate the Transaction and is
willing to purchase all of the Assets on an all cash, "as is" basis. This
structure allows the Limited Partners to receive a cash distribution of the fair
market value of the Assets, that can be invested in alternative investments.
See "Special Factors - Purpose of and Reasons for the Transaction."
EFFECTS OF THE TRANSACTION
If the Transaction is approved and the remaining conditions to the Sale met
or waived, the Assets of the Partnership will be sold to the Purchaser, the
Partnership will receive the purchase price of $12,489,100 for the Assets, the
Partnership will pay the Transaction Costs and will pay or make provisions for
the payment of all other Partnership liabilities and the Partnership will be
liquidated and dissolved. Promptly thereafter, each Class A Limited Partner
will receive a liquidating distribution of approximately $6.95 to $7.50 per Unit
in cash and each Class B Limited Partner will receive a liquidating distribution
of approximately $8.44 to $8.73 per Unit in cash, based upon the time such
Limited Partners invested in the Partnership. At the time of investing, Class A
Limited Partners acknowledged that they were subject to certain risks, including
receipt of smaller cash distributions on the liquidation of the Partnership
and/or the sale of the Assets if there were a loss on the sale of the
properties. See "Accounting Issues and Income Tax Consequences of the
Transaction -- Income Tax Consequences of the Transaction
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- -- Differing Tax Treatment of the Limited Partners." Thereafter, Limited
Partners will cease to be owners of the Partnership and will no longer bear the
costs or benefits associated with such ownership. See "Special Factors -
Effects of the Transaction," "Special Factors - Purpose of and Reasons for the
Transaction -Costs and Risks Associated with Continued Ownership" and "Special
Factors - Purpose of and Reasons for the Transaction - Benefits of the
Transaction."
The General Partners will not receive any fees from the Partnership in
connection with the Transaction and will receive only a de minimis liquidating
distribution of less than $17,000 in the aggregate in accordance with the terms
of the Partnership Agreement. In addition, the Braults have a minority
ownership interest in the Purchaser which will own the Assets following the
consummation of the Transaction. Furthermore, each of Brauvin Management
Company and Brauvin Financial, Inc., corporations owned, in part, by Cezar M.
Froelich and an affiliate of Jerome J. Brault, will receive $21,870 from the
Purchaser (not the Partnership) for advisory services rendered in connection
with the Transaction.
If the Transaction is not consummated, there can be no assurance as to
whether any future liquidation or disposition of the Assets, either in whole or
in part, will occur or on what terms they might occur. However, if not
approved, the Operating General Partners will continue to operate the
Partnership in accordance with the terms of the Partnership Agreement and in
fulfillment of their fiduciary duties, including the review of any third-party
offers to purchase any or all of the Assets, in an effort to enhance the
Partnership's value on behalf of the Limited Partners. In addition, the
Operating General Partners will continue to evaluate the various alternatives to
the Transaction, as described under the heading "Special Factors -Alternatives
to the Transaction" below. Such alternatives include: (i) continuing to hold
the Assets; (ii) individual property sales; (iii) an auction of any or all of
the properties; and (iv) solicitation of third-party bids. The Operating
General Partners have concluded that such options are not in the best interest
of the Limited Partners at this time, particularly in light of the Purchaser's
offer. The Operating General Partners do not intend to actively solicit bids
for the Assets in the immediate future.
VALUATION OF THE ASSETS; FAIRNESS OPINION
Cushman & Wakefield Valuation Advisory Services ("Cushman & Wakefield"),
the largest real estate valuation and consulting organization in the United
States, was engaged by the Partnership to prepare an appraisal of the Assets.
Cushman & Wakefield was subsequently engaged to provide an opinion as to the
fairness of the Transaction to the Limited Partners from a financial point of
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view. Cushman & Wakefield preliminarily valued the Assets at $11,851,220. The
Operating General Partners reviewed the initial valuation and concluded that the
values of the Assets set forth therein were lower than expected. As a result of
subsequent considerations presented by the Operating General Partners, the
valuation was increased to $12,489,100, which is the total cash consideration to
be paid by the Purchaser in connection with the Sale. In addition, Cushman &
Wakefield has advised the Partnership that in its opinion, the Transaction is
fair to the Limited Partners from a financial point of view. See "Special
Factors - Valuation of the Assets; Fairness Opinion."
RECOMMENDATIONS OF THE GENERAL PARTNERS
The Operating General Partners have determined that the terms of the
Transaction are fair to the Limited Partners and, therefore, recommend that the
Limited Partners vote "FOR" the Transaction. The recommendation of the
Operating General Partners is, however, subject to conflicts of interest as
described herein. The Operating General Partners' determination of fairness was
based on the following factors in favor of the Transaction: (i) use of an
independent appraiser's valuation of the Assets as a basis for the purchase
price; (ii) the structure of the Sale as an all cash, "as is" sale of all of the
Assets, thereby eliminating the need for the Partnership to continue operations
with the less salable or valuable properties; (iii) avoidance of certain
potential transaction costs, such as investment banking fees or real estate
brokerage commissions, which could have approximated $375,000 to $750,000 in the
aggregate; (iv) the willingness of the Purchaser to effect an all cash
transaction; (v) the independent fairness opinion rendered in connection with
the Transaction; (vi) the fact that the Transaction will be effected with
minimal representations and warranties by the Partnership, thereby eliminating
the need to escrow funds; (vii) the flexibility granted to the Operating General
Partners in the Acquisition Agreement to pursue subsequent offers that can
produce a better return to the Limited Partners; (viii) the fact that a majority
in interest of the Limited Partners (in excess of 50%) is required to approve
the Transaction; (ix) the average lease term of the Assets and other risks
associated with continuing to own the Assets; (x) the high cost of operating a
publicly-held entity; (xi) the lack of an established trading market for the
Units; (xii) the comparison of the per Unit purchase price to current and
historical market prices; (xiii) the expressed desire of certain Limited
Partners to have their investment in the Partnership liquidated; and (xiv) the
Operating General Partners' industry knowledge regarding the marketability of
properties with lease terms similar to the Assets. In determining the fairness
of the Transaction, the Operating General Partners also considered the following
factors: (i) the affiliated nature of the Transaction and other conflicts of
interest; (ii) that there can be no
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assurance that the cash purchase price received by the Limited Partners in
connection with the Transaction can be invested in alternative investments that
will generate a return equal to or greater than that generated by the investment
in the Partnership; (iii) that the Limited Partners will no longer have an
ownership interest in the Assets and thus will not share in any potential
changes in their value; (iv) that there can be no assurances that a better offer
for the acquisition of the Assets may not be available now or in the future; and
(v) that the Limited Partners may incur certain tax liabilities as a result of
the Transaction. Mr. Froelich is not recommending the Transaction since he
believes that the most advantageous methodology for determining a fair price for
the Assets would be to seek third-party offers through an arm's-length bidding
process. See "Special Factors -Recommendations of the General Partners" for a
discussion of the foregoing.
CONFLICTS OF INTEREST
The Transaction is subject to certain conflicts of interest as more fully
described under the heading "Conflicts of Interest" below. Such conflicts
include: (i) that the Operating General Partners are affiliated with the
Purchaser, due to the minority ownership interest of the Braults in such entity
and, therefore, they have an indirect economic interest in consummating the
Transaction that may be considered to be in conflict with the economic interests
of the Limited Partners; (ii) that the General Partners will receive a de
minimis liquidating distribution of less than $17,000 in the aggregate in
connection with the liquidation and dissolution of the Partnership; (iii) that
each of Brauvin Management Company and Brauvin Financial, Inc., which are owned,
in part, by Cezar M. Froelich and an affiliate of Jerome J. Brault, will receive
$21,870 from the Purchaser (not the Partnership) for advisory services rendered
in connection with the Transaction; and (iv) that the General Partners have been
granted certain indemnification rights by each of the Partnership and the
Purchaser.
SPECIAL MEETING OF THE LIMITED PARTNERS
SPECIAL MEETING; RECORD DATE
Pursuant to the terms of the Partnership Agreement, the approval of the
Limited Partners holding a majority of the Units is required to approve the
Transaction. A Special Meeting of the Limited Partners will be held on August
__, 1996, at the offices of the Partnership, 150 South Wacker Drive, Chicago,
Illinois 60606, at _:00 a.m., local time, to consider and vote upon the
Transaction. The Partnership Agreement provides that the General Partners may
call a special meeting of the Limited Partners, which special meeting shall have
a record date, for the purpose
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of determining the Limited Partners entitled to vote, of not more than 60 days
nor less than 20 days prior to the date when ballots are delivered to the
Limited Partners. In accordance therewith, the close of business on
________________, 1996 has been established as the Record Date. Under the terms
of the Partnership Agreement, only the Limited Partners holding Units of record
on the Record Date are eligible to vote those Units on the proposals set forth
in this Proxy Statement. A Limited Partner holding Units of record as of the
Record Date will retain the right to vote on the proposals set forth herein even
if such Limited Partner sells or transfers such Units after such date. As of
the Record Date, the Partnership had 1,632,510.487 Units outstanding and
entitled to vote, held of record by 885 Limited Partners. A list of the Limited
Partners entitled to vote at the special meeting will be available for
inspection at the executive offices of the Partnership at 150 South Wacker
Drive, Suite 3200, Chicago, Illinois 60606. There are no quorum requirements
with respect to the Special Meeting, however, if Limited Partners holding a
majority of the Units do not submit a proxy or vote in person at the Special
Meeting, neither the Transaction nor the Amendment can be approved.
All Limited Partners are invited to attend the Special Meeting. However,
even those Limited Partners intending to attend the Special Meeting are
requested to complete and return the enclosed proxy card promptly.
PROCEDURES FOR COMPLETING PROXIES
Accompanying this Proxy Statement is a proxy card solicited by and on
behalf of the Partnership for use at the Special Meeting. When a proxy card is
returned, properly executed, the Units represented thereby will be voted at the
Special Meeting by the Managing General Partner in the manner specified on the
proxy card. It is important that you mark, sign and date your proxy card and
return it in the enclosed, postage-prepaid envelope or by facsimile to (214)
999-9323 or (214) 999-9348 as soon as possible. When voting your proxy by
facsimile, both sides of the proxy must be transmitted. Delivery of your proxy
does not prohibit you from attending the Special Meeting. To be properly
executed, the proxy card must be signed by and bear the date of signature of the
Limited Partner voting the Units represented thereby. All questions as to the
form of documents and the validity of consents will be determined by the
Managing General Partner, which determinations shall be final and binding. The
Managing General Partner reserves the right to waive any defects or
irregularities in any proxy.
Each Unit entitles the holder thereof to one vote with respect to the
proxies solicited hereby. Only holders of Units of record on the record date
may grant a proxy with respect to those Units. IF UNITS STAND OF RECORD IN THE
NAMES OF TWO OR
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MORE PERSONS, ALL SUCH PERSONS MUST SIGN THE PROXY CARD. WHEN SIGNING AS AN
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE THE FULL
TITLE OF SUCH. IF A CORPORATION, THE PROXY SHOULD BE SIGNED BY THE PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP'S NAME BY
AN AUTHORIZED PERSON. IF YOUR UNITS ARE HELD IN THE NAME OF A BROKERAGE FIRM,
BANK, NOMINEE OR OTHER INSTITUTION, ONLY SUCH INSTITUTION CAN SIGN A PROXY WITH
RESPECT TO YOUR UNITS AND CAN DO SO ONLY AT YOUR DIRECTION. ACCORDINGLY, IF YOUR
UNITS ARE SO HELD, PLEASE CONTACT YOUR ACCOUNT REPRESENTATIVE AND GIVE
INSTRUCTIONS FOR A PROXY TO BE SIGNED WITH RESPECT TO YOUR UNITS.
A Limited Partner in favor of the Transaction should mark the "FOR" box on
the enclosed proxy card, date and sign the proxy and mail it promptly in the
enclosed, postage-prepaid envelope or fax a copy to (214) 999-9323 or (214) 999-
9348. When voting your proxy by facsimile, both sides of the proxy card must be
transmitted. If a proxy card is executed but no indication is made as to what
action is to be taken, it will be deemed a vote "FOR" the Transaction. By
consenting to the Transaction, the Limited Partners irrevocably appoint the
Managing General Partner, or his designee, as their attorney-in-fact to execute
and deliver such documents as are necessary to effect the Transaction.
AS THE CONSENT OF THE LIMITED PARTNERS HOLDING A MAJORITY IN INTEREST OF
THE OUTSTANDING UNITS IS NECESSARY TO CONSUMMATE THE PROPOSED TRANSACTION,
FAILURE TO RETURN A PROXY IN A TIMELY MANNER OR TO VOTE AT THE SPECIAL MEETING,
ABSTENTION FROM VOTING OR A BROKER NON-VOTE WILL EACH HAVE THE SAME EFFECT AS A
VOTE "AGAINST" THE TRANSACTION.
Questions and requests for assistance or for additional copies of the Proxy
Statement and proxy card may be directed to the Partnership's Information Agent,
The Herman Group, Inc., 2121 San Jacinto Street, 26th Floor, Dallas, Texas
75201, (800) 992-6145. In addition to soliciting proxies by mail, proxies may
be solicited in person and by telephone or telegraph. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the proxy solicitation.
VOTE REQUIRED
Pursuant to the terms of the Partnership Agreement, the vote of the Limited
Partners owning a majority of the Units (in excess of 50%) is necessary to
approve the Transaction. Each Unit entitles the holder to one vote on each
matter submitted to a vote of the Limited Partners. If a majority in interest
of the Limited Partners consent to the Transaction and certain other conditions
are met, the Sale will be consummated, the Partnership will be liquidated and
dissolved and the proceeds of the Sale, together with all remaining cash of the
Partnership, after
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payment of the Transaction Costs and other Partnership liabilities, will be
distributed to the Limited Partners in accordance with the Partnership
Agreement. A consent to the Transaction, therefore, includes a consent to both
the Sale and the Liquidation.
SOLICITATION PROCEDURES
The Partnership has retained The Herman Group, Inc. to act as Information
Agent and for advisory services in connection with this proxy solicitation. In
connection therewith, The Herman Group, Inc. will be paid reasonable and
customary compensation and will be reimbursed for its reasonable out-of-pocket
expenses, as described herein. See "Special Factors -- Costs Associated with
the Transaction." The Partnership has also agreed to indemnify The Herman
Group, Inc. against certain liabilities and expenses including, liabilities and
expenses under federal securities laws.
The Partnership will not pay any fees or commissions to any broker or
dealer or other person (other than to The Herman Group, Inc.) for soliciting
proxies pursuant to this solicitation. Banks, brokerage houses and other
custodians, nominees and fiduciaries will be requested to forward the
solicitation material to the customers for whom they hold Units, and the
Partnership will reimburse them for reasonable mailing and handling expenses
incurred by them in forwarding proxy materials to their customers.
REVOCATION OF PROXIES
A proxy executed and delivered by a Limited Partner may subsequently be
revoked by submitting written notice of revocation to the Partnership. A
revocation may be in any written form validly signed by a Limited Partner as
long as it clearly states that such Limited Partner proxy previously given is no
longer effective. To prevent confusion, the notice of revocation must be dated.
Notices of revocation should be delivered to The Herman Group, Inc., 2121 San
Jacinto Street, 26th Floor, Dallas, Texas 75201, (800) 992-6145. A Limited
Partner may also revoke its proxy by attending the Special Meeting and voting in
person. If a Limited Partner signs, dates and delivers a proxy to the
Partnership and, thereafter, on one or more occasions dates, signs and delivers
a later-dated proxy, the latest-dated proxy card is controlling as to the
instructions indicated therein and supersedes such Limited Partner's prior proxy
as embodied in any previously submitted proxy card.
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TERMS OF THE TRANSACTION
THE ACQUISITION AGREEMENT
The Partnership and the Purchaser entered into the Acquisition Agreement as
of June 14, 1996, pursuant to which the Partnership has agreed to sell and the
Purchaser has agreed to purchase the Assets on the terms and subject to the
conditions set forth therein. The summary of the Acquisition Agreement which is
set forth below is qualified in its entirety by reference to the complete form
of Acquisition Agreement, which is available for inspection and copying by any
interested Limited Partner, or its representative who has been so designated by
the Limited Partner, at the Partnership's principal executive offices during
regular business hours. A copy of the Acquisition Agreement shall also be sent
to any Limited Partner or duly designated representative thereof, at such
Limited Partner's expense, upon request of such Limited Partner.
Pursuant to the terms of the Acquisition Agreement, the Purchaser proposes
to purchase the Assets for $12,489,100 in cash, which is equal to $7.65 per
Unit. The purchase price is equal to the fair market value of the Assets as
determined by an independent appraiser. See "Special Factors - Valuation of the
Assets; Fairness Opinion." The Acquisition Agreement also provides that the
Purchaser will acquire all earnings of the Partnership that accrue after July
31, 1996. The Purchaser has not and is not expected to pay any earnest money in
connection with the Sale. If the Closing Conditions (as hereinafter defined) are
met, the Sale is subject to close on or before September 15, 1996. Should the
Transaction not be consummated by September 15, 1996, the financing to
consummate the Sale may not be available. In order to meet certain other interim
deadlines established by the Purchaser, the Transaction must be approved by the
Limited Partners no later than August 15, 1996.
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Pursuant to the Acquisition Agreement, the Purchaser has represented and
warranted to the Partnership that: (i) it is a limited liability company duly
formed and in good standing under the laws of the State of Delaware with the
requisite authority to carry on the business it will conduct following the
Transaction; (ii) it has the requisite power and authority to enter into the
Acquisition Agreement and perform its obligations thereunder; and (iii) all
government approvals and notices which are required for it to effect the
Transaction have been obtained or been properly filed, except those approvals or
filings where the failure to make such filing or obtain authorization, consent
or approval will not have a material adverse affect on the Purchaser.
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Pursuant to the Acquisition Agreement, the Partnership has represented and
warranted to the Purchaser that: (i) it is a limited partnership duly formed and
validly existing and in good standing under the laws of the State of Delaware;
(ii) it has the requisite power to carry on its business; (iii) it has
1,632,510.487 issued and outstanding Units; (iv) it has the requisite power and
authority to enter into the Acquisition Agreement, subject to the approval of
the Limited Partners; (v) except as otherwise disclosed, entering into the
Acquisition Agreement will not violate, conflict with, or result in a breach of
any provision of, or constitute a default under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien upon
any of the Assets of the Partnership under any of the terms, conditions or
provisions of the Partnership's organizational documents or Partnership
Agreement, any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation which the Partnership is a party to,
or violate any statute, rule or regulation or preclude the Partnership or any of
its Assets, except as otherwise disclosed; (vi) the Partnership has made all
required filings with the Securities and Exchange Commission; (vii) the
Partnership has no liabilities other than those disclosed on its balance sheet
provided pursuant to the Acquisition Agreement; (viii) there has been no adverse
changes in the Partnership's financial condition since the preparation of the
financial statements provided pursuant to the Acquisition Agreement; (ix) to the
knowledge of the Partnership, there is no action or proceeding or investigation
pending, threatened against or involving the Partnership or any of the Assets or
rights of the Partnership and to the Partnership's knowledge, no liabilities
which if adversely determined would individually or in the aggregate have a
material adverse affect on the condition of the Partnership; and (x) the
Partnership will provide to the Purchaser a true, correct and complete set of
all files, documents and other written materials relating to each real property
held directly or indirectly by the Partnership including, without limitation,
copies of environmental reports, letters of credit or other credit enhancement
instruments, title insurance policies, hazard insurance policies, flood
insurance policies and other insurance policies, all balance sheets, operating
statements and other financial statements, all existing engineering reports,
soil studies and reports, plans, specifications, architectural and engineering
drawings, completion agreements, arrangements, warranties, commitments and other
similar reports, studies and items, leases and contracts, property management
and leasing brokerage agreements and other writings whatsoever.
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ADDITIONAL AGREEMENTS
The Partnership agreed to file a proxy statement soliciting approval of
the Limited Partners for the Transaction and to hold a meeting of the Limited
Partners as soon as practicable thereafter.
The Operating General Partners have agreed that, if required pursuant
to their fiduciary obligation, they will respond to any unsolicited inquiry,
contract or proposal made by a third party to the Partnership (an "Alternative
Proposal"), and nothing in the Acquisition Agreement shall prohibit any of the
General Partners from responding to such Alternative Proposal, making any
required disclosures under Federal securities laws or providing information
regarding the Partnership to the party making such Alternative Proposal,
negotiating with such party in good faith, terminating the Acquisition Agreement
or taking any other action, provided, however, that the Partnership agrees to
give the Purchaser reasonable notice of any such response, negotiations or other
matters, as well as a reasonable opportunity to respond, taking into account in
good faith the facts and circumstances that were valid at the time of such
response, negotiation or other matters. In the event the Acquisition Agreement
is terminated due to the consummation of an Alternative Proposal, Purchaser
shall be entitled to a fee equal to 1% of the fair market value of the
Assets.
CONDITIONS TO CLOSING THE TRANSACTION
The respective obligations of each party to effect the Transaction shall
be subject to the fulfillment at or prior to the Effective Time, as such term is
defined in the Acquisition Agreement, of each of the following conditions which
may be waived, in whole or in part, only by written agreement of the Partnership
and the Purchaser: (i) all approvals, notices, filings, registrations and
authorizations of any governmental authority required for consummation of the
Transaction shall have been obtained or made; (ii) approval of the Transaction
by Limited Partners holding a majority of Units shall have been obtained; (iii)
no preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, nor any statute, rule, regulation or
executive order promulgated or enacted by a governmental authority shall be in
effect which would prevent the consummation of the Transaction.
The obligation of the Partnership to effect the Transaction is also
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions which may be waived, in whole or in part, by the
Partnership: (i) the Purchaser shall in all material respects have performed
each obligation to be
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performed by it under the Acquisition Agreement on or prior to the Effective
Time; (ii) the representations and warranties of the Purchaser set forth in the
Acquisition Agreement and described above shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of such
time, except to the extent that any such representation or warranty is made as
of a specified date, in which case such representation or warranty shall have
been true and correct as of such date; (iii) the Partnership shall have
received a certificate of the Purchaser, dated the Closing Date, signed by the
manager of the Purchaser, to the effect that the conditions specified in
sections (i) and (ii) above have been fulfilled; (iv) a favorable opinion of
Cushman & Wakefield as to the fairness of the purchase price to the Limited
Partners, from a financial point of view, shall have been delivered to the
Partnership; and (v) no later than the earlier of (A) July 15, 1996 or (B) the
date of the mailing of this Proxy Statement, the Purchaser shall have delivered
to the Partnership a commitment letter executed by a financial institution or
other financing source providing for debt financing in an amount at least equal
to $58,000,000 and on terms commercially reasonable from the point of view of
the Partnership as the selling party in the Transaction.
The obligation of the Purchaser to effect the Transaction is also
subject to the fulfillment at or prior to the Effective Time, or such earlier
date as specified therein, of each of the following conditions which may be
waived in whole or in part by the Purchaser: (i) the Partnership shall in all
material respects have performed each obligation to be performed by it under the
Acquisition Agreement on or prior to the Effective Time; (ii) the Purchaser
shall have received certificates of the Partnership, dated the Closing Date,
signed by the Operating General Partners to the effect that the conditions
specified in section (i) have been fulfilled; (iii) the Purchaser shall have
received evidence, in form and substance reasonably satisfactory to its counsel,
that such licenses, permits, consents, approvals, waivers, authorizations,
qualifications and orders of domestic governmental authorities and parties to
contracts and leases with the Partnership as are necessary in connection with
the consummation of the transactions contemplated in the Acquisition Agreement
(excluding licenses, permits, consents, approvals, authorizations,
qualifications or orders, the failure to obtain which after the consummation of
the transactions contemplated hereby, in the aggregate, will not have a material
adverse effect on the condition of the Partnership); (iv) no action, suit or
proceeding before any court or governmental authority shall have been commenced
and be pending by any person against the Partnership or the Purchaser or any of
their affiliates, partners, officers or directors seeking to restrain, prevent,
change or delay in any material respect any of the terms or provisions of the
Transaction or seeking material damages in
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connection therewith; (v) the Purchaser, its manager and its lenders shall have
received the favorable legal opinion of Holleb & Coff, counsel to the
Partnership, and Prickett, Jones, Elliott, Kristol, & Schnee, special Delaware
counsel to the Partnership, with respect to certain corporate and partnership
matters; (vi) receipt by the Purchaser of debt and equity financing which in its
sole judgement is satisfactory; (vii) the Partnership shall not have undergone a
material adverse change in its condition or its ability to perform its
obligations under the Acquisition Agreement; (viii) the Purchaser shall have
determined that the legal, accounting and business due diligence investigation
of the Partnership to be conducted by or on behalf of the Purchaser, including,
without limitation, any information obtained from the Disclosure Schedule to be
attached as an exhibit to the Acquisition Agreement, has not revealed that
proceeding with the Transaction would be inadvisable or contrary to the
Purchaser's best interests; (ix) the Partnership shall not have made a
distribution of earnings with respect to any Units from June 14, 1996 through
the Effective Time; (x) the Purchaser shall have received from the Partnership
an environmental assessment of each Asset, and the Purchaser shall have
completed its review of such Environmental Reports and the Purchaser shall be
satisfied in its reasonable discretion that (A) the Purchaser will not be
exposed to unacceptable risk, liability or obligation as a consequence of the
Acquisition Agreement and the Transaction contemplated thereby and (B) the
Purchaser will not be subject to any material adverse, unusual or onerous
agreements, conditions, liabilities or obligations to which the Partnership is a
party; (xi) the Purchaser shall have completed its review of the assets and
business of the Partnership and found them to be satisfactory to it in its
reasonable discretion; (xii) the Partnership, at its own expense, shall have
ordered and delivered to the Purchaser an owner's title insurance policy (ALTA
Owner's Policy Form B-1970 (rev. 10/17/70 and 10/17/84)) with respect to each
Asset (or an endorsement of existing policies in favor of the Purchaser),
insuring the Purchaser and its lenders and issued as of the Closing Date by a
title insurance company reasonably satisfactory to the Purchaser, in such
amount(s) as may be reasonably satisfactory to Purchaser, showing fee simple
title thereto to be vested in the Purchaser, subject in each case only to
permitted liens acceptable to the Purchaser, with extended coverage over all
general exceptions, if available, a zoning endorsement in the form of ALTA
endorsement Form 3.1 and such other endorsements as the Purchaser shall
reasonably request; (xiii) the Partnership, at its own expense, shall have
ordered and delivered to the Purchaser surveys of each Asset for which title
insurance is being obtained, dated not earlier than March 31, 1996, prepared by
a licensed surveyor, and certified to the Purchaser and the title insurance
company, as having been prepared in accordance with American Land Title
Association land survey standards, and showing all material improvements to be
within lot, side lot, rear lot and setback lines, and showing no encroachments
onto
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<PAGE>
each Asset. Such surveys shall reveal no material encroachments on each Asset
and be sufficient to enable to title company issuing the title policies
described in section (xii) above to issue same with full extended coverage; and
(xiv) the Partnership shall have delivered to the Purchaser such further
information, documents and instruments as the Purchaser shall reasonably
require.
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
If the Transaction is approved and the Sale consummated, the Partnership
will have sold substantially all of its assets and, pursuant to the terms of the
Partnership Agreement, will be liquidated and dissolved. Promptly thereafter
each Class A Limited Partner will receive a liquidating distribution of
approximately $6.95 to $7.50 per Unit in cash and each Class B Limited Partner
will receive a liquidating distribution of approximately $8.44 to $8.73 per Unit
in cash. Prior to payment of this liquidating distribution, all Transaction
Costs will be paid and all other Partnership liabilities will be satisfied. The
actual amount of the liquidating distribution to be paid to the Limited Partners
will be calculated as set forth below under "Determination of Cash Available for
Distribution." The General Partners will not receive any fees in connection with
the Transaction and will receive only a de minimis liquidating distribution of
less than $17,000 in the aggregate, in accordance with the terms of the
Partnership Agreement. In addition, it is estimated that, for income tax
purposes, each Class A Limited Partner will be allocated approximately $.45 to
$.48 of loss per Unit in 1996 and each Class B Limited Partner will be allocated
approximately $.56 to $.54 of loss per Unit in 1996, based upon the time such
Limited Partner invested in the Partnership. These losses are subject to special
treatment which may vary according to each Limited Partner's tax situation. Each
Limited Partner will recognize capital gains or losses upon the sale of the
Assets. For a further discussion of the assumptions underlying the estimated
distribution per Unit, see "Terms of the Transaction - Determination of Cash
Available for Distribution" and "Accounting Issues and Income Tax Consequences
of the Transaction."
Distributions of cash to the Limited Partners are anticipated within
30 days of the consummation of the Transaction. There can be no assurance that
such distributions will take place on this schedule as circumstances beyond the
control of the Partnership could affect the timing, as well as the amount, of
distributions to the Limited Partners. The Corporate General Partner intends to
complete the liquidation and winding up of the Partnership no later than
December 31, 1996.
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<PAGE>
DETERMINATION OF CASH AVAILABLE FOR DISTRIBUTION
The purchase price to be paid by the Purchaser for the Assets is
$12,489,100, which is equal to the fair market value of the Assets as determined
by Cushman & Wakefield, an independent appraiser. As of June 19, 1996, cash on
hand was $609,800. The Operating General Partners have estimated that net
earnings from June 19, 1996 to July 31, 1996 will be approximately $88,000. The
Operating General Partners have also estimated that the Transaction Costs will
be $172,600, of which $9,718 have been paid by the Partnership to date and
estimated wind-up costs and other liabilities will be $60,800 as of the
consummation of the Transaction. Therefore, the Operating General Partners
believe the estimated distribution per Unit to be as follows:
<TABLE>
<CAPTION>
<S> <C>
Appraised value of Assets $12,489,100
Cash on hand as of June 19, 1996 609,800
Estimated earnings through July 31,
1996 88,000
------
Available cash 697,800
Estimated Transaction Costs (172,600)
Estimated Partnership wind-up cost
and other liabilities (60,800)
Rally's Reserve ( 10,000)
Estimated cash available for
distribution $12,943,500
===========
</TABLE>
Based on the number of issued Units, the estimated cash available for
distribution is the equivalent of $7.93 per Unit. However, pursuant to Section
V of the Partnership Agreement, cash will be distributed to the Limited Partners
in accordance with their positive capital accounts, after allocation of gains
and losses from the operations of the Partnership and the sale of its assets.
The cash available for distribution will be adjusted for changes
occurring subsequent to June 19, 1996, in the items set forth above. The
General Partners will not receive any fees from the Partnership in connection
with the Transaction and will receive only a de minimis liquidating distribution
of less than $17,000 in the aggregate, in accordance with the terms of the
Partnership Agreement. The Transaction is subject to certain additional
conflicts of interest, including the fact that the Braults have a minority
ownership interest in the Purchaser. See "Conflicts of Interest."
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<PAGE>
TERMINATION OF THE ACQUISITION AGREEMENT
The Acquisition Agreement may be terminated and the Transaction
contemplated hereby may be abandoned, by written notice promptly given to the
other parties hereto, at any time prior to the Effective Time, whether prior to
or after Limited Partners' approval of the Transaction: (i) by mutual written
consent of the Purchaser and the Partnership; (ii) by either the Purchaser or
the Partnership, if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
the Acquisition Agreement and such order, decree, ruling or other action shall
have become final and nonappealable; (iii) by either the Purchaser or the
Partnership, if the Effective Time shall not have occurred on or before the
Termination Date, unless the absence of such occurrence shall be due to the
failure of the party seeking to terminate the Acquisition Agreement to perform
in all material respects each of its obligations under the Acquisition Agreement
required to be performed by it prior to the Effective Time; (iv) by either the
Purchaser or the Partnership, if Limited Partners' approval of the Transaction
shall not be obtained; (v) by the Purchaser, if the Partnership shall have
withdrawn, modified or amended in any respect its approval of the Transaction;
(vi) by the Purchaser, if the Partnership fails to perform in all material
respects its obligations under the Acquisition Agreement; (vii) by the
Purchaser, if there shall have occurred a material adverse change in the
condition of the Partnership since the date of the Acquisition Agreement; (viii)
by the Partnership, if the Purchaser fails to perform in all material respects
its obligations under the Acquisition Agreement; (ix) by the Purchaser, if the
Partnership shall have settled or compromised any lawsuit or other designated
action without the prior written consent of the Purchaser, unless such
settlement or compromise (A) requires the payment of money by the Partnership in
an amount which, when aggregated with the amount of money paid or payable in
connection with all other designated actions, does not exceed $15,000 and (B)
does not include any other material term or condition to which the Purchaser
shall reasonably object; (x) by the Purchaser, if, prior to the Effective Time,
the representations and warranties of the Partnership set forth in the
Acquisition Agreement shall not be true and correct in all material respects at
any time as if made as of such time, except to the extent that any such
representation or warranty is made as of a specific date, in which case such
representation or warranty shall have been true and correct as of such date; or
(xi) by the Partnership, if there shall have been a failure of the Purchaser to
obtain the necessary commitment for financing as described herein. In the event
the Acquisition Agreement is terminated due to the confirmation of an
Alternative Proposal, Purchaser shall be
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<PAGE>
entitled to a fee equal to 1% of the fair market value of the Assets.
AMENDMENT OF THE ACQUISITION AGREEMENT
The Acquisition Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto; provided, however,
that after Limited Partners' approval of the Transaction has been obtained, no
amendment may be made which effects any change which would adversely affect the
Limited Partners without further Limited Partners' approval.
AMENDMENT OF PARTNERSHIP AGREEMENT
The Partnership Agreement provides in Section P, paragraph 2(e), that
the Partnership shall not sell or lease property to the General Partners or any
"Affiliate" of the General Partners. As used therein, the Purchaser would be
considered an "Affiliate" of the General Partners. Therefore, an approval of
the Transaction by the Limited Partners holding a majority of the Units will
result in the amendment of the Partnership Agreement to permit a sale of the
Assets to the Purchaser. Section Y, paragraph 8 of the Partnership Agreement
provides that the Limited Partners owning a majority of the Units may amend the
Partnership Agreement and Section Q, paragraph 6 further provides that the
Limited Partners owning a majority of the Units may approve or disapprove the
sale of all or substantially all of the Partnership's assets without the
necessity for concurrence by the General Partners. As a result, the vote of the
General Partners is not required to approve the Transaction or the amendment and
the Transaction and therefore the amendment will be approved upon receipt of
approval of the Limited Partners holding a majority of the Units.
RELATED TRANSACTIONS
In addition to the offer to purchase the Assets of the Partnership,
the Purchaser has proposed a series of mergers (the "Affiliated Transactions")
with Brauvin High Yield Fund L.P., Brauvin High Yield Fund L.P. II and Brauvin
Income Plus L.P. III, which partnerships are affiliates of the Partnership (the
"Affiliated Limited Partnerships"). Each of the Affiliated Limited Partnerships
has investment objectives substantially identical to the Partnership and owns
property similar to the types of properties owned by the Partnership. In one
instance, the Partnership is a joint venture partner with certain of the
Affiliated Limited Partnerships, which joint venture owns one property subject
to a triple-net lease. See "Certain Information About the Partnership, Its
General Partners and Their Affiliates - Description of the Assets." The
approval of the limited partners of each of the Affiliated Limited Partnerships
to the Affiliated Transactions is being solicited concurrently with the
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<PAGE>
Partnership's solicitation pursuant to this Proxy Statement. It is a condition
to the effectiveness of the Transaction that the limited partners of each of the
Affiliated Limited Partnerships approve the Affiliated Transactions. This
condition may be waived by the Purchaser in its sole discretion.
ACCOUNTING ISSUES AND
INCOME TAX CONSEQUENCES OF THE TRANSACTION
Accounting Issues
If the Transaction is approved and the remaining conditions to the Sale met
or waived, the Partnership will: (i) receive from the Purchaser the purchase
price of $12,489,100 in exchange for the Assets; (ii) pay all of the Transaction
Costs; (iii) pay or make provisions for the payment of all other Partnership
liabilities, including the Rally's litigation, as described below; and (iv)
distribute to the Limited Partners remaining cash from the sale of the Assets,
plus cash on hand (including earnings through July 31, 1996) by way of a
liquidating distribution. In determining cash available for distribution, the
Partnership intends to take a reserve in the amount of $10,000 in connection
with the Rally's litigation. See "Certain Information About the Partnership, Its
General Partners and Their Affiliates - Legal Proceedings."
The Partnership will prepare financial statements in accordance with
generally accepted accounting principles as of the closing date of the
Transaction and will engage its auditors to audit the financial statements. The
difference between the carrying value of the Assets and the cash received
therefor will be recognized as a gain or loss, as applicable. A final
distribution is contemplated to occur within 30 days of the consummation of the
Transaction.
Income Tax Consequences of the Transaction
Upon the sale of each Asset, the Partnership will recognize a loss for
federal income tax purposes equal to the difference between the consideration
received for such Asset and the adjusted tax basis thereof. The Partnership
shall allocate such losses to the Partners in accordance with the provisions of
the Partnership Agreement. The Partnership will allocate to each Partner Net
Profit or Net Loss from the Partnership's operations prior to any sale
authorized hereunder.
Method for Determining Amount of Net Loss
Based on the purchase price set forth above, a Limited Partner who
acquired its Units in the Partnership's initial offering will be allocated Net
Losses from the Sale based on the
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<PAGE>
ratio of its capital account in comparison to all capital accounts.
A transferee of Units (a "Transferee") will be allocated losses from
the Sale equal to the amount that the transferor Limited Partner would have been
allocated under the formula set forth above, regardless of the amount the
Transferee paid for its Units. If the amount such Transferee is allocated
differs from the amount he or she would have received if it had acquired its
Units directly from the Partnership, such Transferee will recognize on its
income tax return the amount of such difference as: (i) a capital gain, if the
amount of loss allocated exceeds the amount it would have been allocated; or
(ii) a capital loss, if the amount of loss allocated is less than the amount it
would have been allocated.
Character of Loss
Of the losses allocated to each Partner, a portion will be
characterized as long-term losses from the sale or exchange of capital assets
("Capital Losses"), while the remainder will be characterized as losses from the
sale of property used in a trade or business ("Section 1231 Losses"). Each
Limited Partner will include the amount of its Capital Losses on its income tax
return with all other capital gains and losses. Each Limited Partner may use
its share of the Capital Losses to offset long-term or short-term capital gains
from any source plus, in the case of non-corporate taxpayers, ordinary income of
up to $3,000 per year. Any Capital Losses not used in the year of sale will
carry forward to future years to offset capital gains in such future years plus
up to $3,000 of ordinary income per year, until fully utilized. Section 1231
Losses are aggregated with all long-term capital gains and losses for any year,
and if such Section 1231 Losses exceed the capital gains, all losses are treated
as ordinary losses, which are not subject to the deductibility limits ordinarily
imposed on Capital Losses. A Limited Partner that recognizes Section 1231 Gains
in the five tax years following the year of sale may be required to treat such
gain as ordinary income, rather than capital gain, to the extent of the Section
1231 Losses from the Partnership treated as an ordinary loss. Therefore, the
deductibility of both Capital Losses and Section 1231 Losses will depend on each
Limited Partner's particular income tax situation for the year of sale and for
future years.
Passive Loss Rules
Generally, the Class B Limited Partners have been allocated losses in
recent years which were subject to the "passive loss" limitation rules, which,
subject to various phase-in rules, allowed these Limited Partners to deduct
passive losses only against passive income (if any) from the Partnership or
other
22
<PAGE>
sources. Any unused passive losses were suspended and carried forward for use
in future years or at the time of a complete disposition of a Class B Limited
Partner's entire interest in the passive activity. The sale of the
Partnership's assets and its liquidation constitutes a complete disposition of
each Class B Limited Partner's interest in the Partnership and the Partnership's
passive activities and, therefore, each Class B Limited Partners' suspended loss
(other than Capital Losses) can be fully used at this time to offset all forms
of income. Although the Capital Losses and Section 1231 Losses constitute
passive losses, they also can be used to offset all forms of income or gain,
subject to the Capital Loss limitation rules discussed above.
Differing Tax Treatment of the Limited Partners
At the time of subscription, those Limited Partners not in need of passive
income elected to be classified as Class A Limited Partners. Investors that were
tax-exempt or seeking passive income to offset passive losses from other
investments elected to be classified as Class B Limited Partners. The
Partnership Agreement contains a special allocation provision which allocates
all of the depreciation allocable to the Limited Partners to the Class A
Investors. In all other respects, the Class A Investors and the Class B
Investors have been and will be treated alike. Due to the special allocation of
depreciation, which resulted in the Class A Investors receiving certain
benefits, such as increased amounts of depreciation deductions and "tax-
sheltered cash flow" (i.e., cash distributions in excess of taxable income), in
the early years of the Partnership's existence, the Class A Investors were
subject to certain risks, including: (i) allocation of a greater amount of gain
upon the sale of properties which, if such depreciation deductions are used and
not carried forward under the "passive loss rules," will result in greater tax
liability without receiving greater cash distributions; and (ii) receipt of
smaller cash distributions on the liquidation of the Partnership and/or the sale
of the Assets if there is a loss on the sale of the properties, which differ
from those to which the Class B Investors will be subject. As a result of the
assets being sold at a loss, the Class A Limited Partners will receive a lower
amount of cash on the liquidation of the Partnership. Limited Partners are urged
to consult with their tax advisors regarding this issue.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE BASED UPON
PRESENT LAW, ARE FOR GENERAL INFORMATION ONLY AND DO NOT PURPORT TO BE A
COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS WHICH MAY APPLY TO A
LIMITED PARTNER. THE TAX CONSEQUENCES TO A PARTICULAR LIMITED PARTNER MAY BE
DIFFERENT FROM THE TAX CONSEQUENCES TO OTHER LIMITED PARTNERS, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS,
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<PAGE>
AND THUS, LIMITED PARTNERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
INCOME TAX CONSEQUENCES OF THE TRANSACTION.
SPECIAL FACTORS
PURPOSE OF AND REASONS FOR THE TRANSACTION
The principal purpose of the Transaction is to cause the transfer of the
Assets to the Purchaser in return for cash proceeds which, upon Liquidation,
will be distributed to the Limited Partners. Promptly upon consummation of the
Transaction, the Class A Limited Partners will receive a liquidating
distribution of approximately $6.95 to $7.50 per Unit in cash and the Class B
Limited Partners will receive a liquidating distribution of approximately $8.44
to $8.73 per Unit in cash, based upon the time such Limited Partners invested in
the Partnership.
Background and Operational History of the Partnership
The Partnership is a Delaware limited partnership organized on August 7,
1991 to raise funds from investors to acquire income-producing retail and other
commercial properties predominantly all of which were subject to triple-net
leases. The Partnership completed its public offering on December 11, 1993 and
raised a total of $16,008,310. As of December 31, 1995, the Partnership had also
raised an additional $394,118 through its distribution reinvestment plan. As of
the date hereof, the Partnership owns the land and buildings underlying ten
properties as well as a majority interest in a joint venture which owns the land
and building underlying a CompUSA store. See "Certain Information about the
Partnership, Its General Partners and their Affiliates - Description of the
Assets." Prior to January 1996, all of the properties of the Partnership were
under lease. In January 1996, the property located in Joliet, Illinois,
previously leased to SoFro Fabrics, Inc. and guaranteed by its parent company,
House of Fabrics, Inc., was vacated in connection with House of Fabrics, Inc.'s
bankruptcy filing. Although the Partnership has engaged a national brokerage
firm to assist in re-leasing this property, the property remains vacant to date.
Cash distributions to Limited Partners for 1995, 1994 and 1993 were
$1,296,726, $1,244,736 and $495,847, respectively. As a result of the
termination of the lease on the Joliet, Illinois property, the Partnership
recently reduced the quarterly distribution payment by one-half percent. Because
of the decision to present the Transaction to the Limited Partners, the
Operating General Partners have determined that no further distributions of
operating cash flow will be made by the Partnership to the Limited Partners
prior to consummation or termination of the Transaction. The Operating General
Partners
24
<PAGE>
have also determined that the Partnership will not repurchase Units from Limited
Partners during this period. See "Certain Information About the Partnership, Its
General Partners and their Affiliates - Distributions."
The Partnership is the last of a series of affiliated limited partnerships
formed to acquire similar properties. The Partnership's Prospectus dated
December 12, 1991 (the "Prospectus") states that the anticipated holding period
for the Partnership's properties is no more than seven to nine years. However,
because the Affiliated Limited Partnerships were formed prior to the
Partnership, the properties acquired by the Affiliated Limited Partnerships are
either at the beginning or end of the period in which it was anticipated that
such properties would be sold. As a result, the Operating General Partners began
investigating options for the liquidation of the properties held by the
Affiliated Limited Partnerships and therefore also considered the liquidation of
the properties held by the Partnership.
Actions Resulting in the Transaction; Mitigation of Conflicts
Over the past few years, in an attempt to enhance Limited Partner value
with respect to the Units, as well as such value to the limited partner
investors in the Affiliated Limited Partnerships, the Operating General Partners
approached several investment banking firms regarding various strategies and
alternatives available to the Partnership and the Affiliated Limited
Partnerships, including the liquidation of the Assets and the assets of the
Affiliated Limited Partnerships and return the proceeds from such liquidation to
the investors. Although numerous meetings were held with representatives from
such investment banks, no viable value enhancement scenarios were formulated.
During the past several months the Operating General Partners increased their
activity with respect to formulating a liquidation strategy, as Brauvin High
Yield Fund L.P., one of the Affiliated Limited Partnerships, is at the end of
its anticipated holding period of six to nine years for its properties. As a
result of recent conversations with persons familiar with the triple-net lease
industry, it was determined that the rapidly approaching termination dates for
many of the leases governing the Partnership's and the Affiliated Limited
Partnership's properties caused such properties to fall outside of the
acquisition parameters and standards of several organizations interested in
acquiring a portfolio of triple-net lease properties and thus limited the
salability of the Partnership's portfolio. As a result of the Operating General
Partners consideration of an exit strategy, the Braults began to actively pursue
the possibility of acquiring the Assets from the Partnership. In attempting to
obtain the necessary financing to effect this purchase, the Braults met with
various third-party
25
<PAGE>
debt and equity sources who negotiated and structured the terms of the
Transaction on behalf of the Purchaser so as to allow the Purchaser to
consummate the Transaction on an all cash basis. In connection with the
negotiation of the financing arrangements, the terms of the Transaction and the
ownership structure of the Purchaser, each party, including the Purchaser, the
Partnership, the debt and equity participants and the General Partners, were
represented by separate professionals experienced in transactions of this type.
The retention of such professionals was deemed to be important in order to
mitigate the potential conflicts of interest inherent in the Transaction. The
sale price was based on the independent appraisal of Cushman & Wakefield, who
was retained by the Partnership in connection with the Partnership's annual
valuation of the Assets, prior to any discussions of the Transaction with
Cushman and Wakefield and the terms of the Transaction were negotiated with the
assistance of counsel to the Purchaser and counsel to the Partnership. In
addition, Cushman & Wakefield was retained to provide an opinion that the
Transaction is fair to the Limited Partners from a financial point of view.
Prospects of the Partnership
Pursuant to the terms of the Acquisition Agreement, the Purchaser has
agreed to pay $12,489,100 in cash for the Assets. The purchase price is the
fair market value of the Assets as determined by Cushman & Wakefield. Due to
the relatively fixed nature of the lease payments generated by the Assets, the
remaining lease terms, and the non-performing nature of the Joliet, Illinois
property in particular, the fair market value may not increase over the
foreseeable future. Prior to the filing by the Partnership of its preliminary
proxy materials, the Partnership had not been presented with any offers for the
purchase of the Assets, although it has received and pursued a few expressions
of interest from third parties. One such expression of interest was for all of
the Assets (together with the assets of the Affiliated Limited Partnerships) but
at an aggregate purchase price lower than that proposed by the Purchaser, with
higher transaction costs and other factors, such as a lack of management
ability, that led the Operating General Partners to believe that this
transaction would not be better for the Limited Partners or the limited partners
of the Affiliated Limited Partnerships. However, the Operating General Partners
did pursue this possible transaction long enough to cause an increase in the
offer price by approximately 6% from the initial offer price. Another expression
of interest was for only certain of the Assets, which would result in an overall
lesser return to the Limited Partners and the need to continue to operate the
Partnership and the Affiliated Limited Partnerships and thus the proposal was
not pursued.
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<PAGE>
As a result of its proxy solicitation processes, at the close of business
on July 17, 1996, the Partnership received a contract with respect to an
acquisition of the Partnership's assets from an experienced owner of properties
similar to those owned by the Partnership (the "Offeror"). The Operating General
Partners are in the process of reviewing the contract and the financial
capabilities of the Offeror. Although it does not appear, after a preliminary
review, that this offer is more beneficial to the Limited Partners than the
Transaction, the Operating General Partners will continue to compare and
contrast the terms of this offer to the terms of the Transaction and to
negotiate with the Offeror in an effort to present the most beneficial offer
to the Limited Partners for their consideration. In addition, should the
Operating General Partners deem it necessary, an independent third-party advisor
will be retained to evaluate the offer and possibly to negotiate with each of
the Purchaser and the Offeror. If it is determined that the Offeror is willing
and able to consummate a transaction that is more beneficial to the Limited
Partners than the Transaction, the Limited Partners will be notified and the
proxy solicitation with respect to the Transaction will be amended.
In an effort to address Mr. Froelich's belief that the Partnership should
actively seek third-party offers through an arms-length bidding process to
establish a fair price for the Assets. In this regard, the Partnership has made,
and will continue during the pendency of the proxy solicitation process to make,
all pertinent information pertaining to the Partnership and the Assets available
to other potential purchasers, including the Offeror, who appear to have the
financial ability to acquire the Assets on an all cash basis. If the Transaction
is not approved, there can be no assurance as to whether any future liquidation
or disposition of the Assets will occur or on what terms they might occur.
Despite the Partnership obtaining both the Valuation and the Fairness Opinion
from Cushman & Wakefield, there can be no assurances that a better offer for the
acquisition of the Assets may not be available.
Costs and Risks Associated with Continued Ownership
The average remaining lease term for the Assets is 10.8 years. The longer
the Assets are held by the Partnership, the greater the risk to the Partnership
of lease rollover, renegotiation and non-renewal. This risk is evidenced by the
recent lease default by House of Fabrics, Inc. in connection with its bankruptcy
filing. Because many of the Partnership's properties were designed for a
particular type of operation, lease default or non-renewal could result in the
need for substantial capital improvements or remodeling to attract new tenants.
Eventually the Partnership will be required to reserve against such risks.
Lease defaults and non-renewals, as well as reserves against such risks will
eventually result in lower distributions to the Limited Partners.
The Partnership incurs general and administrative costs related to its
status as a public reporting entity under the Federal securities laws. The
costs of preparing reports such as Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q, as well as the expenses of printing and mailing these
materials can be significant. The Partnership incurs significant legal and
accounting fees in complying with the Federal securities laws. Over the past
two years, the Partnership has spent approximately $146,480 and $164,081 on
partnership administration expense, and legal, accounting and tax advisory fees
necessitated by the
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<PAGE>
on-going Federal securities law compliance. If the Partnership were not a
publicly-held entity, many of these costs could be eliminated, although such
cost savings would not be of benefit to the Limited Partners.
There is no established trading market for the Units. As a result, the
Limited Partners and the Partnership incur all of the costs associated with
public-entity status, but have little of the benefits. Since the Units are not
readily transferable, the Limited Partners are essentially locked into their
investment in the Units.
Benefits of the Transaction
As a result of the Transaction, the Limited Partners will receive their
proportionate share, on an all cash basis, of the fair market value of the
Assets, as valued by an independent appraiser. Such proceeds can then be
reinvested by the Limited Partners in other investments that could possibly
yield a higher return than the investment in the Partnership. The terms of the
Transaction are viewed by the Operating General Partners to be favorable to the
Partnership and the Limited Partners in part because the cost of the Transaction
to the Partnership, which is estimated to equal approximately 1 1/2% of the
total value of the Transaction, is believed to be below industry standards for a
transaction of this size. It is not unusual in similar types of transactions to
see investment banking fees or real estate brokers commissions which alone
exceed 3% of the value of a transaction. In addition, the structure of the
Transaction eliminates the need for the Partnership to reserve or hold back any
funds from distribution to the Limited Partners to satisfy any post-closing
liabilities. Finally, consummation of the Transaction and liquidation and
dissolution of the Partnership will permit the Limited Partners to make
alternative investments which may generate favorable returns and greater
liquidity.
Disadvantages and Risks of the Transaction
The Transaction is not without certain potential disadvantages and risks to
the Limited Partners. Such disadvantages and risks include the fact that: (i)
there can be no assurance that the cash purchase price received by the Limited
Partners in connection with the Transaction can be invested in alternative
investments that will generate a return equal to or greater than that generated
by the investment in the Partnership; (ii) the Limited Partners will no longer
have an ownership interest in the Assets and thus will not share in any
potential changes in their value; (iii) despite the Partnership obtaining both
the Valuation and the Fairness Opinion from Cushman & Wakefield, there can be no
assurances that a better offer for the acquisition of the Assets may not be
available now or in the future; and (iv) the Limited Partners may incur certain
tax
28
<PAGE>
liabilities as a result of the Transaction. Notwithstanding the foregoing, the
Operating General Partners concluded that, as with any investment, such
potential disadvantages and risks are speculative, are unable to be quantified
and do not outweigh the benefits of the Transaction.
ALTERNATIVES TO THE TRANSACTION
The Operating General Partners considered several alternatives to selling
the Assets to the Purchaser as contemplated by the Acquisition Agreement
including: (i) continuing to hold the Assets; (ii) individual property sales;
(iii) an auction of any or all of the properties; (iv) solicitation of third-
party bids; and (v) a merger of the Partnership with and into the Purchaser.
Continuing to hold the Assets was rejected as the risk from ownership
increases the longer the properties are held and thus the value of the Assets
becomes less certain. This risk results from the approaching maturity dates for
each of the leases of the Assets (which is currently 10.8 years on average), the
costs of the renegotiation of such leases and the related risk of default or
non-renewal. A sale of the Assets at this time will avoid such increasing
risks, which was recently evidenced by the lease default by House of Fabrics,
Inc. with respect to the Joliet, Illinois property.
Individual property sales were rejected as this option would likely result
in the Partnership's more salable or valuable properties being sold and the
Partnership being forced to retain the less salable or valuable properties.
Even if the more valuable properties were sold on an all cash basis comparable
to the Sale, the Partnership would likely be required to retain a substantial
portion of the proceeds of such sales to cover the expenses related to ongoing
administration of the Partnership. Because the Partnership's administrative
costs are relatively fixed, a sale of the more salable or valuable properties
would ultimately result in proportionally less cash being available for
distribution to the Limited Partners. Furthermore, it is the belief of the
Operating General Partners that costs associated with individual sales of the
properties would, in the aggregate, be greater than the costs associated with a
sale of all of the Assets, due in part to the need to negotiate with multiple
parties and the loss of economies of scale. These increased costs would further
result in less cash being available for distribution to the Limited Partners.
Finally, because the more salable or valuable properties will likely be sold
first, risks associated with lease defaults and non-renewals, as well as risks
associated with particular markets and industries will increase. Therefore, the
sale of the Assets in a single transaction, eliminates the need for the
Partnership to remain in existence with a smaller, less diverse and more risky
portfolio.
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<PAGE>
An auction of all of the Assets was also rejected, as it is the belief of
the Operating General Partners that real estate auctions (as opposed to a
solicitation of third-party bids through the use of investment bankers or real
estate brokers) are generally viewed as a sale method of last resort and the
typical buyer at such an auction is seeking below market price purchases. An
auction of individual assets would likely result in the same adverse effects as
those resulting from sales of individual properties.
A formal solicitation of third-party bids for the Assets was not undertaken
by the Operating General Partners prior to the date the Partnership entered into
the Acquisition Agreement. However, over the past few years the Operating
General Partners had approached several investment banking firms regarding
various strategies and alternatives available to the Partnership, including the
liquidation of the Assets and the assets of the Affiliated Limited Partners.
Although numerous meetings were held with representatives from such investment
banking firms, no viable value enhancement scenarios were formulated.
Furthermore, after recent conversations with persons familiar with the triple-
net lease industry, it was determined that the rapidly approaching termination
dates for many of the leases to which the Partnership's properties were subject
and those of the Affiliated Limited Partnerships caused such properties to fall
outside of the acquisition parameters and standards of several organizations
interested in acquiring a portfolio of triple-net lease properties and thus
limited the salability of the Partnership's portfolio. Notwithstanding the fact
that the Operating General Partners did not believe that the solicitation of
third-party bids would result in a better offer for the Limited Partners, the
Operating General Partners required that the terms of the Acquisition Agreement,
permit the General Partners to terminate the Sale at any time should they
receive an offer for the Assets which they in good faith believe to be on terms
preferable to the Sale. However, in accordance with the terms of the
Acquisition Agreement, the Partnership will not actively solicit third-party
bids. Although there have been a few expressions of interest from potential
third-party purchasers generated by the Purchaser's effort to secure financing,
as described above, no party has made a firm offer for the Assets. In
conjunction with Mr. Froelich's belief that the solicitation of third-party
offers through an arm's-length bidding process would be the most advantageous
method for determining a fair price for the Assets, the Partnership will
continue to make available to prospective purchasers all relevant materials
necessary to conduct due diligence with respect to the Assets. Until the
Transaction is approved, the General Partners will entertain any offers which
can produce a comparable overall return to the Limited Partners.
Notwithstanding the foregoing, the Operating General Partners have surveyed the
market and have been unable to identify a strategic or financial buyer that
would be interested in
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<PAGE>
purchasing the entire portfolio of the Assets, on an all cash basis. This is
mainly the result of three factors: (i) 36% of the Assets have lease terms which
provide the lessees with rights of first refusal on any sale of the Assets,
significantly complicating negotiations of any possible offers from third
parties; (ii) the average remaining lease term of 10.8 years makes the Assets
less attractive to such purchasers; and (iii) the fact that one of the
Partnership's properties is not currently under lease.
The Purchaser was unwilling to structure the Transaction as a merger of the
Partnership with and into the Purchaser, due in part to the fact that the
Partnership Agreement places additional voting requirements on such a
transaction that the Operating General Partners believe would make such a
transaction more difficult to consummate.
EFFECTS OF THE TRANSACTION
General
If the Transaction is approved and the remaining conditions to the Sale are
met or waived, the Assets will be sold to the Purchaser in exchange for the
purchase price of $12,489,100. The Partnership will then pay the Transaction
Costs and pay or make provisions for the payment of all other Partnership
liabilities and the Partnership will be liquidated and dissolved. Thereafter,
the registration of the Units under Section 12(g)(4) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") will then be terminated. Further,
upon dissolution, the Partnership will no longer be subject to the periodic
reporting requirements of the Exchange Act and will cease filing information
with the Securities and Exchange Commission (the "Commission"). The Corporate
General Partner intends to conclude the liquidation of the Partnership as soon
as possible and no later than December 31, 1996.
Effects on the Limited Partners
Upon liquidation and dissolution of the Partnership, in accordance with the
Partnership Agreement, the resulting proceeds of the Sale, together with all
cash on hand (including earnings through July 31, 1996), will be used to make
distributions to the Limited Partners after payment of or making provisions for
the payment of; (i) all Transaction Costs; and (ii) all other Partnership
liabilities, including the Rally's litigation. The Operating General Partners
currently anticipate that the Class A Limited Partners will receive a
liquidating distribution of approximately $6.95 to $7.50 per Unit and the Class
B Limited Partners will receive a liquidating distribution of approximately
$8.44 to $8.73 per Unit, based upon the time such Limited Partners invested in
the Partnership.
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<PAGE>
Thereafter, the Limited Partners will cease being owners of the Partnership
and will no longer bear the costs and risks associated with such ownership. A
description of such risks and benefits is set forth above under the heading
"Special Factors -Purpose of and Reasons for the Transaction - Costs and Risks
Associated with Continued Ownership." However, the Limited Partners will
thereafter assume the risks associated with consummation of the Transaction.
See "Special Factors - Purposes of and Reasons for the Transaction - Costs and
Risks of the Transaction" above.
Effects on the General Partners
The General Partners will not receive any fees from the Partnership in
connection with the Transaction and will receive only a de minimis liquidating
distribution of less than $17,000 in the aggregate, in accordance with the terms
of the Partnership Agreement. However, the Braults have a minority ownership
interest in the Purchaser and thus will become part owners of the Assets
following the consummation of the Transaction. In addition, each of Brauvin
Management Company and Brauvin Financial, Inc., corporations owned, in part, by
Cezar M. Froelich and an affiliate of Jerome J. Brault, will receive $21,870
from the Purchaser (not the Partnership) for advisory services rendered in
connection with the Transaction. See "Terms of the Transaction - Determination
of Cash Available for Distribution."
Effects of Failure to Approve the Transaction
If the Transaction is not consummated, there can be no assurance as to
whether any future liquidation or disposition of the Assets, either in whole or
in part, will occur or on what terms they might occur. However, if not
approved, the Operating General Partners will continue to operate the
Partnership in accordance with the terms of the Partnership Agreement and in
fulfillment of their fiduciary duties, including the review of any third-party
offers to purchase any or all of the Assets, in an effort to enhance the
Partnership's value on behalf of the Limited Partners. In addition, the
Operating General Partners will continue to evaluate the various alternatives to
the Transaction, as described under the heading "Special Factors -Alternatives
to the Transaction" below. Such alternatives include: (i) continuing to hold
the Assets; (ii) individual property sales; (iii) an auction of any or all of
the properties; and (iv) solicitation of third-party bids. The Operating
General Partners have concluded that such options are not in the best interest
of the Limited Partners at this time, particularly in light of the Purchaser's
offer. The Operating General Partners do not intend to actively solicit bids
for the Assets in the immediate future should the Transaction not be
consummated.
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<PAGE>
VALUATION OF THE ASSETS; FAIRNESS OPINION
The Valuation Advisory Services Group of Cushman & Wakefield of Illinois,
Inc. ("Cushman & Wakefield") was engaged by the Partnership on March 15, 1996 to
value the Assets pursuant to the Partnership's obligation to provide a valuation
of the Units within 120 days after the end of the fiscal year to satisfy the
requirements of the Employee Retirement Income Security Act of 1974, as amended.
The Partnership subsequently engaged Cushman & Wakefield to provide an opinion
as to whether the Transaction is fair from a financial point of view (the
"Fairness Opinion"). Other than the engagements described herein, and the
engagement of Cushman & Wakefield by the Affiliated Limited Partnerships in
connection with the Affiliated Transactions, there has been no material
relationship between Cushman & Wakefield or its affiliates and the Partnership
or its affiliates, nor is any such relationship contemplated.
Copies of the Valuation and the Fairness Opinion are attached hereto as
Annex I and Annex II, respectively.
Experience of Cushman & Wakefield
Cushman & Wakefield is part of a national network of affiliated full
service real estate companies providing brokerage, management, consulting and
valuation services in the United States (the "C&W Affiliated Companies"). The
clients of the C&W Affiliated Companies include major commercial and investment
banks, Fortune 500 corporations, pension funds, advisory firms and government
agencies. The Valuation Advisory Services Group of the C&W Affiliated Companies
has 19 branch offices located in various geographic regions of the United
States. This large network of professionals provides local expertise in key
markets and sub-regions and enables Cushman & Wakefield to effectively handle
broad-based, multi-property assignments. Furthermore, the C&W Affiliated
Companies valuation network provides a large national database of market
information and ensures a consistent methodology for each property valuation.
The Operating General Partners considered several appraisal firms but ultimately
chose Cushman & Wakefield based upon their expertise and industry
leadership.
Valuation
Pursuant to its engagement, Cushman & Wakefield reported to the Partnership
that the sum of the individual valuations of the Assets was $12,489,100 as of
April 1, 1996 (collectively, the "Valuation"). Certain of the assumptions,
qualifications and limitations to the Valuation are described below. The
summary set forth below does not purport to be a complete description of the
analysis employed by Cushman & Wakefield in preparing the Valuation. A copy of
the Valuation analysis will be made
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<PAGE>
available to Limited Partners upon request. The Partnership imposed no
conditions or limitations on the scope of Cushman & Wakefield's investigation or
the methods and procedures to be followed in preparing the Valuation. No other
appraisals of the Assets were obtained by the Partnership due to the significant
cost involved and the Operating General Partners' opinion that the Valuation was
prepared according to industry standards by a reliable and independent appraisal
firm.
Factors Considered
In preparing the Valuation, Cushman & Wakefield: (i) conducted a physical
inspection of each property; (ii) considered the location and market area of
each property, with particular attention given to the submarket definition,
demand generators, competitive properties, trade area demographics and outlook;
(iii) reviewed property sales history where provided; (iv) analyzed site and
improvements with regard to quality, functionality and condition of improvements
toward existing use; and (v) considered the highest and best use of each site.
In addition, Cushman & Wakefield conducted a review and analysis of each
existing individual lease abstract, or leases where provided, affecting each of
the properties. In conducting their analysis, Cushman & Wakefield was provided
with, among other things: (i) certain information relating to the business,
earnings, operating cash flow and assets of the Partnership, including sales
performance of the Assets for 1993 through 1995, where provided, and estimates
for 1996; (ii) surveys, legal descriptions, current property tax statements, and
detailed lease abstracts; and (iii) such other information as Cushman &
Wakefield deemed necessary or appropriate. In addition, Cushman & Wakefield
personnel questioned the Operating General Partners about the markets in which
the Assets operate and the operating history of the Assets.
Summary of Cushman & Wakefield's Methodology and Approaches to Value
Cushman & Wakefield's valuation of the Assets was based primarily on a
discounted cash flow analysis. Cushman & Wakefield believes that the valuation
resulting from the discounted cash flow analysis is the best indication of
value, as an investor in the type of property owned by the Partnership considers
its income producing capabilities as most important. A sales comparison
approach based on comparable sales was determined to be less reliable because of
the lack of comparable properties and recent sales data for many of the Assets.
Individual evaluation reports containing property specific information such
as location, competition, and market and trade
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<PAGE>
area analysis, were prepared by Cushman & Wakefield for each Asset. These
evaluation reports formed the foundation for Cushman & Wakefield's valuation
analysis. In conducing its cash flow analysis, Cushman & Wakefield performed an
individual property-by-property analysis to establish an anticipated cash flow
to be received over a specified holding period, typically of a ten-year
duration, for a particular property. Analysis as to cash flows takes into
account the contractual rent and the terms and conditions of each lease, plus
reversion, as well as the credit associated therewith.
Cushman & Wakefield also conducted an analysis of the reversionary
component of the cash flow analysis for each property, which values the property
at the end of a specified holding period, based on the estimated highest and
best use of the property, at reversion. The highest and best use of a property
was formulated based on a decision matrix which takes into account specific
property and location characteristics, demographic profile and outlook, sales
history and market position of the property relative to its competition. Where
the highest and best use of a property at reversion was estimated to be a
continuation of the existing use, the reversionary value of the property is
based on capitalizing the property's eleventh year's net operating income into
value by means of direct capitalization. Use of a ten-year investment holding
period within a discounted cash flow analysis represents typical investor
criteria within the market. The discounted cash flow method is an accepted
means within the market of analyzing and valuing properties similar to the
Assets, and is in conformance with the established and accepted valuation
procedures of the Appraisal Institute regarding properties of this type. Where
the anticipated highest and best use of a property differs from the existing
use, the reversionary value of the property was estimated based on a cost
approach methodology, which incorporates land value estimates and depreciated
replacement cost estimates for the improvement contribution, if any. Cushman &
Wakefield determined the current use of each property to be its highest and best
use, except as otherwise determined within the valuation and evaluation reports.
Pursuant to the discounted cash flow analysis, Cushman & Wakefield's
valuation of the Assets totalled $11,851,220. As a result of subsequent
considerations presented by the Operating General Partners the total of the
valuations was increased to $12,489,100, which is the amount allocated by the
Purchaser to the Assets in connection with the Transaction. The considerations
presented by the Operating General Partners included clarification of certain
lease provisions relating to existing and new tenants and sub-tenants, as well
as further discussions relating to yield rates and market and renewal rent
parameters as a function of gross sales volumes for the restaurant properties.
The Operating General Partners have reviewed and
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<PAGE>
accept the final Valuation and believe that it was prepared in accordance with
appropriate professional standards.
Assumptions, Limitations and Qualifications of Cushman & Wakefield's
Valuation
Aside from the Assumptions and Limiting Conditions contained in Cushman &
Wakefield's evaluation and valuation reports, in preparing the Valuation,
Cushman & Wakefield relied, without independent verification, on the accuracy
and completeness of all information supplied or otherwise made available to it
by or on behalf of the Partnership. In arriving at the Valuation, Cushman &
Wakefield assumed: (i) good and marketable title; (ii) that each Asset was free
and clear of all liens, unless otherwise stated; (iii) responsible ownership and
competent management of each Asset; (iv) no hidden or unapparent conditions; (v)
full compliance with zoning laws; (vi) possession of all necessary licenses,
certificates of occupancy and other governmental consents; (vii) that no
potentially hazardous or toxic materials were located at or about the Assets;
and (viii) compliance with the Americans with Disabilities Act of 1990. Cushman
& Wakefield did not conduct a legal survey of the Assets. An appraisal is only
an estimate of value, as of the specific dates stated in the appraisal, and is
subject to the assumptions and limiting conditions stated in the report. An
opinion is not a measure of realizable value and may not reflect the amount
which would be received if the property was sold. Reference should be made to
the entire appraisal report.
Fairness Opinion
Subsequent to its engagement in connection with the Valuation, Cushman &
Wakefield was engaged to provide an opinion as to the fairness of the
Transaction to the Limited Partners from a financial point of view. Cushman &
Wakefield was neither asked to make, nor did it make, any recommendation as to
the purchase price of the Assets, although it did provide the Valuation on which
the Transaction price was based. Cushman & Wakefield was not asked to solicit
offers from other interested parties nor was it asked to opine on any aspects of
the Transaction other than that specifically mentioned above. In connection with
rendering its opinion, Cushman & Wakefield reviewed the information and
conducted the analysis as described in its Fairness Opinion.
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<PAGE>
Cushman & Wakefield has advised the Partnership through the Corporate
General Partner that in its opinion, the price per Unit reflected in the
Transaction is fair, from a financial point of view, to the Limited Partners.
In its opinion Cushman & Wakefield stated that the determination that a price is
"fair" does not mean that the price is the highest price which might be obtained
in the marketplace, but rather that based upon the sum of the appraised values
of the Assets, the price reflected in the Transaction is within a range that
Cushman & Wakefield believes is reasonable. Although there is no active market
in trading the Units, Cushman & Wakefield noted that for those Units that have
traded the price per Unit was at or below the price per Unit in the Transaction.
Cushman & Wakefield relied on its appraisal work as a basis for establishing the
fairness of the Transaction. Other methods could have been employed to test the
fairness of the Transaction and yielded different results. In rendering this
opinion, Cushman & Wakefield noted that it had not considered, and had not
addressed, market conditions and other factors (e.g., whether the sale of the
Assets as a portfolio rather than a series of sales of individual properties,
would produce a premium or a discounted selling price) that, in an open-market
transaction, could influence the selling price of the Assets and result in
proceeds to the Limited Partners greater or less than the proposed price per
Unit. Cushman & Wakefield also noted that it had not considered the price and
trading history of other publicly traded securities that might be deemed
relevant due to the relative small size of the Transaction and the fact that the
Units are not publicly traded. Furthermore, Cushman & Wakefield noted that it
had not compared the financial terms of the Transaction to the financial terms
of other transactions that might be deemed relevant, given that the Transaction
involves all cash to the Limited Partners.
Compensation
Cushman & Wakefield was paid a fee of $2,500 for each Asset valued in
connection with the Valuation, for an aggregate fee of $27,000 from the
Partnership, plus out-of-pocket expenses, and will be paid $8,750 by the
Partnership for the Fairness Opinion. In addition, the Affiliated Limited
Partnerships will pay Cushman & Wakefield on the same basis for services
rendered to each of them in connection with the Affiliated Transactions.
Cushman & Wakefield is also entitled to reimbursements for certain costs
incurred in connection with providing their services to the Partnership. The
fees paid to Cushman & Wakefield in connection with the Valuation and the
Fairness Opinion were negotiated by the Operating General Partners. The
Partnership has agreed to indemnify Cushman & Wakefield against certain
liabilities arising out of its engagement to prepare and deliver the Valuation
and the Fairness Opinion.
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RECOMMENDATIONS OF THE GENERAL PARTNERS
Factors Considered
The Operating General Partners have determined that the terms of the
Transaction are fair to the Limited Partners and recommend that the Limited
Partners vote "FOR" the Transaction. In determining the fairness of the
Transaction and their decision to recommend the Transaction, the Operating
General Partners considered each of the factors discussed below. Although the
Operating General Partners were unable to weigh each factor precisely, the
factors are set forth below in their approximate order of importance:
Factors in Favor of the Transaction:
-----------------------------------
* The sales price of the Assets was based on the Valuation, which was
prepared by Cushman & Wakefield, an expert, independent appraiser that is
considered one of the best valuation firms in the industry in valuing
triple-net lease assets. The Valuation considered the current fair market
value of each and every Asset. See "Special Factors - Valuation of the
Assets; Fairness Opinion" for a detailed description of this Valuation. As
described herein, the Operating General Partners reviewed a preliminary
draft of the valuation and concluded that the values of the properties set
forth therein were lower than expected. As a result of subsequent
considerations presented by the Operating General Partners, the fair market
value as set forth in the Valuation was increased. In considering the
importance of this factor, the Operating General Partners considered that
Cushman & Wakefield was retained to conduct the Valuation on behalf of the
Partnership, not the Purchaser, and in connection with an annual valuation
of the assets. Since the Purchaser was willing to pay the current fair
market value of the Assets on an all cash basis, the Operating General
Partners concluded that such factor weighed heavily in favor of the
fairness of the Transaction.
* The Purchaser's willingness to purchase all of the Assets and to assume all
existing lease obligations on each of the properties, thereby eliminating
the need for the Partnership to continue operations with the less salable
or valuable properties. The Operating General Partners also concluded that
this factor weighed heavily in favor of the Transaction. As described
above under "Special Factors - Alternatives to the Transaction," there are
significant detriments attached to sales of less than all of the Assets.
* The avoidance of certain potential transaction costs, such as investment
banking fees or real estate brokerage commissions, which could have
approximated $375,000 to
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<PAGE>
$750,000 in the aggregate based on. Such costs are not atypical in
transactions similar to the Transaction and the fact that neither the
Partnership nor the Purchaser would need to pay such costs was deemed to be
a significant benefit of the Transaction.
* The fact that the Purchaser was willing to consummate the Sale on an all
cash basis and that the Partnership will not be required to finance any
part of the purchase price. This all cash transaction will allow the full
amount of the purchase price to be paid to the Limited Partners in cash at
the time of the liquidation and dissolution, which can thereafter be
reinvested by the Limited Partners in other investments. An all cash
transaction also significantly simplifies the transaction and lowers
transaction costs.
* The fact that an opinion was received from Cushman & Wakefield stating that
the Transaction is fair to the Limited Partners from a financial point of
view. See "Special Factors - Valuation of the Assets; Fairness Opinion"
above for a discussion of this Fairness Opinion. This opinion was one of
the items considered by the Operating General Partners in making their
recommendation to the Limited Partners as to the fairness of the
Transaction.
* The fact that the Sale is on an "as is" basis. As an "as is" sale, the
Partnership will not be required to make any representations and warranties
to the Purchaser as to the condition of the Assets, thereby eliminating the
need for hold backs typically associated with the sale of assets. This
will allow all of the sale price to be paid to the Limited Partners at the
time of the liquidation and thereafter to be invested by the Limited
Partners in other investments.
* The fact that the Acquisition Agreement permits the General Partners to
terminate the Sale at any time if they receive an offer for the Assets
which they in good faith believe to be on terms preferable to the Sale.
Until the Transaction is approved by the Limited Partners, the General
Partners will continue to entertain any and all offers which can produce a
comparable overall return to the Limited Partners.
* The fact that the vote of a majority in interest of the Limited Partners is
required to approve the Transaction. As a result, the Transaction can only
be effected if it is approved by persons who are not affiliated with the
Purchaser and not subject to a conflict of interest.
* The fact that the longer the Assets are held the greater the risk to the
Partnership of lease rollover, renegotiation and non-renewal. Similarly,
as a result of the average lease
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term for the Assets being 10.8 years, the Assets may become more difficult
to sell. These costs and risks are highlighted above under the "Special
Factors - Purpose of and Reasons for the Transaction."
* The high cost of operating the Partnership as a publicly-held entity. Over
the past two years, the Partnership has spent $146,480 and $164,081 on
partnership administration expense and legal, accounting and tax advisory
fees necessitated, in part, by the on-going Federal securities law
compliance.
* The lack of an established exchange or market for the Units which makes it
extremely difficult for the Limited Partners to liquidate their investment.
Based on the May 1996 issue of The Stanger Report, the transaction price
per Unit for sales of Units in the "secondary" market was $6.05, which
represents only one transaction for 5,000 Units from December 1, 1995
through February 29, 1996. Over the past 12 months, only 16,177 Units were
sold in private transactions in the "secondary" market.
* Comparison of the per Unit price to be paid in connection with the
Transaction to current and historical market prices of the Units indicates
that the per Unit price to be paid to the Limited Partners in connection
with the Partnership's liquidation and dissolution will be at the high end
of such market prices.
* The recent decrease in the percentage distribution resulting from the
default by House of Fabrics and the uncertainty regarding the re-leasing
prospects of this property.
* The expressed desire of certain Limited Partners to have their investment
in the Partnership liquidated.
* The Operating General Partners' industry knowledge regarding the
marketability of the Assets.
Factors Against the Transaction:
-------------------------------
* Since the Operating General Partners are affiliates of the Purchaser, their
recommendation is subject to a conflict of interest. See "Conflicts of
Interest." Furthermore, no unaffiliated representative was retained to act
solely on behalf of the Limited Partners for the purpose of negotiating the
Transaction. However, separate counsel was retained on behalf of each of
the Partnership, the Purchaser and the General Partners, the sale price was
based on an independent appraisal and such party rendered an opinion that
the Transaction is fair to the Limited Partners from a financial point of
view.
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* The Limited Partners may be unable to invest the cash received by them in
connection with the Transaction in alternative investments that will
generate a return equal to or greater than that generated by the investment
in the Partnership.
* The Limited Partners will no longer have an ownership interest in the
Assets and thus will not share in any potential changes in their value.
* There can be no assurances that a better offer for the acquisition of the
Assets may not be available now or in the future.
* The Limited Partners may incur certain tax liabilities as a result of the
Transaction. See "Income Tax Consequences of the Transaction."
* The fact that as set forth in the Prospectus, the anticipated holding
period for the assets was originally contemplated to be from seven to nine
years.
The current value of the Assets as compared to their book value (of
$13,604,117 as reflected on the Partnership's financial statements as of March
31, 1996) was not a significant factor in the Operating General Partners'
determination of the fairness of the terms of the Transaction because, in real
estate transactions, book value is not considered an accurate representation of
underlying market value. Likewise, liquidation value was not deemed to be
applicable due to the finite life investment oriented nature of the
Partnership's Assets.
Conclusion
After evaluation of each of the foregoing factors the Operating General
Partners concluded that the factors weighing in favor of the Transaction
outweighed the factors weighing against the Transaction. In particular, the
Operating General Partners concluded that, as with any investment decision, the
potential disadvantages and risks of the Transaction are speculative, are unable
to be quantified and do not outweigh the benefits of the Transaction.
Therefore, the Operating General Partners determined that the terms of the
Transaction are fair to the Limited Partners and recommend that the Limited
Partners vote "FOR" the Transaction and "FOR" the Amendment. Mr. Froelich is
not recommending the Transaction because he believes that the most advantageous
methodology for determining a fair price for the Assets would be to seek third-
party offers through an arm's-length bidding process.
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APPRAISAL RIGHTS
Neither the Partnership Agreement nor the Act, provide rights of appraisal
or similar rights to the Limited Partners who dissent from the vote of the
majority in approving the Transaction. As a result, if Limited Partners holding
a majority of the Units approve the Transaction and if the Transaction is
consummated, the Partnership will be liquidated and all Limited Partners,
including those who do not approve the Transaction will receive liquidating
distributions pursuant to the terms of the Partnership Agreement.
COSTS ASSOCIATED WITH THE TRANSACTION
The following is an itemized statement of the approximate amount of all
expenses incurred or to be incurred by the Partnership in connection with the
Transaction:
<TABLE>
<CAPTION>
<S> <C>
Legal fees 34,300
Fairness Opinion and related expenses 8,800
Printing and mailing costs 12,000
Accounting 7,300
Title, survey and environmental reports 71,200
Proxy solicitation fees 11,000
Other, including filing fees 28,000
--------
Total $172,600
--------
</TABLE>
All of the foregoing fees and expenses will be paid by the Partnership from
cash from operations. Of such fees and expenses $9,718 have been paid to date.
No part of such funds is expected to be borrowed. In addition, the Partnership
will pay the Valuation fees and related expenses of approximately $36,400 of
which $13,500 have been paid to date. The cost of the Valuation was a necessary
Partnership expense in accordance with the requirements of the Partnership
Agreement and, therefore, is not considered an expense of the Transaction.
The fees and expenses of the Purchaser in connection with the Transaction
will be paid by the Purchaser. Certain of these fees and expenses to be paid by
the Purchaser (not the Partnership) include $21,870 payable to each of Brauvin
Management Company and Brauvin Financial, Inc. for advisory services. Brauvin
Management Company and Brauvin Financial, Inc. are owned, in part, by Mr.
Froelich and an affiliate of the Managing General Partner. None of these fees
are being paid out of the proceeds of the Partnership.
42
<PAGE>
CONFLICTS OF INTEREST
INTERESTS IN THE PURCHASER
The Operating General Partners are affiliated with the Purchaser and,
therefore, have an indirect economic interest in consummating the Transaction
that may be considered to be in conflict with the economic interests of the
Limited Partners. This affiliated status results from the Braults and certain
other members of the management of the Corporate General Partner being minority
equity participants in the Purchaser. The amount of such equity participation
in the Purchaser has not been finally determined, but will be dependent on
meeting certain performance standards and will range from 0% to 20%. To the
extent such equity participation results in less than 10% ownership, the
Operating General Partners may not be considered "affiliates" of the Purchaser
pursuant to the Federal securities laws, although they would still be subject to
certain conflicts of interest. Although the "affiliate" status of the Operating
General Partners has not been finally determined, the Partnership has complied
with the Federal securities law requirements relating to "affiliate"
transactions, including the filing of a Schedule 13E-3. Notwithstanding the
Braults minority ownership in the Purchases, the General Partners remain
accountable to the Partnership as fiduciaries and consequently must exercise
good faith and fair dealing toward the Limited Partners.
PURCHASER FEES
Each of Brauvin Management Company and Brauvin Financial, Inc., which
are owned, in part, by Cezar M. Froelich and an affiliate of Jerome J. Brault,
will receive $21,870 from the Purchaser (not the Partnership) for advisory
services rendered in connection with the Transaction.
INDEMNIFICATION UNDER THE PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, the Partnership
has agreed to indemnify the General Partners and any of their affiliates, to the
maximum extent allowed by law, and to hold them harmless, and the Limited
Partners have agreed to make no claim against the General Partners and any
affiliates of the General Partners, for any loss suffered by the Partnership
which arises out of any action or inaction of the General Partners or their
affiliates if the General Partners, in good faith, determine that such course of
conduct was in the best interests of the Partnership and such course of conduct
did not constitute negligence or misconduct of the General Partners.
Furthermore, the General Partners and their affiliates are to be indemnified by
the Partnership, to the maximum extent allowed by law and by the Partnership
Agreement, against any losses, judgments, liabilities, expenses and amounts paid
in settlement of any
43
<PAGE>
claims sustained by them in connection with the Partnership, provided that the
same were not the result of negligence or misconduct on the part of the General
Partners and their affiliates, that the General Partners and their affiliates
made a good faith determination that their actions were in the best interest of
the Partnership and that the General Partners and their affiliates were acting
within the scope of the General Partners' authority.
If a claim is made against the General Partners or their affiliates in
connection with their actions on behalf of the Partnership with respect to the
Transaction, the General Partners expect that they and such affiliates will seek
to be indemnified by the Partnership with respect to such claim. Any expenses
(including legal fees) incurred by the General Partners and such affiliates in
defending such claim shall be advanced by the Partnership prior to the final
disposition of such claim, subject to receipt by the Partnership of an
undertaking by the General Partners and such affiliates to repay any amounts
advanced if it is determined that the indemnified person's actions constituted
fraud, negligence, breach of fiduciary duty or misconduct. As a result of these
indemnification rights, a Limited Partner's remedy with respect to claims
against the General Partners and their affiliates relating to the General
Partners' or such affiliates' involvement in the Transaction could be more
limited than the remedies which would have been available absent the existence
of these rights in the Partnership Agreement. A successful claim for
indemnification, including the expenses of defending a claim made, would reduce
the Partnership's assets by the amount paid.
Notwithstanding the foregoing, the General Partners and their
affiliates shall not be indemnified by the Partnership for liabilities arising
under federal and state securities laws unless: (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee and the court approves
indemnification of litigation costs; (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee and the court approves indemnification of litigation
costs; or (iii) a court of competent jurisdiction approves the settlement of the
claims as to the particular indemnitee and finds that indemnification of
settlement and related costs should be made.
INDEMNIFICATION BY THE PURCHASER
Pursuant to the Acquisition Agreement, the Purchaser shall provide the
General Partners for their sole benefit, the indemnification set forth in the
Partnership Agreement as in effect on the date of the Acquisition Agreement.
Pursuant to the Acquisition Agreement, the Partnership and, following the
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<PAGE>
Transaction, the Purchaser and its affiliates, jointly and severally release and
discharge, subject to termination as discussed below, Jerome J. Brault and Cezar
M. Froelich and their respective heirs, executors, administrators and personal
representatives (collectively, the "Released Parties"), jointly and severally,
from and against any and all claims arising out of or relating in any way to any
acts, omissions, transactions or occurrences which took place, in whole or in
part, prior to and including the date of the Acquisition Agreement, whether
known or unknown, suspected or unsuspected, matured or unmatured, fixed or
contingent, including, without limitation, any which relate to or arise in any
way out of the Transaction, but not including the Released Parties' respective
obligations under the Acquisition Agreement or acts, omissions, transactions or
occurrences which involve fraud or criminal conduct with respect to the
financial affairs of the Partnership. In addition, the Acquisition Agreement
provides that, if such Released Parties have fully performed their respective
obligations under the Acquisition Agreement to be performed on or prior to the
Effective Time, the release shall be extended to cover the period prior to and
including the Effective Time.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP,
ITS GENERAL PARTNERS AND THEIR AFFILIATES
THE PARTNERSHIP
The Partnership was organized on August 7, 1991 as a limited
partnership under the Act. The Partnership is governed by the Partnership
Agreement, which vests exclusive management control over the Partnership in the
General Partners, subject to the rights of the Limited Partners to vote on
certain limited matters. The address of the Partnership's principal executive
office is 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606, and the
telephone number is (312) 443-0922.
The Partnership was formed to acquire, on an all-cash basis, existing,
income-producing retail and other commercial properties predominantly all of
which were to be subject to triple-net leases. The Partnership raised a total
of $16,008,310 through its offering to the public which commenced on December
12, 1991 and terminated on December 11, 1993, as well as an additional $394,118
through its distribution reinvestment plan through December 31, 1995. The
reinvestment of distributions through the distribution reinvestment plan was
suspended for the May 15, 1996 distribution, as the valuation of the Units was
not complete at such time. As of December 31, 1995, Units valued at $83,706 had
been purchased by the Partnership from Limited Partners liquidating their
original investment and such Units have been retired. The Partnership has
utilized the proceeds of its offering and the funds received through the sale of
Units through
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<PAGE>
the distribution reinvestment plan to acquire the land and buildings underlying
ten properties, as well as a 70.2% equity interest in a joint venture with two
of the Affiliated Limited Partnerships, which venture owns the land and building
underlying a CompUSA store. See the subsection entitled "Description of the
Assets," below.
The original objectives of the Partnership were the: (i) preservation
and protection of capital; (ii) distribution of the Partnership's current cash
flow attributable to rental income; (iii) capital appreciation; (iv) the
potential for increased income through escalations in the base rent or
participation in the growth of the sales of the tenants of the Partnership's
properties; (v) the deferral of the taxation of cash distributions for investors
who are not exempt from federal taxation; and (vi) the production of "passive"
income to offset "passive" losses from other investments.
The Partnership acquired five of its properties in 1993 and three of
its properties in 1994. The Partnership did not acquire any properties in 1995
or 1996. The Partnership does not currently have sufficient funds available for
additional property acquisitions. The Partnership has made quarterly
distributions of operating cash flow as described in the subsection below
entitled "Distributions." As distributions of operating cash flow to the
Limited Partners will be suspended during the pendency of the proposed
Transaction, the Partnership will not be selling any additional Units to the
Limited Partners pursuant to the terms of the Partnership's distribution
reinvestment plan and, therefore, no funds will be raised for additional
acquisitions.
THE GENERAL PARTNERS
The Corporate General Partner is Brauvin Realty Advisors IV, Inc., an
Illinois corporation, with its principal business address at 150 South Wacker
Drive, Suite 3200, Chicago, Illinois 60606. The principal business of the
Corporate General Partner is to act as a general partner of the Partnership.
The directors and executive officers of the Corporate General Partner are Jerome
J. Brault, Chairman of the Board, President and Chief Executive Officer and
James L. Brault, Executive Vice President, Secretary, Treasurer and Chief
Financial Officer. The business address of the director and each of the
executive officers of the Corporate General Partner is 150 South Wacker Drive,
Suite 3200, Chicago, Illinois 60606. Each of the individual General Partners
and the directors and executive officers of the Corporate General Partner is a
citizen of the United States.
Jerome J. Brault is the Managing General Partner of the Partnership
and a beneficial owner of the Corporate General Partner. Mr. Brault is also a
general partner of a series of
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<PAGE>
public limited partnerships affiliated with the Partnership, including the
Affiliated Limited Partnerships, and a director and executive officer of various
corporations affiliated with the Partnership and said public limited
partnerships. In addition, Mr. Brault is an executive officer and a director of
Brauvin Net Lease V, Inc., a publicly-held real estate investment trust. Prior
to his affiliation with the Brauvin organization in 1979, Mr. Brault was the
Chief Operating Officer of Burton J. Vincent, Chesley & Company, a New York
Stock Exchange member firm. Jerome J. Brault has a minority ownership interest
in the Purchaser.
James L. Brault is an executive officer of various corporations
affiliated with the Partnership and a series of other public limited
partnerships affiliated with the Partnership, including the Affiliated Limited
Partnerships. In addition, Mr. Brault is an executive officer and a director of
Brauvin Net Lease V, Inc., a publicly-held real estate investment trust. Prior
to joining the Brauvin organization in May 1989, Mr. Brault was Vice President
of the Commercial Loan Division of The First National Bank of Chicago in
Washington D.C., where he had worked since 1983. While with The First National
Bank of Chicago, Mr. Brault was responsible for the origination and management
of commercial real estate loans, as well as the direct management of a loan
portfolio in excess of $150,000,000. Mr. Brault is the son of Jerome J. Brault.
James L. Brault has a minority ownership interest in the Purchaser.
Cezar M. Froelich is a principal with the Chicago law firm of Shefsky
Froelich & Devine Ltd., 444 N. Michigan Avenue, Chicago, Illinois 60611, which
in the past has acted as counsel to the General Partners, the Partnership and
certain of their affiliates. Mr. Froelich is also a beneficial owner of the
Corporate General Partner. Mr. Froelich is an individual general partner in
seven other affiliated public limited partnerships, including the Affiliated
Limited Partnerships and is a shareholder in Brauvin Management Company and
Brauvin Financial Inc. Mr. Froelich resigned as an individual General Partner
of the Partnership on May 23, 1996, which resignation will become effective
ninety days from June 20, 1996, the date notice of such resignation was first
given to the Limited Partners.
DESCRIPTION OF THE ASSETS
The Partnership currently owns ten, and has a majority interest in an
eleventh, income-producing properties predominantly all of which are subject to
triple-net leases. The Partnership is a landlord only and does not participate
in the operations of any of the properties discussed herein. All lease payments
due the Partnership are current and 100% of the properties are occupied. All
properties were paid for in cash, without any financing. The General Partners
believe that all
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<PAGE>
properties are adequately insured. A description of each of the properties
owned by the Partnership follows.
Steak n Shake, Pearless Park, Missouri
- --------------------------------------
The property is located on the southeast corner of Highway 141 and
Interstate I-44, approximately 16 miles southwest of downtown St. Louis. The
single-story building is 3,860 square feet situated on a 39,500 square foot
parcel of land.
Children's World Learning Center, Arlington, Texas
- --------------------------------------------------
The property is located at 1235 West Sublet. The building is 4,950 square
feet built on 0.625 acres of land. The single-story, wood-frame building has
brick veneer exterior and has a pitched roof with asphalt shingles. The building
was constructed in 1984.
Chuck E. Cheese's Restaurants:
- -----------------------------
Ashwaubenon, Wisconsin
----------------------
The property is located at 1273 Lombardi Access Road. The building consists
of 10,183 square feet situated on a 3.385 acre parcel and was constructed in
1983 utilizing a steel frame with birch and wood siding.
Springfield, Ohio
-----------------
The property is located at 2345 Valley Loop Road. The building consists of
10,183 square feet situated on a 2.769 acre parcel and was constructed in 1983
utilizing a steel frame with concrete block.
Mrs. Winner's Chicken & Biscuit Restaurant, Oakwood, Georgia
- ------------------------------------------------------------
The property is located at 3465 Mundy Mill Road. The building consists of
2,436 square feet situated on a 25,700 square foot parcel and was constructed in
1983 utilizing concrete block construction with vinyl siding.
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<PAGE>
House of Fabrics, Joliet, Illinois
- ----------------------------------
The following real property constitutes 10% or more of the total assets or
gross revenues of the Partnership.
On July 15, 1993, the Partnership acquired the land and building underlying
a SoFro (d.b.a. House of Fabrics) fabric store (the "Joliet Property") at 2900
Colorado Avenue in Joliet, Illinois from an unaffiliated developer for
$1,430,000, plus closing costs. The Partnership owns the Joliet Property in fee
simple. The Joliet Property is not subject to any material mortgages, liens or
other encumbrances.
The Joliet Property consists of a 20,000 square foot building situated on a
1.299 acre parcel and was constructed in 1993 utilizing concrete block
construction with steel frame and metal deck roof. The Joliet Property was
leased to SoFro Fabrics, Inc. and guaranteed by its parent company, House of
Fabrics, Inc. under a triple-net lease expiring March 31, 2008, with two five-
year renewal options. SoFro was required to pay base minimum rent each month
which would be increased by $10,000 per annum every five years with the first
increase scheduled for April 1, 1998. Pursuant to the triple-net lease, SoFro
was responsible for all obligations and expenses incident to the operating and
maintenance of the building, including all taxes and insurance premiums, but not
including roof and structural repairs. The average effective annual rental per
square foot for each of the last three years in which the Partnership owned the
Joliet Property is $7.50, for the years ended 1995, 1994 and 1993.
The Federal income tax basis of the Joliet Property is $1,167,573 and
depreciation is calculated on the straight line method which varies between 39
years and 40 years. Annual realty taxes were $24,423 for 1995, which were paid
in 1996.
In October 1994 House of Fabrics filed for protection under Chapter 11 of
the United States Bankruptcy Code. At the time of the filing the tenant was over
one month in arrears. From October 1994 until January 1996, House of Fabrics
occupied the Joliet Property and paid all rents and occupancy expenses on a
timely basis. In August 1995, House of Fabrics notified the Partnership that,
under the provisions of the bankruptcy code, they had rejected the lease and
indicated that they would vacate the Joliet Property at the end of January 1996.
House of Fabrics vacated the Joliet Property on January 31, 1996. The
Partnership has engaged a national brokerage firm to assist in re-leasing this
property.
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<PAGE>
Volume ShoeSource, Blaine, Washington
- -------------------------------------
The following real property constitutes 10% or more of the total
assets or gross revenues of the Partnership.
On September 8, 1993, the Partnership purchased the land and building
at 439 Peace Portal Drive (the "Washington Property") underlying a Volume
ShoeSource store, a division of Payless ShoeSource Inc., from Payless
ShoeSource, Inc. for $1,627,822, plus closing costs. The Partnership owns the
Washington Property in fee simple. The Washington Property is not subject to any
material mortgages, liens or other encumbrances.
The Washington Property consists of 10,900 square feet situated on a
.389 acre parcel and was fully renovated in 1992. The Washington Property was
leased to May Department Stores Company Inc. for 10 years starting on the day of
closing and expiring on September 30, 2003, plus four five-year renewal options.
The tenant is obligated to pay base minimum rent each month. In addition, the
lease includes minimum rent escalations of 15% of the then minimum base rent
every five years beginning in the sixth year of the lease. The tenant leased the
property under an absolute triple-net lease whereby the tenant pays for all
expenses related to the property including real estate taxes, insurance
premiums, maintenance and repair costs. The average effective annual rental per
square foot for each of the last three years or portions thereof in which the
Partnership owned the Washington Property is $16.05, for the years ended 1995,
1994 and 1993.
The Federal income tax basis of the Washington Property is $954,704
and depreciation is calculated on the straight line method which varies between
39 years and 40 years. Annual realty taxes are paid by the tenant and are
$5,516.34 for 1995.
CompUSA, Duluth, Georgia
- ------------------------
The following real property constitutes 10% or more of the total
assets or gross revenues of the Partnership.
On November 9, 1993, the Partnership purchased a 70.2% interest in a
joint venture (the "Joint Venture") with two of the Affiliated Limited
Partnerships that acquired the land and building underlying a CompUSA store in
Duluth, Georgia, a suburb of Atlanta, in the Gwinnett Place Mall Shopping Area
(the "Georgia Property") from an unaffiliated seller for $2,350,000, plus
closing costs. The Joint Venture owns the Georgia Property in fee simple. The
Georgia Property is not subject to any material mortgages, liens or other
encumbrances.
The Georgia Property is a 25,000 square foot single story building
located on a 105,919 square foot parcel in Duluth,
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Georgia. The single story building was completed in March 1993 utilizing a frame
of steel and concrete block. The Georgia Property is leased to CompUSA, Inc., a
NYSE-listed company, for a minimum term of 15 years (from March 1993). The
tenant has the option to renew the lease for up to four five-year terms. The
tenant is obligated to pay base minimum rent each month in the amount of
$20,703, plus periodic fixed increases of $.50 per square foot of leasable every
five years beginning in the sixth lease year. The tenant leased the property
under a triple net lease whereby the tenant pays for all expenses related to the
property including real estate taxes, insurance, maintenance and repair costs.
The Joint Venture is responsible for the roof and structural components of the
building excluding normal maintenance. The roof has a 15-year manufacturer's
warranty (from March 1993) that has been assigned to the Joint Venture. The
average effective annual rental per square foot for each of the last three years
or portion thereof in which the Partnership owned the Georgia Property is $9.86,
$10.04 and $9.94, for the years ended 1995, 1994 and 1993, respectively.
The Federal income tax basis of the Georgia Property is $2,475,640 and
depreciation is calculated on the straight line method which varies between 31
years and 40 years. Annual realty taxes are paid by the tenant and were
$36,477.30 for 1995.
Blockbuster Video, Eagan, Minnesota
- -----------------------------------
The property is located at 2075 Cliff Road and consists of a 7,028
square foot building situated on a 37,364 square foot parcel of land. The
building was constructed in 1993 of concrete block and steel frame covered with
stucco.
East Side Mario's, Copely, Ohio
- -------------------------------
The following real property constitutes 10% or more of the total
assets or gross revenues of the Partnership.
On January 18, 1994, the Partnership purchased the land and building
located at 85 W. Montrose Avenue, Copely, Ohio (the "Ohio Property") underlying
an East Side Mario's restaurant, from Morgan's Foods, Inc. for $1,435,000, plus
closing costs. The Partnership owns the Ohio Property in fee simple. The Ohio
Property is not subject to any material mortgages, liens or other encumbrances.
Morgan's Food is the East Side Mario's franchisee for the State of
Ohio. The Ohio Property consists of a 6,240 square foot building situated on
1.76 acres of land. The building was constructed in 1993 of concrete block and
steel frame. During 1994, the franchisor, Prime Group of Canada, Inc., sold the
East Side Mario's concept to Pizza Hut, Inc., a division of Pepsico, Inc. This
sale has no effect on the existing lease. The Ohio
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<PAGE>
Property is leased to Morgan's Creative Concepts, Inc. and the lease is
guaranteed by the parent company Morgan Foods, Inc., for 20 years expiring on
January 31, 2014, plus two ten-year renewal options. The tenant is obligated to
pay base minimum rent each month in the amount of $13,453 plus minimum rent
escalations of 15% of the then minimum base rent every five years beginning in
the sixth year of the lease. The tenant is also obligated to pay percentage rent
of 5% of total annual sales which exceed a pre-established amount. The tenant
leased the Ohio Property under a triple-net lease whereby the tenant pays for
all expenses related to the Ohio Property including real estate taxes,
insurance, and maintenance and repair costs. The average effective annual rental
per square foot for each of the last two years in which the Partnership owned
the Ohio Property is $25.87, for the years ended 1995 and 1994.
The Federal income tax basis of the Ohio Property is $975,894 and
depreciation is calculated on the straight line method which varies between 39
years and 40 years. Annual realty taxes are paid by the tenant and were
$20,424.72.
Walden Books Store, Miami, Florida
- ----------------------------------
The following real property constitutes 10% or more of the total assets or
gross revenues of the Partnership.
On February 28, 1994, the Partnership purchased the land and building
located on the southeast corner of Kendall Drive and S.W. 112th Street, Miami,
Florida (the "Florida Property") occupied by a Walden Books store located in
Miami, Florida, from an unaffiliated seller, for a purchase price of $1,680,000,
plus closing costs. The Walden Books Property was completed in November 1988 and
is leased under a triple-net lease to Walden Books, Inc. for a minimum term
ending January 31, 2009. The tenant is obligated to pay base minimum rent each
month in the amount of $14,167 with scheduled increases in rent beginning in
February 1999. The tenant is also obligated to pay a percentage of the rent
based on the total annual sales which exceed a pre-established amount. The
Partnership owns the Florida Property in fee simple. The Florida Property is not
subject to any material mortgages, liens or other encumbrances.
The Florida Property consists of a 8,500 square foot building situated on
.743 acres of land. The building was constructed in 1988 of masonry block with
stucco and dryvit parapet. The Florida Property is leased under a triple-net
lease whereby the tenant pays for all expenses related to the Florida Property,
including real estate taxes, insurance premiums and maintenance and repair
costs. The Partnership is responsible for repairs to the roof and structure. The
average effective annual rental per square foot for each of the last two years
in which
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<PAGE>
the Partnership owned the Ohio Property is $20.00, for the years ended 1995 and
1994.
The Federal income tax basis of the Ohio Property is $1,225,195 and
depreciation is calculated on the straight line method which varies between 39
years and 40 years. Annual realty taxes are paid by the tenant and were
$25,140.29 for 1995.
DISTRIBUTIONS
Cash distributions to Limited Partners for 1995, 1994 and 1993 were
$1,296,726, $1,244,736 and $495,347, respectively of which $1,203,510,
$1,030,281 and $492,617, respectively, represented net income of the
Partnership. Cash distributions for the first quarter of 1996 were $327,397.
Distributions of operating cash flow, if available, were paid four times per
year, 45 days after the end of each calendar quarter. The actual distribution
for 1993 to each investor was calculated on a per diem basis from the date of
the investment at an annualized rate of 5% to 6%. The distributions were
generated from a combination of property operations and interest income. No
amount distributed in 1994, 1995 or 1996 was a result of a sale of assets. The
difference between cash distributions of the Partnership and the net income
earned is primarily the result of depreciation expense and, to a lesser extent,
differences between the accrual basis of accounting and the cash generated from
operations.
Below is a table summarizing the historical data for the Partnership's
distribution rates per Unit per annum:
<TABLE>
<CAPTION>
Distribution
Date 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
February 15 $0.2000 $0.2000 $0.1625 $0.1500 ---
May 15 --- 0.2000 0.1750 0.1500 0.0920
August 15 --- 0.2000 0.2000 0.1250 0.1750
November 15 --- 0.2000 0.2500 0.1375 0.1500
</TABLE>
The distribution percentage was decreased for May 15, 1996 as a result of
the lease default by House of Fabrics, Inc., which has vacated the Joliet,
Illinois property. Future changes in the Partnership's distributions would
largely depend on sales at the Partnership's Assets resulting in changes to
percentage rent and, to a lesser extent, on rental increases or decreases which
will occur due to changes in the Consumer Price Index or scheduled changes in
base rent and loss of rental payments resulting from defaults and lease payment
reductions due to lease
53
<PAGE>
renegotiations. The Operating General Partners have determined that during the
pendency of the proxy solicitation no future distributions of operating cash
flow will be made to the Limited Partners. As of the date hereof, the
Partnership has no preferred return deficiency.
OWNERSHIP OF UNITS
No person (including any "group" as that term is used in Section 13(d)(3)
of the Exchange Act) is known to the Partnership to be the beneficial owner of
more than 5% of the outstanding Units as of April 30, 1996, and no individual
General Partner or director or executive officer of the Corporate General
Partner beneficially owns any Units.
MARKET FOR THE UNITS
The Units are not traded on any established trading market, nor has there
been such a market during the past two years. Thus, no information is available
as to high and low bid quotations or sales prices. It is not anticipated that
there will be a public market for the Units in the future. Furthermore, no
person has contacted the Partnership expressing an interest in purchasing Units.
Neither the General Partners nor the Partnership are obligated to redeem or
repurchase Units, but the Partnership may purchase Units under certain very
limited circumstances. The Partnership will not purchase Units during the
pendency of the proposed Transaction.
Below is a table summarizing purchases of Units made by the Partnership
during the last two fiscal years and the current fiscal year:
<TABLE>
<CAPTION>
Units Range Average
For the Quarter Ended: Purchased of Prices Price
- ------------------------ --------- --------- -------
<S> <C> <C> <C>
March 31, 1994 2,125.696 $10.00 $10.00
June 30, 1994 --- --- ---
September 30, 1994 2,700.000 $10.00 $10.00
December 31, 1994 1,009.873 $10.00 $10.00
March 31, 1995 1,548.473 $10.00 $10.00
June 30, 1995 968.101 $10.00 $10.00
September 30, 1995 --- --- ---
December 31, 1995 --- --- ---
March 31, 1996 3,500.000 $10.00 $10.00
June 30, 1996 --- --- ---
</TABLE>
Purchases of the Units by the Partnership prior to receipt of the
Valuation were made at the initial public offering price. Should the
Transaction not be completed, any future purchases of
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<PAGE>
Units by the Partnership will be at a price equal to the then current Valuation
of the Units based on a third-party valuation.
LEGAL PROCEEDINGS
On October 14, 1993, Brauvin, Inc., an affiliate of the Partnership,
brought a lawsuit in the Circuit Court, 4th Judicial Circuit in and for Duval
County, Florida against an unaffiliated seller due to the seller's alleged
refusal to proceed under the terms of a purchase and sale agreement pursuant to
which Brauvin, Inc. was to acquire three properties in Jacksonville, Florida.
In this lawsuit, Brauvin, Inc. sought specific performance of the purchase and
sale agreement to require the unaffiliated seller to sell the subject properties
to Brauvin, Inc. Brauvin, Inc. subsequently amended its complaint to add the
tenant of the properties, Rally's, Inc., as an additional defendant seeking an
unspecified amount of damages. Rally's, Inc. was added because of its
activities which Brauvin, Inc. alleges have tortiously interfered with the
business relations between Brauvin, Inc. and the seller. Brauvin, Inc. intended
to transfer its contract right with respect to such properties to the
Partnership prior to acquisition. Since Brauvin, Inc. was acting as an agent
for the Partnership, the Operating General Partners believe that it is
appropriate for the Partnership to defend the claims made against its
agent.
In response to the lawsuit, the seller made a counterclaim against
Brauvin, Inc. with counts for slander of title, tortious interference with an
advantageous business relationship, conspiracy and to quiet title. The seller
had also sued a former employee of Brauvin, Inc. The counterclaim is seeking
damages in an amount in excess of $2,000,000, together with punitive damages.
The Partnership filed a motion to dismiss as the Partnership believes the
Florida court does not have jurisdiction over the Partnership. During 1994, the
motion to dismiss was denied. The Partnership and the seller have held
discussions in an attempt to resolve the claims. Currently, the claims have not
been resolved and if no resolution occurs the Partnership intends to vigorously
defend itself with respect to this action, as the Operating General Partners
believe that the claims made lack merit and therefore are unlikely to have any
impact on the Partnership's financial statements. The Partnership is not taking
a reserve in connection with this litigation, as the amount is not material.
However, the Partnership will establish a reserve of $10,000 for such litigation
in connection with its liquidation and dissolution.
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<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, whose report on the Partnership's financial
statements as of December 31, 1995 and 1994 and for the three years in the
period ended December 31, 1995 appear in the Partnership's 1995 Annual Report on
Form 10-K, are the current independent auditors of the Partnership. No
representative of Deloitte & Touche LLP is expected to be present at the Special
Meeting.
AVAILABLE INFORMATION
The Units are registered pursuant to Section 12(g) of the Exchange Act. As
such, the Partnership is subject to the informational filing requirements of the
Exchange Act, and in accordance therewith, is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Comprehensive financial information is included in
the Partnership's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
and other documents filed by the Partnership with the Commission, including the
1995 Annual Report on Form 10-K, excerpts from which are included on Schedule I
hereto, and the Quarterly Report on Form 10-Q for the period ended March 31,
1996, excerpts from which are included on Schedule II hereto. Such reports and
other information should be available for inspection and copying at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies should be available by mail
upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 450 Fifth Street, N.W., Washington, D.C.
20549.
The Corporate General Partner is a privately held company and is not
subject to the reporting requirements of the Exchange Act.
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser is a Delaware limited liability company that was recently
formed to acquire the Assets and the assets of the Affiliated Limited
Partnerships. The Purchaser has not engaged in any business or activity of any
kind, or entered into any agreement or arrangement with any person or entity or
incurred, directly or indirectly, any material liabilities or obligations,
except in connection with its formation, the proposed Sale and the proposed
Affiliated Transactions. Upon completion of the Sale and the Affiliated
Transactions, the Purchaser will own and
56
<PAGE>
operate the Assets and the assets owned by the Affiliated Limited Partnerships.
The Braults have a minority ownership interest in the Purchaser. In
addition, certain other members of the Corporate General Partner's management
may participate in the ownership of the Purchaser. Mr. Froelich will not have
any affiliation with the Purchaser. The Purchaser is in the process of securing
equity and debt financing to consummate the Sale and the Affiliated
Transactions. Thus, the ultimate ownership of the Purchaser will not be known
until the completion of these investment activities. It is anticipated that the
members of the Purchaser will be a number of unrelated, accredited
investors.
The Purchaser's principal executive office and place of business is 150
South Wacker Drive, Suite 3200, Chicago, Illinois 60606. Its telephone number is
(312) 443-0922. All information contained in this Proxy Statement concerning the
Purchaser is based upon statements and representations made by the Purchaser or
its representatives to the Partnership or its representatives.
SELECTED FINANCIAL DATA
The tables attached hereto as Schedules I and II provide a summary of
certain financial data for the Partnership. Such selected financial data should
be read in conjunction with the detailed information and financial statements
included in the Partnership's Annual Report to Limited Partners which was
distributed to the Limited Partners on May 1, 1996 and are included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1995,
the Partnership's Annual Report, as amended, on Form 10-K/A for the year ended
December 31, 1995 and the Partnership's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, which are incorporated herein by reference.
The Partnership's ratio of earnings to fixed charges, for each of March 31,
1996, December 31, 1995 and December 31, 1994 was 0.00%, as the Partnership has
no fixed charges.
The foregoing information is derived from the audited financial statements
of the Partnership for 1994 and 1995 and the unaudited financial statements of
the Partnership for the first quarter of 1996.
Pro forma data disclosing the effect of the Transaction is not material.
The Purchaser is a newly formed entity and thus has no historical financial
data.
57
<PAGE>
INCORPORATION BY REFERENCE
The following documents filed by the Partnership with the Commission
are incorporated in this Proxy Statement by reference and made a part hereof:
1. The Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. The Partnership's Annual Report, as amended, on Form 10-K/A for the
year ended December 31, 1995;
3. The Partnership's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; and
4. All reports filed by the Partnership with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act since January 1, 1995 to the
date of the Special Meeting.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Proxy Statement modifies or replaces such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
The Partnership will provide without charge to each person to whom a copy
of this Proxy Statement is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference (other than exhibits to such documents unless such documents are
specifically incorporated by reference into the information this Proxy Statement
incorporates). Written and telephone requests for such copies should be
addressed to the Partnership at its principal executive office.
58
<PAGE>
SCHEDULE I
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
(A DELAWARE LIMITED PARTNERSHIP)
(NOT COVERED BY INDEPENDENT AUDITOR'S REPORT)
FOR PERIOD AUGUST 7, 1991 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
(IN DOLLARS)
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Selected Income Statement Data:
Rental Income 1,643,736 1,571,077 639,565 96,859 --
Interest Income 31,777 37,754 124,814 50,333 --
Net Income 1,203,510 1,030,281 492,617 47,090 --
Net Income Per
Unit (a) 0.74 0.64 0.42 0.14 --
Selected Balance Sheet Data:
Cash and Cash
Equivalents 711,167 569,244 4,803,350 2,411,424 1,000
Land, Buildings
and Improve-
ments 14,308,630 14,308,630 10,066,508 3,454,263 --
Total Assets 14,850,948 14,895,510 15,009,234 6,166,502 252,208
</TABLE>
59
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Cash Distribu-
tions to Limited
Partners 1,296,726 1,244,736 495,347 75,484 --
Cash Distribu-
tions to Limited
Partners Per Unit(a) 0.80 0.77 0.43 0.22 --
Book Value Per
Unit (a) 8.60 8.66 8.74 8.80 --
</TABLE>
(a) Net income per Unit, cash distributions per Unit and book value per Unit
are based on the average Units outstanding during the quarter since they
were of varying dollar amounts and percentages based upon the dates Limited
Partners were admitted to the Partnership and additional Units were
purchased through the Partnership's distribution reinvestment plan.
60
<PAGE>
SCHEDULE II
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
(A DELAWARE LIMITED PARTNERSHIP)
(NOT COVERED BY INDEPENDENT AUDITOR'S REPORT)
---------------------------------------------
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1996 MARCH 31,1995
<S> <C> <C>
Selected Income Statement Data:
Rental Income 388,593 401,447
Interest Income 8,272 4,757
Net Income 261,649 299,869
Net Income Per Unit(a) 0.16 0.19
Selected Balance Sheet Data:
Cash and Cash
Equivalents 698,052 569,486
Land, Buildings and
Improvements 14,308,630 14,308,630
Total Assets 14,796,123 14,866,210
Cash Distributions to
Limited Partners 327,397 324,567
Cash Distributions to
Limited Partners Per
Unit (a) 0.20 0.20
Book Value Per Unit(a) 8.55 8.64
- ----------------------------------
</TABLE>
(a) Net income per Unit, cash distributions per Unit and book value per Unit are
based on the average Units outstanding during the year since they were of
varying dollar amounts and percentages based upon the dates Limited Partners
were admitted to the Partnership and additional Units were purchased through
the Partnership's distribution reinvestment plan.
61
<PAGE>
YOUR VOTE IS EXTREMELY IMPORTANT
Regardless of the number of Units of Brauvin Corporate Lease Program IV
L.P. you own, please vote by taking these simple steps:
1. Please SIGN, MARK, DATE and MAIL the enclosed proxy card in the enclosed,
postage-paid envelope (or by facsimile) as soon as possible before the
Special Meeting on August __, 1996.
2. You may also transmit your proxy by facsimile to (214) 999-9323 or (214)
999-9348. When voting your proxy by facsimile, both sides of the proxy card
must be transmitted.
3. If you wish to vote "FOR" the Transaction, which includes a vote for the
Sale and the Liquidation, you must submit the enclosed proxy card.
4. If your Units are held for you in "street name" by a bank or broker, the
bank or broker may not give your proxy without your instruction. Please
call your bank or broker and instruct your representative to vote "FOR" the
Transaction. A broker non-vote is the equivalent of a vote "AGAINST" the
Transaction and the Amendment.
5. If you have any questions or require any additional information concerning
this Proxy Statement please contact either:
Investor Services Department
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
150 South Wacker Drive
Chicago, Illinois 60606
CALL TOLL-FREE (800) 272-8846
or our solicitation agent who can also assist you in
voting:
THE HERMAN GROUP, INC.
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
CALL TOLL-FREE (800) 992-6145
PLEASE SIGN, MARK, DATE AND RETURN YOUR PROXY CARD TODAY.
62
<PAGE>
Annex II
Preliminary Form and Content of
Cushman & Wakefield Fairness Opinion
------------------------------------
Cushman & Wakefield has advised the Partnership through its Corporate
General Partner that in its opinion, the price per Unit reflected in the
proposed Transaction is fair, from a financial point of view, to the Unit
holders. The determination that a price is "fair" does not mean that the price
is the highest price which might be obtained in the marketplace, but rather that
based upon the sum of the appraised values of the Assets, the price reflected in
the proposed Transaction is within a range that Cushman & Wakefield believes is
reasonable. Although there is no active market in trading the Units, for those
Units that have traded the price per Unit was at or below the price per Unit in
the proposed Transaction. Cushman & Wakefield relied on its appraisal work as a
basis for establishing the fairness of the proposed Transaction. Other methods
could have been employed to test the fairness of the proposed Transaction and
yielded different results. In rendering this opinion, Cushman & Wakefield has
not considered, and has not addressed, market conditions and other factors
(e.g., whether the sale of the Assets as a portfolio rather than a series of
sales of individual assets, would produce a premium or a discounted selling
price) that, in an open-market transaction, could influence the selling price
of the Assets and result in proceeds to Unit holders greater or less than the
proposed price per Unit. Cushman & Wakefield also has not considered the price
and trading history of other publicly traded securities that might be deemed
relevant due to the relative small size of the proposed Transaction and the fact
that the Units are not publicly traded. Furthermore, Cushman & Wakefield has
not compared the financial terms of the proposed Transaction to the financial
terms of other transactions that might be deemed relevant, given that the
proposed Transaction involves all cash to the Unit holders.
<PAGE>
BRAUVIN CORPORATE LEASE PROGRAM IV L.P., 150 SOUTH WACKER DRIVE, SUITE 3200,
CHICAGO, ILLINOIS 60606
THIS PROXY IS SOLICITED ON BEHALF OF BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
The undersigned hereby appoints Jerome J. Brault, with full power of
substitution, the attorney and the proxy of the undersigned, to represent and to
vote, as designated below, all units of limited partnership interest ("Units")
of Brauvin Corporate Lease Program IV L.P., a Delaware limited partnership (the
"Partnership") that the undersigned is entitled to vote if personally present at
the Special Meeting of Limited Partners of the Partnership to be held on August
__, 1996, at __:00 a.m. (Chicago time), at the offices of the Partnership, 150
South Wacker Drive, Suite 3200, Chicago, Illinois 60606 and at any
adjournment(s) or postponement(s) thereof. This proxy revokes all prior proxies
given by the undersigned.
(Please mark each proposal with an "X" in the appropriate box)
1. APPROVAL OF THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE
PARTNERSHIP TO BRAUVIN REAL ESTATE FUNDS L.L.C., A DELAWARE LIMITED LIABILITY
COMPANY, AND THE LIQUIDATION AND DISSOLUTION OF THE PARTNERSHIP, WHICH APPROVAL
WILL AUTOMATICALLY RESULT IN THE ADOPTION OF AN AMENDMENT TO THE PARTNERSHIP'S
RESTATED LIMITED PARTNERSHIP AGREEMENT, AS AMENDED, TO ALLOW THE PARTNERSHIP TO
SELL OR LEASE PROPERTY TO AFFILIATES.
[_] FOR [_] AGAINST [_] ABSTAIN
2. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, MARK, DATE AND RETURN YOUR PROXY CARD TODAY IN THE ENCLOSED
ENVELOPE.
SEE REVERSE SIDE
----------------
<PAGE>
This Proxy, when properly executed, will be voted in the manner directed
herein. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
Please date and sign this proxy
exactly as your name appears
hereon and return this proxy in
the enclosed postage prepaid
envelope.
________________________________
(Signature)
________________________________
(Signature, if held jointly)
________________________________
(Title)
Dated:__________________________
When Units are held by joint
tenants, both should sign. When
signing as attorney in fact,
executor, administrator, trustee,
guardian, corporate officer or
partner, please give full title as
such. If a corporation, please
sign in corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
