Exhibit 99.1
February 5, 2004
[XXXXXX XXXXXXX HISTORIC PROPERTIES II, L.P. LETTERHEAD]
LETTER TO UNIT HOLDERS
Re: Xxxxxx Xxxxxxx Historic Properties II, L.P.
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Dear unit holder:
As you may know, a tender offer (the "Everest Offer") to purchase up to 317
units, or approximately 40% of the outstanding units, of Xxxxxx Xxxxxxx Historic
Properties II, L.P. (the "Partnership") has been announced by Everest Investors
14, LLC ("Everest") at a purchase price of $13,000 per unit (the "Offer Price").
The Partnership has filed with the Securities and Exchange Commission (the
"SEC") a statement on Schedule 14D-9 relating to the Everest Offer. A copy of
that Schedule 14D-9, which you should read carefully, is enclosed with this
letter.
Through the ownership of interests in three operating limited partnerships,
the Partnership is the indirect owner of the 433-unit apartment complex in
Jersey City, New Jersey, known as Xxxxx Mill (the "Property"). Assuming no
significant further deterioration of the national or local economies, your
general partner is optimistic about the long-term prospects of the Property, but
makes no recommendation as to whether you should tender your units pursuant to
the Everest Offer. Your general partner recognizes that each unit holder's
personal financial situation is unique, and while some unit holders may prefer
to liquidate their investment now, others may prefer to continue to hold their
interests in the Partnership, and for the Partnership to continue to hold the
Property, with a goal of maximizing potential benefits. Unit holders are
strongly urged to consult with their own tax and financial advisors in order to
reach their own decision as to these matters.
Each unit holder should carefully consider all of the circumstances and
available information. Considerations that could affect a unit holder's decision
about the Everest Offer may include, but are by no means limited to, the
following:
o If a unit holder tenders to Everest at $13,000 per unit in cash now,
and the full unit is purchased, the unit holder, while foregoing the
potential for a higher purchase price or annual cash distributions
from operations, will avoid the risk that the Property may not be sold
in the near future or that future annual distributions are not made.
Also, unit holders may have different views over whether to take an
assured amount in the Everest Offer of $13,000 per unit in cash now or
to receive potentially higher tender offers or additional
distributions, including if the Property is sold. The Partnership and
your general partner believe that unit holders should make their own
decision on whether to tender based upon their personal investment
strategy, their current need for investment liquidity, the degree of
risk that they wish to assume regarding the possibility of a sale of
the Property, the individual tax consequences of tendering in the
Everest Offer or continuing to hold the units and other relevant
personal considerations.
o If a unit holder does not tender its units, and either another tender
offer is made at a
higher price (the Everest Offer is the second tender offer for units
in less than a month) or a sale of the Property is completed, the unit
holder could receive an amount of cash that exceeds the Offer Price.
In 2002, the operating general partner received offers for the
Property of approximately $33 million. Your general partner estimates
that a sale at $33 million could result in net proceeds of
approximately $13,000 per unit depending on the cash reserves on hand
at the time of distribution. Your general partner has embarked upon a
process to receive proposals for the sale of the Property in 2004 and
will not know the highest proposed bid until the process is completed.
The Partnership previously received a proposal from an affiliate of
Everest that did not include a binding offer price per unit but would
have required the Partnership to provide such affiliate with an
exclusive due diligence period. It is possible that future offers for
the Property could be made at higher prices and, if consummated, could
result in distributions to investors in an amount in excess of the
Offer Price. It is also possible that future offers could be at lower
prices. The factors on which the sale price depends would likely
include the results of a potential buyer's diligence, conditions in
the housing market in which the Property is located, interest rates
and other financing costs and general business and economic
conditions. The size of the distribution would also depend on the
amount of cash the Property had generated for the Partnership from
operations prior to sale, which amount is expected to be larger the
later in the year a sale were to occur.
In its offer to purchase, Everest stated that one of its purposes in
making the Everest Offer was so that it could be in a position,
together with its affiliates, to prevent any sale of the Property
without its consent. If Everest accepts all of the 317 units that it
is offering to acquire in the Everest Offer, Everest and its
affiliates will hold 52% of the outstanding Units and any sale of the
Property would require their consent.
o If a unit holder does tender all of its units, the unit holder will
not receive any cash distributions. The Partnership receives cash
distributions from the operating limited partnerships in which it is
invested, which in turn depend on the operating cash flow of the
Property. The general partner of the operating limited partnerships
has indicated that it intends to make an annual analysis of cash flow
performance when considering the amount of cash distributions to the
Partnership. Last year, the Partnership made a cash distribution of
$1,325 per unit, or approximately 10.2% of the Offer Price. The
Partnership can provide no assurance of the amount or timing of future
distributions from operating cash flow.
A unit holder will not receive any distributions from the Partnership
for units tendered in the Everest Offer. If the Partnership were to
make a distribution after Everest became the owner of the units,
Everest would receive that distribution. If the Partnership were to
make a distribution prior to the time that Everest became the owner of
the units, Xxxxxxx has said that it will reduce the per unit amount of
cash paid in the Everest Offer by the per unit amount of the
distribution.
o As the Everest Offer is only for 317 units, unit holders who tender in
the offer may retain a portion of the units if the Everest Offer is
over-subscribed. Everest has provided unit holders with the option of
requiring it to accept all or none of their tendered units. If the
Everest Offer is over-subscribed and the unit holder selected this
option, Everest will not accept any units tendered by the unit holder.
However, if the unit holder did not select this option, it is possible
that the unit holder would retain a portion of its units even if it
had tendered all of its Units. Unit holders should therefore be aware
that not all units tendered may be accepted for payment. Unit holders
who do not tender all of their
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units, or who tender all of their units but have only a portion that
are accepted for payment, would remain limited partners of the
Partnership in respect of the units or portion of a unit that they
continue to hold.
o All unit holders are advised to consult with their own tax advisers
concerning the tax consequences of tendering units in the Everest
Offer. Unit holders should be aware that there could be different tax
consequences depending upon whether all or only some of their units
are purchased in the Everest Offer. If a unit holder sells only a
portion of its units, the tendering unit holder would only be able to
utilize suspended losses in the year of the sale to the extent of any
gain on sale, as described in the documents relating to the Everest
Offer. If a unit holder's entire interest is sold, any suspended
losses from the Partnership would be deductible from ordinary income
(subject to any other applicable limitation). There will be other tax
consequences to individual unit holders as a result of accepting the
Everest Offer or any other tender offer and those tax consequences
could vary significantly for each unit holder based on such unit
holder's unique tax situation or other circumstances.
o Everest and its affiliates could acquire a controlling percentage of
the outstanding units. Approximately 12% of the outstanding units are
held by affiliates of Everest. If Everest accepts all of the 317 units
for purchase, Everest and its affiliates will hold approximately 52%
of the outstanding units and will be able control the outcome of any
vote requiring the approval of a majority of unit holders, including
the approval of a future sale of the Property and the removal of your
general partner.
The foregoing are only some of the considerations that may be relevant to
unit holders. These and certain other matters are mentioned in greater detail in
the enclosed Schedule 14D-9.
Your decision is not required immediately. The Everest Offer is scheduled
to expire on February 20, 2004. All unit holders are advised to carefully
consider the Everest Offer.
Very truly yours,
XXXXXX XXXXXXX HISTORIC PROPERTIES II, LP
By: Xxxxxx Xxxxxxx Historic Corporation,
General Partner
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
President
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