Exhibit 99.1
February 25, 2004
[▇▇▇▇▇▇ ▇▇▇▇▇▇▇ HISTORIC PROPERTIES II, L.P. LETTERHEAD]
LETTER TO UNIT HOLDERS
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Re: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Historic Properties II, L.P.
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Dear unit holder:
As you may know, a tender offer (the "▇▇▇▇▇ Offer") to purchase 408 units,
or approximately 51% of the outstanding units, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Historic
Properties II, L.P. (the "Partnership") has been announced by ▇▇▇▇▇ Mill
Investor, LLC, an affiliate of the operating general partner ("▇▇▇▇▇"), at a
purchase price of $13,500 per unit (the "▇▇▇▇▇ Offer Price"). ▇▇▇▇▇ originally
offered $13,250 per unit, but increased its offer price to $13,500 per unit on
February 18, 2004. The Partnership has filed with the Securities and Exchange
Commission (the "SEC") a statement on Schedule 14D-9 relating to the ▇▇▇▇▇
Offer. A copy of that Schedule 14D-9, which you should read carefully, is
enclosed with this letter.
Through the ownership of limited partnership 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 ▇▇▇▇▇ Mill (the
"Property"). The members of ▇▇▇▇▇ are the same as the members of the operating
general partner in these operating limited partnerships. 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 ▇▇▇▇▇
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.
Unit holders should be aware that, on February 12, 2004, Everest Investors
14, LLC ("Everest") increased its offer price in its pending offer for units
from $13,000 per unit to $13,300 per unit (the "Everest Offer Price") and
announced a seven day extension of its tender offer (the "Everest Offer") to
5:00 p.m., Los Angeles time, on February 27, 2004, unless extended further.
▇▇▇▇▇▇▇ also waived the condition that at least 317 units tender before it
accepts any units for purchase in the Everest Offer.
Each unit holder should carefully consider all of the circumstances and
available information. Considerations that could affect a unit holder's decision
about the ▇▇▇▇▇ Offer may include, but are by no means limited to, the
following:
Comparison of Everest Offer and the ▇▇▇▇▇ Offer
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Because of the considerations common to both the ▇▇▇▇▇ Offer and the
Everest Offer discussed below, the General Partner made no recommendation
whether unit holders should tender their units. As between the ▇▇▇▇▇ Offer and
the Everest Offer, unit holders should note the following considerations:
o The ▇▇▇▇▇ Offer currently is for a higher price per unit then the
Everest Offer.
o The ▇▇▇▇▇ Offer is for more units than the Everest Offer. 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. On the other hand, 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. Accordingly, if a substantial number of units are tendered,
unit holders may be more likely to be pro rated in the Everest Offer
than in the ▇▇▇▇▇ Offer, so that unit holders that wish to receive
cash for their units may be able to sell more units in the ▇▇▇▇▇
Offer.
If ▇▇▇▇▇ accepts all 408 units that it is offering to acquire in the
▇▇▇▇▇ Offer, ▇▇▇▇▇ will hold a controlling interest of 51% of the
outstanding units.
o The Everest Offer expires earlier. Unless it is further extended, the
Everest Offer will expire on Friday, February 27, 2004. Even without
extension, the ▇▇▇▇▇ Offer will expire on Wednesday, March 10, 2004,
almost two weeks later.
o The Everest Offer has fewer conditions. There is no minimum condition
in the Everest Offer. Under the ▇▇▇▇▇ Offer, no units will be
acceptable for purchase unless 408 units are properly tendered and not
withdrawn. Therefore, there is a greater chance that no units will be
accepted for purchase in the ▇▇▇▇▇ Offer. Also, the ▇▇▇▇▇ Offer is
conditioned on ▇▇▇▇▇ receiving the consent of a majority of the unit
holders to an amendment to the limited partnership agreement of the
Partnership that would allow ▇▇▇▇▇ to accept for purchase all 408
units that it is seeking to acquire in the ▇▇▇▇▇ Offer. If the Everest
Offer is fully subscribed, it would not be possible to satisfy the
conditions to the ▇▇▇▇▇ Offer, since Everest and its affiliates would
own more than 50% of the outstanding units. If a unit holder were to
decide not to tender in the Everest Offer because it believed that
more units might be accepted in the ▇▇▇▇▇ Offer, the success of the
Everest Offer could foreclose the satisfaction of the conditions to
the ▇▇▇▇▇ Offer and the unit holder could end up not tendering its
units in either offer.
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Considerations Common to Both Offers
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o If a unit holder tenders for 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 may not be made. Also, unit holders may
have different views over whether to take an assured amount 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 any
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 ▇▇▇▇▇ Offer is the third tender
offer for units in two months) or a sale of the Property is completed,
the unit holder could receive an amount of cash that exceeds the
prices currently being offered for units. 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. 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 current offers. 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.
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 operating general partner 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% of the price per unit offered in the current offers.
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 accepted for purchase in the current offers. If the
Partnership were to make a distribution after an offeror became the
owner of the units, the offeror would receive that distribution. If
the Partnership were to make a distribution prior to the time that an
offeror became the owner of the units, the per unit amount of cash
paid in either offer will be reduced by the per unit amount of the
distribution.
o Neither the ▇▇▇▇▇ Offer nor the Everest offer is for all of the
outstanding units and may be over-subscribed. 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 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 that they continue to hold.
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o All unit holders are advised to consult with their own tax advisers
concerning the tax consequences of tendering units. 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 ▇▇▇▇▇ 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 offer documents.
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 and those tax consequences could vary
significantly for each unit holder based on such unit holder's unique
tax situation or other circumstances. If the ▇▇▇▇▇ Offer is
consummated and the consent solicitation is successful, the
Partnership may be considered terminated within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended, which may have
an adverse effect on unit holders who do not sell their units in the
▇▇▇▇▇ Offer or who retain a portion of their units after giving effect
to proration.
o The offeror in each of the current offers is seeking to acquire a
controlling percentage of the outstanding units. The ▇▇▇▇▇ Offer is
contingent on ▇▇▇▇▇ acquiring 51% of outstanding units in the ▇▇▇▇▇
Offer. The Everest Offer seeks to acquire a number of units that, when
combined with the units already held by its affiliate, would be in
excess of 50% of the outstanding units. If either offeror acquires a
majority of the units, it 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.
Attention to this decision is required immediately. Unit holders are urged
to consider all available information and to consider the ▇▇▇▇▇ Offer along with
the competing Everest Offer in deciding whether to tender their units. Unit
holders should be aware that, while the ▇▇▇▇▇ Offer is scheduled to expire on
March 10, 2004, the Everest Offer is scheduled to expire on February 27, 2004,
in each case unless extended by their respective offerors.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ HISTORIC PROPERTIES II, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Historic Corporation,
General Partner
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
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