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Exhibit 9(a)
SM7 APARTMENT INVESTORS, INC.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
January 14, 1999
Dear Limited Partner:
As we communicated to you last week, MP Value Fund 4, LLC;
Xxxxxx-Xxxxxx Fund, LLC; and MP Value Fund 6, LLC (collectively, the
"Purchasers") have made an offer (the "Offer") to purchase up to 3,324 units of
limited partnership interest ("Units") of S/M Real Estate Fund VII, Ltd. (the
"Partnership") at a price of $65 per Unit. Please note that affiliates of a
former member of the Purchasers' group offered a price of $10 and $35 per Unit
in January 1998 and August 1998, respectively.
The attached Schedule 14D-9 replaces in its entirety the materials we
previously sent to you dated January 6, 1999. Please disregard the previous
mailing.
AFTER CAREFULLY REVIEWING THE OFFER, THE GENERAL PARTNERS BELIEVE THAT
THE PRICE PER UNIT OFFERED TO YOU BY THE PURCHASERS IN THE OFFER MAY NOT FAIRLY
COMPENSATE YOU FOR YOUR INTEREST IN THE PARTNERSHIP AND, THEREFORE, RECOMMEND
THAT YOU DO NOT TENDER YOUR UNITS PURSUANT TO THE OFFER.
As stated in our earlier correspondence, we believe that the
purchasers' underlying objective is to purchase your units at a substantial
discount. In determining to recommend that Limited Partners do not tender their
Units in the Offer, the General Partners considered a number of factors,
including, without limitation, the following:
(1) The price offered by the Purchasers in the offer is
approximately 50% below the General Partnership's estimate of net asset
value of $130 per Unit. This estimated net asset value was calculated
based on a recent appraisal, which valued the Fifth Avenue Apartments
(the "Property") at approximately $8 million, adjusted for the cost of
sales, the Partnership's remaining assets and liabilities and
liquidation expenses. The appraisal was completed in September 1998 as
a part of a refinancing that was completed on December 3, 1998. Of
course, the actual realizable value per Unit upon a sale of the
Property and liquidation of the Partnership would depend on many other
factors, including the actual selling price of the Property and
Partnership liquidation expenses.
(2) The General Partners believe that the Offer does not
adequately reflect the favorable impact of the recent refinancing of
the Property. In the refinancing, the Partnership entered into a new
loan, which will reduce debt service payments in 1999 by approximately
$170,341 (approximately a 25% reduction from the previous loan) and
provides for $114,375 to be used for the replacement of the existing
roof. Although there can be no assurance, the General Partners believe
that this refinancing will improve the financial condition of the
Partnership and may enable the General Partners to realize a greater
sales price than the current appraisal value.
(3) The General Partners' plan, over the next two years is to
complete the improvements described above and market the Property for
sale in an orderly fashion, with the goal of selling the Property to
maximize liquidating cash distributions to Limited Partners. Although
there can be no assurance as to a
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particular selling price, it is anticipated that planned improvements
to the Property may allow the actual selling price to exceed the
current appraised value. There can, however, be no assurance as to when
or whether a sale will occur, or whether such a sale will be on terms
favorable to the Partnership.
(4) The tender of Units pursuant to the Offer may constitute a
taxable event to the participating Limited Partner.
IN SUMMARY, WE DO NOT BELIEVE THAT THE OFFER IS IN YOUR BEST INTEREST.
WE RECOMMEND THAT YOU DO NOT TENDER ANY UNITS AND DO NOT SIGN THE FORMS SENT
TO YOU BY THE PURCHASERS.
In arriving at their recommendation, the General Partners of the
Partnership gave careful consideration to the factors described in the attached
Amendment No. 1 to Schedule 14D-9, which is being filed today with the
Securities and Exchange Commission. This document contains important information
relating to the Offer, and we urge you to read it carefully.
We will, of course, keep you informed of significant events concerning
the Partnership. If you have any questions, please call S/M VII Investor
Services at (000) 000-0000.
Very truly yours,
SM7 Apartment Investors Inc. Xxxxxx Realty Investors VII, Inc.
a general partner a general partner
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxx
President Vice President
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