1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
0 Xxxxxxxx Xxxxx, Xxxxx 000
P.O. Box 9507
Boston, Massachusetts 02114
July 11, 2005
Dear Limited Partner:
As you are aware, Sutter Opportunity Fund 3, LLC and certain of its
related parties ("Sutter") is making an offer to purchase up to 125 units of
limited partnership interest (the "Units") in 1999 Broadway Associates Limited
Partnership (the "Partnership") at a purchase price of $16,500 per Unit.
Xxxxxx'x offer is being made pursuant to the terms and conditions of an Offer to
Purchase dated June 23, 2005, and the related Letter of Transmittal (together,
the "Sutter Offer"). Pursuant to the rules of the Securities and Exchange
Commission, the Partnership is required to make a recommendation whether you
should accept or reject the tender, or whether the Partnership is remaining
neutral.
The Partnership recommends against accepting the Sutter Offer for two
principal reasons: (1) the Partnership's management believes that the net
purchase price for the Partnership's property, when added to current reserves
would generate a per Unit distribution greater than the purchase price offered
by Sutter; and (2) if the Sutter is successful in acquiring all of the Units
sought, it is likely that the Partnership would no longer be subject to the
reporting requirements (10K, 10Q, etc.) of the Securities Exchange Act of 1934.
However, limited partners who would prefer not to take the risks associated with
the sale of the property or the timing of distributions from such sale, if
consummated, may wish to consider the Sutter Offer. Accordingly, each limited
partner is encouraged to consult with his or her own financial advisor in
determining whether to tender his or her Units in the Sutter Offer. We also note
that that the Sutter Offer is schedule to expire on July 22, 2005 which we
believe is earlier than the required period of time a tender offer is required
to remain open pursuant to Rule 14e-1 of the Securities Exchange Act of 1934.
Pursuant to 14e-1, a tender offer is required to be open for 20 business days
from the day it is first published or sent to security holders. It is our
understanding that the Sutter Offer was not published and was mailed on June 30,
2005, less than 20 business days prior to July 22, 2005
Value of the Property
The Partnership's asset is a class A 42-story office building in downtown
Denver, Colorado. The offer price is equivalent to the distribution that would
be made per Unit if the Partnership's property were sold at a purchase price of
approximately $66,710,000, after taking into consideration estimated closing
costs, satisfaction of existing indebtedness (including prepayment premiums) and
cash reserves. The Partnership's management monitors the applicable cap rates
and other factors that generally determine real estate office building sale
prices in the Denver, Colorado market as well as comparable sales of real
property. In addition, the Partnership has recently begun marketing its property
for sale. In this regard, the Partnership has been advised by local real estate
brokers that they believe the minimum price that could be achieved would be not
less than the price being offered by Sutter. To the extent the property is sold
for an amount greater than $66.7 million, the estimated distribution per Unit
for each additional $1,000,000 in purchase price would be approximately $2,100.
Accordingly, if the property were sold for $70 million, the per Unit
distribution is expected to be approximately $23,250 and if sold for $75
million, the per Unit distribution is expected to be approximately $33,500.
Limited Partners should note, however, that there is no assurance that the
property will be sold, or if sold that the purchase price will be greater than
$66.7 million. Further, it is always possible that one or more favorable or
unfavorable circumstances could occur that will affect the price ultimately
received for the property. As indicated in the Partnership's Quarterly Report on
Form 10-Q, although the property has been able to maintain an 85% occupancy rate
in a down office rental market in the Denver, Colorado area, the Lucent
Technologies lease which accounts for 12% of the rentable space at the property
is scheduled to expire at the end of 2005. The property's cash flow exclusive of
the Lucent Technologies lease may not be sufficient to meet the Partnership's
debt service payments and necessary capital improvements. Accordingly, if the
Partnership is unsuccessful in selling the property, the Partnership, if it
cannot obtain additional tenants at commensurate rental rates, will need to
negotiate a loan modification with the existing lender or obtain mezzanine or
junior debt from a third party or through a rights offering made to the
Partnership's partners, which may have the effect of diluting a partner's
interest in the Partnership. If the Partnership is unsuccessful in consummating
one or more of the foregoing options, it is possible that the property could be
foreclosed upon.
Reporting Requirements of the Securities Exchange Act of 1934
If Sutter were successful in acquiring all or a substantial portion of the
Units it is seeking in the Sutter Offer, it is likely that the number of limited
partners in the Partnership would be reduced to less than 300. If this were to
occur, the Partnership would no longer be subject to the reporting requirements
under the Securities Exchange Act of 1934 that require the Partnership to file
its Annual, Quarterly and Current Reports on the forms prescribed by the
Securities and Exchange Commission.
Recommendation
Based on the foregoing, the Partnership recommends against accepting the
Sutter Offer. However, limited partners who would prefer not to take the risks
associated with the sale of the property or the timing of distributions from
such sale, if consummated, may wish to consider the Sutter Offer. Accordingly,
each limited partner is encouraged to consult with his or her own financial
advisor in determining whether to tender his or her Units in the Sutter Offer.
We note that affiliates of the general partner that own Units will not be
tendering their Units in the Sutter Offer.
In addition, the Partnership expects that it will have firm indication as
to the potential purchase price for the property by no later than the end of
July. Accordingly, the general partner of the Partnership, in accordance with
its authority under the Partnership's partnership agreement to withhold consent
to any transfers of Units at its sole discretion, will not effect any transfers
of Units pursuant to the Sutter Offer until after July 31 and then only if the
transferee confirms in writing that it desire to transfer its Units after being
advised of the prospective purchase price.
We urge you to consult with your tax advisor prior to making your decision
as the sale of your Unit may have significant adverse tax consequences to you.
The Partnership notes that certain statements contained herein that are
forward-looking in nature are based on current expectations that are subject to
a number of uncertainties and risks, and actual results may differ materially.
The Partnership undertakes no responsibility to update or revise any forward
looking statements.
If you have any questions, please contact Xxxxxxx Xxxxxxx at 000-000-0000.
Sincerely,
1999 BROADWAY ASSOCIATES
LIMITED PARTNERSHIP
