Exhibit 1
XXXXX REALTY FUND, LTD. - III
December 5, 1996
Dear Limited Partner:
As you are by now aware, Krescent Partners L.L.C., a Delaware
limited liability company (the "Purchaser"), has made an offer (the "Krescent
Offer") to purchase limited partnership units ("Units") of Xxxxx Realty Fund,
Ltd. - III (the "Partnership") for $315 per Unit.
THE XXXXX CORPORATION, A GENERAL PARTNER OF THE PARTNERSHIP (A
"GENERAL PARTNER"), IN LIGHT OF ALL RELEVANT CIRCUMSTANCES, HAS DETERMINED THAT
THE KRESCENT OFFER IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE UNIT
HOLDERS. THE GENERAL PARTNER RECOMMENDS THAT THE HOLDERS OF UNITS REJECT THE
KRESCENT OFFER AND NOT TENDER THEIR UNITS PURSUANT THERETO. The General Partner
reached this conclusion after considering a number of factors, including, but
not limited to, the following:
o THE PRICE PER UNIT OFFERED BY THE PURCHASER
DOES NOT REFLECT THE VALUE INHERENT IN THE
UNITS. The price being offered by the Purchaser is
less than 48% of the General Partner's estimate of
the Partnership's net asset value of $661 per Unit.
(Such net asset value assumes a sale of all of the
Partnership's properties at net asset value, after
deduction for estimated transaction costs, and the
distribution of the net proceeds of such sale to the
Unit holders. Actual transaction costs and market
conditions will affect the actual amount available
for distribution.) Although Unit holders, in
exchange for receiving the certainty of a cash
purchase price from the Purchaser, may prefer to
forego the opportunity to hold their Units and
receive proceeds upon the potential future
liquidation of the Partnership's assets in excess of
the amount being offered by the Purchaser, the
General Partner believes that the price specified in
the Krescent Offer reflects too great a discount to
value.
o AS STATED BY THE PURCHASER IN THE KRESCENT
OFFER, THE PURCHASER IS MAKING THE KRESCENT
OFFER WITH A VIEW TO MAKING A PROFIT.
Accordingly, there is a conflict of interest between
the
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Purchaser's desire to purchase the Units at a low
price and the Unit holders' desire to sell their
Units at a high price.
o UNIT HOLDERS WHO ACCEPT THE KRESCENT OFFER
WILL NO LONGER RECEIVE CASH DISTRIBUTIONS. The
Partnership currently is paying a semi-annual cash
distribution of $7.93, or $15.86 annually, per Unit.
Unit holders who sell their Units to the Purchaser
will lose their right to receive future semi-annual
distributions from operations that are payable in
respect of Units. Furthermore, Unit holders who sell
their Units to the Purchaser will lose their right
to future distributions from future sales of
Partnership properties.
o AS STATED BY THE PURCHASER IN THE KRESCENT OFFER,
UNIT HOLDERS WHO TENDER UNITS ACQUIRED FROM THE
PARTNERSHIP IN CONNECTION WITH THE ORIGINAL ISSUANCE
THEREOF ARE EXPECTED TO RECOGNIZE TAXABLE GAIN, WHICH
WILL BE IN EXCESS OF THE PURCHASE PRICE RECEIVED BY
THEM FROM THE PURCHASER.
Enclosed is a copy of the Partnership's Statement on Schedule
14D-9 which has been filed with the Securities and Exchange Commission and sets
forth the Partnership's response to the Krescent Offer. Limited partners are
advised to carefully read the Schedule 14D-9.
Unit holders also should be advised that, by letter dated
November 4, 1996, Xxxxxxxx Corp. ("Xxxxxxxx") requested that the Partnership
provide to it a list of the Partnership's Unit holders. The letter stated that
the request was being made to facilitate a tender offer by an affiliate of
Xxxxxxxx. As a result of negotiations, the General Partner agreed to provide a
list of the Partnership's Unit holders to Xxxxxxxx in connection with obtaining
the agreement by Xxxxxxxx, pursuant to a Standstill Agreement dated as of
November 26, 1996, that Xxxxxxxx and its affiliates, among other things, would
refrain from acquiring in excess of 25% of the Units for a period ending 30
months after receipt from the Partnership of any list of its Unit holders. The
General Partner was subsequently advised by Xxxxxxxx that its affiliate,
American Holdings I, L.P. ("American Holdings"), intended to commence an offer
to acquire up to 4.9% of the outstanding Units at a price of $325 per Unit,
which is in excess of the purchase price specified in the Krescent Offer. On
December 4, 1996, a representative of Liquidity advised a representative of the
Partnership that an agreement had been reached between persons affiliated with
each of Xxxxxxxx and Krescent and that, as a result of such agreement, the offer
by American Holdings "would be withdrawn."
The General Partner believes that the market value of the
Partnership's assets have recently begun to recover. As you may know, real
estate values fell precipitously during the late 1980's and early 1990's. The
Partnership survived this turbulent period by adopting various measures,
including the suspension of
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distributions in 1990, the sale of certain properties, and the refinancing of
the remaining properties at favorable rates. The Partnership's properties have
begun to generate greater revenues and reflect increased property values.
Encouraged by this improvement, the General Partner authorized the reinstatement
of distributions in 1994.
The General Partner looks forward to continued success in
recovering the loss in value that occurred in the late 1980's and early 1990's.
The General Partner's strategy is to aggressively manage the Partnership's
properties to maximize their value and prepare the properties for sale when this
goal is reached.
Please do not hesitate to call our Investor Communication
representatives at 0-000-000-0000 for assistance in any Partnership matter.
Sincerely yours,
Xxxxxxxx Xxxxxx
The Xxxxx Corporation, a General
Partner
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