0000950152-95-001857.txt : 19950821 0000950152-95-001857.hdr.sgml : 19950821 ACCESSION NUMBER: 0000950152-95-001857 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19950818 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CLEVETRUST REALTY INVESTORS CENTRAL INDEX KEY: 0000020975 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 341085584 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: 1934 Act SEC FILE NUMBER: 005-19572 FILM NUMBER: 95565289 BUSINESS ADDRESS: STREET 1: 2001 CROCKER RD STE 400 CITY: WESTLAKE STATE: OH ZIP: 44145 BUSINESS PHONE: 2168990909 MAIL ADDRESS: STREET 1: 2001 CROCKER ROAD STREET 2: STE 400 CITY: WESTLAKE STATE: OH ZIP: 44145 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CLEVETRUST REALTY INVESTORS CENTRAL INDEX KEY: 0000020975 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 341085584 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 2001 CROCKER RD STE 400 CITY: WESTLAKE STATE: OH ZIP: 44145 BUSINESS PHONE: 2168990909 MAIL ADDRESS: STREET 1: 2001 CROCKER ROAD STREET 2: STE 400 CITY: WESTLAKE STATE: OH ZIP: 44145 SC 13E4 1 CLEVETRUST SC 13E4 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Schedule 13E-4 Issuer Tender Offer Statement (Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934) (Amendment No. ____) CLEVETRUST REALTY INVESTORS (Name of Issuer in its charter) CLEVETRUST REALTY INVESTORS (Name of Person Filing Statement) Shares of Beneficial Interest (par value $1.00 per share) (Title of Class of Securities) (CUSIP Number of Class of Securities) 186780 10 2 Raymond C. Novinc, Esq. CleveTrust Realty Investors 2001 Crocker Road, Suite 400 Westlake, Ohio 44145 (216) 899-0909 (NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT) Copies to: ---------- Glenn E. Morrical, Esq. Arter & Hadden 1100 Huntington Building, 925 Euclid Avenue Cleveland, Ohio 44115 (216) 696-3431 August 21, 1995 (DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS). Calculation of Filing Fee Transaction Valuation* Amount of filing fee $2,000,000 $400 *Assumes purchase of an aggregate of 500,000 Shares at $4.00 per share. [ ] (Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number of the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A 2 ITEM 1. SECURITY AND ISSUER. (a) The name of the issuer is CleveTrust Realty Investors, a Massachusetts Business Trust (the "Company"), which has its principal executive offices at 2001 Crocker Road, Suite 400, Westlake, Ohio 44145. (b) This Schedule 13E-4 relates to the offer by the Company to purchase up to an aggregate of 500,000 Shares of Beneficial Interest, par value $1.00 per share, of the Company (collectively, the "Shares") at a price, net to the seller in cash, of $4.00 per Share, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 21, 1995 (the "Offer to Purchase"), and related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. The information contained in the "Introduction", "Section 1. Number of Shares; Proration", "Section 8. Purpose of the Offer; Certain Effects of the Offer" and "Section 12. Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in the "Introduction" and "Section 7. Price Range of Shares; Distributions" of the Offer to Purchase is incorporated herein by reference. (d) This statement is being filed by the Company. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in "Section 9. Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a)-(j) The information set forth in the "Introduction", "Section 8. Purpose of the Offer; Certain Effects of the Offer", "Section 11. Certain Information Concerning the Company" and "Section 12. Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. The information set forth in "Section 8. Purpose of the Offer, Certain Effects of the Offer" and "Section 12. Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. The information set forth in the "Introduction" and "Section 12. Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Section 16. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 7. FINANCIAL INFORMATION. (a)-(b) The financial information set forth in "Section 11. Certain Information Concerning the Company" and the Financial Statements set forth in the Offer to Purchase is incorporated herein by reference. ii 3 ITEM 8. ADDITIONAL INFORMATION. (a) The information set forth in the "Introduction", "Section 11. Certain Information Concerning the Company" and "Section 12. Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. (b) The information set forth in "Section 13. Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. (d) Not applicable. (e) Reference is hereby made to the Offer to Purchase and the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, and incorporated in their entirety herein by reference. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase dated August 21, 1995. (a)(2) Form of Letter of Transmittal (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to brokers, dealers, commercial banks, trust companies and other nominees dated August 21, 1995. (a)(5) Form of Letter to clients for use by brokers, dealers, commercial banks, trust companies and other nominees dated August 21, 1995. (a)(6) Form of Letter to shareholders from the Chairman and Chief Executive Officer of the Company dated August 21, 1995. (a)(7) Form of Press Release dated August 18, 1995. (b)(1) Credit Agreement, dated as of November 30, 1994, among the Company, National City Bank, a national banking association, as Agent, and the Banks identified therein (filed as Exhibit (4) (11) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, and incorporated herein by reference). (b)(2) Amendment to Credit Agreement dated effective April 28, 1995, among the Company, National City Bank a national banking association, as Agent, and the Banks identified therein (filed as Exhibit (99) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference). (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) Not applicable. After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. CLEVETRUST REALTY INVESTORS /s/Raymond C. Novinc, Esq. Vice President and Secretary Dated: August 18, 1995 iii EX-1.A 2 CLEVETRUST EX (A)(1) 1 EXHIBIT (a)(1) FORM OF OFFER TO PURCHASE DATED AUGUST 21, 1995. 2 CLEVETRUST REALTY INVESTORS OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 500,000 SHARES OF BENEFICAL INTEREST, EACH AT A PURCHASE PRICE OF $4.00 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT SAVINGS TIME, ON SEPTEMBER 22, 1995 UNLESS THE OFFER IS EXTENDED. CleveTrust Realty Investors, a Massachusetts Business Trust (the "Company" or the "Trust"), is offering to purchase up to an aggregate of 500,000 Shares of Beneficial Interest of the Company, par value $1.00 per share (the "Shares"), at a price, net to the seller in cash, of $4.00 per Share (the "Purchase Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, under certain circumstances, upon the terms and subject to the conditions of the Offer, accept Shares for purchase first from Odd Lot Owners (as defined in Section 2) who properly tender their Shares and then on a pro rata basis from other shareholders whose Shares are properly tendered and not withdrawn. Any shareholder may tender Shares subject to the condition that all or a specified minimum number of Shares (which may be represented by designated stock certificates) or none of such Shares be purchased. THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THIS OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. The Shares are quoted on the NASDAQ National Market System ("NASDAQ") under the symbol "CTRIS". On August 17, 1995, the last full trading day on the NASDAQ prior to the announcement and commencement of the Offer, the closing price for the Shares on the NASDAQ was $3.546875. The bid and asked prices on August 17, 1995 were $3.50 and $3.875 respectively. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7. NEITHER THE COMPANY NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. BECAUSE THE OFFER TO PURCHASE IS MADE BY THE COMPANY, IT WOULD HAVE A CONFLICT OF INTEREST IN MAKING ANY SUCH RECOMMENDATION. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS TRUSTEES OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS. SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. August 21, 1995 II 3 IMPORTANT Any shareholder desiring to tender all or any portion of his Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and deliver it and all other required documents to American Stock Transfer and Trust Company (the "Depositary") and either mail or deliver the stock certificates for such Shares to the Depositary or follow the procedure for book-entry delivery set forth in Section 3, or (2) request his broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him. Shareholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee should contact such person or institution if they desire to tender such Shares. Shareholders desiring to tender Shares and whose certificates for such Shares are not immediately available or who cannot comply with the procedure for book-entry transfer by the expiration of the Offer must tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. SHAREHOLDERS MUST PROPERLY COMPLETE THE LETTER OF TRANSMITTAL IN ORDER TO EFFECT A VALID TENDER OF THEIR SHARES. Questions and requests for assistance may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be obtained from the Information Agent. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. TENDERS WILL NOT BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCES THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION AFTER GOOD FAITH EFFORTS BY THE COMPANY TO COMPLY. III 4 TABLE OF CONTENTS SECTION PAGE ------- ---- Introduction 1. Number of Shares; Proration . . . . . . . . . . . . . . . . . . 2 2. Tenders by Holders of Fewer than 100 Shares . . . . . . . . . . 3 3. Procedure for Tendering Shares . . . . . . . . . . . . . . . . . 3 4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . 5 5. Acceptance for Payment and Payment for Shares . . . . . . . . . 6 6. Certain Conditions of the Offer . . . . . . . . . . . . . . . . 6 7. Price Range of Shares; Distributions . . . . . . . . . . . . . . 8 8. Purpose of the Offer; Certain Effects of the Offer . . . . . . . 9 9. Source and Amount of Funds . . . . . . . . . . . . . . . . . . . 10 10. Shares Outstanding and Significant Shareholders . . . . . . . . 10 11. Certain Information Concerning the Company . . . . . . . . . . . 11 12. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares . . . . . . . . . . . . . . . 14 13. Certain Legal Matters; Regulatory Approvals . . . . . . . . . . 14 14. Certain Federal Income Tax Consequences . . . . . . . . . . . . 14 15. Extension of the Offer; Termination; Amendments . . . . . . . . 17 16. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 18 17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 18 Index to Financial Statements IV 5 TO THE HOLDERS OF SHARES OF BENEFICIAL INTEREST OF CLEVETRUST REALTY INVESTORS: INTRODUCTION The Company hereby invites its shareholders to tender Shares of the Company at a price, net to the seller in cash, of $4.00 per Share (the "Purchase Price"), upon the terms and conditions set forth in this Offer. The Company seeks to purchase up to an aggregate of 500,000 Shares. All Shares properly tendered prior to the Expiration Date (as defined in Section 1) and not withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration terms and the NASDAQ Continued Listing Condition (as defined in Section 1) contained herein. THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THIS OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. THE BOARD HAS UNANIMOUSLY APPROVED THE MAKING OF THIS OFFER, HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. BECAUSE THE OFFER TO PURCHASE IS MADE BY THE COMPANY, IT WOULD HAVE A CONFLICT OF INTEREST IN MAKING ANY SUCH RECOMMENDATION. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS TRUSTEES OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 12. SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. Each shareholder who has properly tendered and not withdrawn Shares will receive the Purchase Price, net to the shareholder in cash, for all Shares purchased, upon the terms and subject to the conditions of the Offer, including the provisions relating to proration and the conditions described herein. The Company will, upon the terms and subject to the conditions of the Offer, accept Shares for purchase first from Odd Lot Owners (as defined in Section 2) who properly tender their Shares and then on a pro rata basis from other shareholders whose Shares are properly tendered and not withdrawn. Notwithstanding the foregoing, the Company reserves the right not to accept Shares from Odd Lot Owners on a preferential basis under certain circumstances as described below. Any shareholder may tender Shares subject to the condition that all or a specified minimum number of Shares (which may be represented by designated stock certificates) or none of such Shares be purchased. See Section 1. The Company will return all Shares not purchased, including Shares not purchased because of proration or conditional tenders. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Company pursuant to the Offer. The Company will pay all fees and expenses of the Depositary and Beacon Hill Partners, Inc. (the "Information Agent") in connection with the Offer. As of August 17, 1995 the Company had issued and outstanding 5,456,696 Shares of Beneficial Interest and had reserved 315,100 shares for issuance upon exercise of outstanding stock options. The aggregate of 500,000 Shares that the Company is offering to purchase represents approximately 9.16% of the Shares outstanding as of such date. The Shares are quoted on the NASDAQ under the symbol "CTRIS". On August 17, 1995, the last trading date before public announcement of the Offer, the last reported transaction price for the Company's shares was $3.546875. The bid and asked prices on August 17, 1995 were $3.50 and $3.875 respectively. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. See Section 7. Shares acquired by the Company pursuant to the Offer will be retired by the Company. The Board of Trustees of the Company has determined to make this Offer because it believes that the Offer is an attractive investment, and because the Company believes that the current market price of the Shares does not adequately reflect the value of the Company's business, assets and prospects, and that the purchase of the Shares at this time is an attractive investment that will benefit the Company and its continuing shareholders. The Offer gives shareholders who are considering the sale of all or a portion of their Shares the opportunity to sell such Shares for a higher price than that available in the open market immediately prior to the announcement of the Offer, without the usual transaction costs associated with market sales. 1 6 1. NUMBER OF SHARES; PRORATION Upon the terms and subject to the conditions of the Offer, the Company will accept for payment and purchase up to an aggregate of 500,000 Shares at the Purchase Price. If the Offer is oversubscribed, Shares tendered prior to the Expiration Date will be subject to proration. The proration period also expires on the Expiration Date. The term "Expiration Date" means 5:00 p.m. eastern daylight savings time, on Friday, September 22, 1995, unless the Company, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. For a description of the Company's right to extend the period of time during which the Offer is open, and to delay, terminate or amend the Offer, see Section 15. The Company reserves the right, in its sole discretion, to purchase additional outstanding Shares, or to reduce the number of Shares it shall purchase, pursuant to the Offer. If (i) the Company increases or decreases the price to be paid for Shares, increases the number of Shares being sought and such increase in the number of Shares being sought exceeds two percent (2%) of the outstanding Shares or decreases the number of Shares being sought and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner described in Section 15, the Offer will be extended until at least the expiration of such 10 business-day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period 12:01 a.m. through 12:00 midnight eastern daylight savings time. All Shares purchased pursuant to the Offer will be purchased at the Purchase Price. All Shares not purchased pursuant to the Offer, including Shares not purchased because of proration or conditional tenders and Shares tendered and withdrawn, will be returned to the tendering shareholders at the Company's expense as promptly as practicable (which, in the event of proration, is expected to be up to approximately seven business days) following the Expiration Date or as promptly as practicable following withdrawal, as the case may be. If the Company determines that, after purchase of the tendered Shares, there will be at least 400 beneficial owners of the Company's Shares, and the Shares will otherwise continue to be eligible for quotation on the NASDAQ, the Company will, upon the terms and subject to the conditions of the Offer, purchase at the Purchase Price up to an aggregate of 500,000 Shares so tendered. For the purpose of this condition, beneficial owners of Shares will be determined in accordance with the provisions of Rule 13d-3 under the Securities Exchange Act of 1934 ("Exchange Act"). This condition is referred to as the "NASDAQ Continued Listing Condition". If the Company determines that there would be fewer than 400 beneficial owners of the Company's Shares if tendered Shares up to the limits described above were purchased, or that the Shares will not continue to be eligible for quotation on the NASDAQ, the Offer will not be completed (in accordance with the conditions set forth in Section 6) and the Company will promptly return all tendered Shares. Upon the terms and subject to the conditions of the Offer, the Company will accept Shares for purchase in the following order of priority: (a) first, all Shares properly tendered prior to the Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined in Section 2) who: (1) tenders all Shares beneficially owned by such Odd Lot Owner (partial tenders and conditional tenders (as described below), will not qualify for this preference); and (2) completes the section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) then, after purchases of all of the foregoing Shares, all other Shares properly and unconditionally tendered, and all other Shares properly and conditionally tendered for which the condition is satisfied on the basis of the number of Shares tendered and the conditions thereto, in each case before the Expiration Date (and not withdrawn), on a pro rata basis, if necessary (with adjustments to avoid purchases of fractional Shares). (c) If the effect of accepting tenders on a pro rata basis is to reduce the number of Shares to be purchased from any shareholder below the minimum number specified by such shareholder, such tender will automatically be deemed withdrawn, except as provided below in this paragraph, and Shares tendered by 2 7 such shareholder will be returned as soon as practicable after the Expiration Date. If any conditional tenders would be deemed withdrawn, then to the extent feasible, the Company will select enough of such conditional tenders, which would otherwise have been deemed withdrawn, to purchase that number of Shares remaining from the maximum number to be purchased. In selecting among such conditional tenders, the Company will select by random lot and will limit its purchase in each case to the designated minimum number of Shares to be purchased. Conditional tenders will be selected by lot only from shareholders who tender all of their Shares. Notwithstanding the foregoing, the Company reserves the right not to accept Shares tendered by Odd Lot Owners on a preferential basis (and instead to accept such Shares on a pro rata basis with Shares tendered by other owners) if the Company, in its sole discretion, determines that accepting such Shares on a preferential basis would cause the NASDAQ Continued Listing Condition not to be satisfied. In the event that proration of tendered Shares is required, the Company will determine the final proration factor as promptly as practicable after the Expiration Date. Proration for each shareholder tendering Shares other than Odd Lot Owners shall be based on the ratio of the number of Shares tendered by such shareholder to the total number of Shares tendered by all shareholders other than Odd Lot Owners. Although the Company does not expect to be able to announce the final results of such proration until approximately seven business days after the Expiration Date, it will announce preliminary results of proration by press release as promptly as practicable after the Expiration Date. Shareholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. As described in Section 14, the number of Shares that the Company will purchase from a shareholder may affect the federal income tax consequences to the shareholder of such purchase and therefore may be relevant to a shareholder's decision whether to tender Shares. Shareholders may designate the order in which their Shares shall be purchased in the event less than all of the Shares tendered are purchased as a result of proration. If as a result of the number of Shares tendered and the conditions thereto the number of Shares to be purchased from any shareholder making a conditional tender is reduced below the minimum number specified by such shareholder, such tender will automatically be regarded as withdrawn, and all Shares tendered by such shareholder will be returned as promptly as practicable after the Expiration Date at the Company's expense, provided that such Shares will be deemed re-tendered if selected by lot for purchase in accordance with Section 1 hereof. 2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES For purposes of the Offer, the term "Odd Lots" means all Shares properly tendered, in accordance with the procedures set forth in Section 3, by the Expiration Date and not withdrawn, by or on behalf of shareholders ("Odd Lot Owners") who beneficially held, as of the close of business on August 17, 1995, an aggregate of fewer than 100 Shares. As set forth above, Odd Lots will, under certain circumstances, be accepted for purchase before any proration. In order to qualify for this preference, an Odd Lot Owner must properly tender all Shares beneficially owned by him and must not make a conditional tender. Partial tenders will not qualify for this preference. The preference is not available to holders of 100 or more Shares, even if holders have separate stock certificates for fewer than 100 Shares. ANY ODD LOT OWNER WISHING TO TENDER ALL SHARES BENEFICIALLY OWNED FREE OF PRORATION MUST COMPLETE THE SECTION ENTITLED "ODD LOTS" IN THE LETTER OF TRANSMITTAL AND, IF APPLICABLE, ON THE NOTICE OF GUARANTEED DELIVERY. Shareholders owning an aggregate of less than 100 Shares, all of whose Shares are purchased pursuant to the Offer, not only will avoid the payment of brokerage commissions, but also will avoid any applicable odd-lot discounts payable on a sale of their Shares in a brokered transaction. 3. PROCEDURE FOR TENDERING SHARES PROPER TENDER OF SHARES. To tender Shares pursuant to the Offer, (i) a properly completed and duly executed Letter of Transmittal (or manually executed facsimile thereof) with any required signature guarantees and any other documents required by the Letter of Transmittal must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase, and either certificates for the Shares to be tendered must be transmitted to and received by the Depositary at such address or such Shares must be tendered pursuant to the procedures for book-entry transfer described below (and a confirmation of such tender received by the Depositary), in each case by the Expiration Date, or (ii) the guaranteed delivery procedure described below must be followed. In addition, Odd Lot Owners who tender all their Shares must complete the section entitled "Odd Lots" in the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery in order to qualify for the preferential treatment which may be available to Odd Lot Owners as set forth in Sections 1 and 2. 3 8 If any shareholder tenders Shares held by him and does not wish to have such Shares subject to proration that would result in the purchase of fewer than a specified number of Shares, such shareholder may tender Shares subject to the condition that all or a specified minimum number of Shares or none be purchased. Any shareholder desiring to make such a conditional tender should so indicate in the box captioned "Conditional Tender" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery. It is the tendering shareholder's responsibility to determine the minimum number of Shares to be purchased. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE EFFECT OF PRORATION OF THE OFFER AND THE ADVISABILITY OF MAKING A CONDITIONAL TENDER. See Section 14. Notwithstanding any other provision hereof, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities, as defined below), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other documents required by the Letter of Transmittal. BOOK-ENTRY DELIVERY. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company, Midwest Securities Trust Company and the Philadelphia Depository Trust Company (collectively referred to herein as "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of any Book-Entry Transfer Facility as described above may make delivery of Shares into the Depositary's account in accordance with the procedures of such Book-Entry Transfer Facility. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Depositary at one of the addresses set forth on the back cover of this Offer to Purchase by the Expiration Date, or the guaranteed delivery procedure described below must be complied with. Delivery of the Letter of Transmittal and any other required documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal if the Letter of Transmittal is signed by the registered holder of the Shares exactly as the name of the registered holder appears on the certificate (which term, for purposes of this Section 3 includes any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered therewith, and payment is to be made directly to such registered holder, or if Shares are tendered for the account of a financial institution that is a member of the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) or the New York Stock Exchange Medallion Signature Program (MSP) (each such entity, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 on the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signer of a Letter of Transmittal, or if payment is to be made, or Shares not purchased or tendered are to be issued to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name of the registered holder appears on the certificate with the signature on the certificate or stock power guaranteed by an Eligible Institution. METHOD OF DELIVERY. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF CERTIFICATES FOR SHARES ARE TO BE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. FEDERAL INCOME TAX BACKUP WITHHOLDING. To prevent federal income tax backup withholding equal to 31% of the gross payments made pursuant to the Offer, each shareholder who has not previously submitted a Substitute Form W-9 to the Company or who does not otherwise establish an exemption from such withholding must notify the Depositary of such shareholder's correct taxpayer identification number (or certify that such taxpayer is awaiting a taxpayer identification number) and provide certain other information by completing a Form W-9 included in the Letter of Transmittal. Foreign shareholders may be required to submit Form W-8, certifying non-United States status, in order to avoid backup withholding. See Instructions 13 and 14 of the Letter of Transmittal. GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to the Offer and cannot deliver certificates for such Shares (or the procedures for book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary by the Expiration Date, such Shares may nevertheless be tendered if all of the following conditions are met: (a) such tender is made by or through an Eligible Institution; 4 9 (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company, is received by the Depositary by the Expiration Date; and (c) the certificates for all tendered Shares in proper form for transfer (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility), together with a properly completed and duly executed Letter of Transmittal (or manually executed facsimile thereof) and any other documents required by the Letter of Transmittal, are received by the Depositary within five business days after the date the Depositary received such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares to be accepted, the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of Shares determined by it not to be in proper form or the acceptance for payment of or payment for which may be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender of Shares. No tender of Shares will be deemed to be properly made until all defects and irregularities have been cured or waived. None of the Company, the Information Agent, the Depositary, or any other person will be under any duty to give notification of any defect or irregularity in tenders or incur any liability for failure to give any such notice. TENDER CONSTITUTES AN AGREEMENT. The tender of Shares pursuant to any one of the procedures described above will constitute a binding agreement between the tendering shareholder and the Company upon the terms and subject to the conditions of the Offer. It is a violation of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person, directly or indirectly, to tender shares for his own account unless, at the time of the tender and at the end of the proration period, the person so tendering (i) has (x) a net long position equal to or greater than the amount of shares tendered or (y) other securities immediately convertible into, exercisable, or exchangeable for the amount of shares tendered and will acquire such shares for tender by conversion, exercise or exchange of such other securities and (ii) will cause such shares to be delivered in accordance with the terms of the offer. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering shareholder's acceptance of the terms and conditions of the Offer as well as the tendering shareholder's representation and warranty that (i) such shareholder has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares complies with Rule 14e-4. The foregoing is only a summary of Rule 14e-4, and shareholders are encouraged to review Rule 14e-4 in its entirety prior to tendering Shares. 4. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 4, tenders of Shares pursuant to the Offer will be irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Company as provided in this Offer to Purchase, may also be withdrawn after 12:00 Midnight, eastern daylight savings time, 40 business days after commencement. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If the certificates have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering shareholder must submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Shares tendered by an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding. None of the Company, the Depositary, the Information Agent or any other person shall be obligated to give any notice of any defects or irregularities in any notice of withdrawal and none of them shall incur any liability for failure to give any such notice. Any Shares properly withdrawn will thereafter be deemed not tendered for purposes of the Offer. However, withdrawn Shares may be retendered by the Expiration Date by again following any of the procedures described in Section 3. 5 10 If as a result of proration the number of Shares to be purchased from any shareholder making a conditional tender is reduced below the minimum number specified by such shareholder, such tender will automatically be regarded as withdrawn, provided that such Shares will be deemed retendered if selected by lot for purchase in accordance with Section 1 hereof. If the Company extends the Offer, is delayed in its purchase of Shares or is unable to purchase Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, subject to applicable law, retain on behalf of the Company all tendered Shares, and the Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in this Section 4. 5. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including proration and the NASDAQ Continued Listing Condition), the Company will accept for payment as soon as practicable after the Expiration Date up to an aggregate of 500,000 Shares (or such greater number of Shares as the Company may elect to purchase). For purposes of the Offer, the Company will be deemed to have accepted for payment (and thereby purchased), subject to proration, Shares that are tendered and not withdrawn when, as and if the Company gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. Payment for Shares accepted for payment pursuant to the Offer will be made by depositing the aggregate Purchase Price for such Shares with the Depositary, which will act as agent for the tendering shareholders for the purpose of receiving payment from the Company and transmitting such payments to tendering shareholders. In the event of proration, the Company will determine the proration factor and pay for those tendered Shares accepted for payment as soon as practicable after the Expiration Date; however, the Company does not expect to be able to announce the final results of any such proration until approximately seven business days after the Expiration Date. Certificates for all Shares not purchased, including Shares not purchased due to proration or conditional tenders, will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to the account maintained within such Book-Entry Transfer Facility by the participant therein who so delivered such Shares) as soon as practicable after the Expiration Date or termination of the Offer without expense to the tendering shareholder. Under no circumstances will interest be paid by the Company by reason of any delay in paying for any Shares or otherwise. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 6. The Company will pay all stock transfer taxes, if any, payable on the transfer to it of Shares purchased pursuant to the Offer, except if (i) payment of the Purchase Price is to be made to, or (ii) (in the circumstances permitted by the Offer) if Shares not tendered or not accepted for purchase are to be registered in the name of any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal. In such circumstances, the amount of all stock transfer taxes, if any (whether imposed on the registered holder or such other person), payable on account of the transfer to such person will be deducted from the Purchase Price unless evidence satisfactory to the Company of the payment of such taxes or exemption therefrom is submitted. See Instruction 6 of the Letter of Transmittal. ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN THE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. 6. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered and may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered, if the NASDAQ Continued Listing Condition is not satisfied. See Section 1 for an explanation of the NASDAQ Continued Listing Condition. The Company does not intend to waive the NASDAQ Continued Listing Condition. In addition, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered and may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered if at any time on or after August 21, 1995 and at or before the payment for any such Shares, any of the following events shall have occurred (or shall have been determined by the Company to have occurred) which, in the Company's sole judgment in any such case and regardless of the circumstances (including any action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for purchase or payment: 6 11 (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental authority or regulatory or administrative agency, domestic or foreign, or by any other person, domestic or foreign, before any court or governmental authority or regulatory or administrative agency, domestic or foreign, (i) that challenges or seeks to make illegal, or delay or otherwise directly or indirectly restrain or prohibit the making of the Offer, the acceptance for payment of or payment for some or all of the Shares by the Company or otherwise directly or indirectly relating in any manner to or affecting the Offer, or (ii) that otherwise, in the sole judgment of the Company, has or may have a material adverse effect on the business, financial condition, income, operations or prospects of the Company and its subsidiaries taken as a whole or has materially impaired or may materially impair the contemplated benefits of the Offer to the Company; or (b) any action shall have been threatened, instituted, pending or taken or approval withheld or any statute, rule, regulation, judgment or order or injunction proposed, sought, enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer or the Company or any of its subsidiaries by any court, government or governmental authority or regulatory or administrative agency, domestic or foreign, that, in the sole judgment of the Company might, directly or indirectly, result in any of the consequences referred to in clauses (i) or (ii) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or on the NASDAQ, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation by any governmental, regulatory or administrative authority or agency or any other event that, in the sole judgment of the Company, might affect the extension of credit by banks or other lending institutions, (v) any significant decrease in the market price of the Shares or any change in the general political, market, economic or financial conditions in the United States or elsewhere that has or may have material adverse effects with respect to the Company's business, operations or prospects or the trading in the Shares, (vi) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Industrial Companies by an amount in excess of 10%, measured from the close of business on August 21, 1995; or (vii) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (d) a tender or exchange offer for some or all of the Shares (other than the Offer) or a proposal with respect to a merger, consolidation or other business combination with or involving the Company or any subsidiary shall have been proposed to be made or shall have been made by another person; or (e) (1) any entity, "group" (as that term is used in Section 13(d)(3) of the Exchange Act) or person (other than entities, groups or persons, if any, who have filed with the Securities and Exchange Commission (the "Commission"), on or before August 21, 1995, a Schedule 13G or a Schedule 13D with respect to any of the Shares) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding Shares; or (2) such entity, group or person that has publicly disclosed any such beneficial ownership of more than 5% of the Shares prior to such date shall have acquired, or proposed to acquire, beneficial ownership of additional Shares constituting more than 2% of the outstanding Shares or shall have been granted any option or right to acquire beneficial ownership of more than 2% of the outstanding Shares; or (3) any entity, person or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 reflecting an intent to acquire the Company or any of its Shares; or (f) any change or changes have occurred (or any development shall have occurred involving any prospective change or changes) in the business, assets, liabilities, condition (financial or otherwise), operations, results of operations or prospects of the Company or any of its subsidiaries that, in the sole judgment of the Company, have or may have a material adverse effect with respect to the Company and its subsidiaries taken as a whole. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company in its sole discretion regardless of the circumstances (including any action or inaction by the Company) giving rise to any such conditions, or may be waived by the Company in its sole discretion, in whole or in part at any time. The failure by the Company at any time to exercise its rights under any of the foregoing conditions shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an 7 12 ongoing right which may be asserted at any time or from time to time. Any determination by the Company concerning the events described in this Section 6 shall be final and binding on all parties. 7. PRICE RANGE OF SHARES; DISTRIBUTIONS The Shares are quoted on the NASDAQ National Market System. The following table sets forth, for the periods indicated, the high and low closing prices for the Company's Shares (as reported on the NASDAQ as compiled from published financial sources) and the cash distributions paid per Share in each such period. These quotations represent inter-dealer prices, without retail mark-down or commissions, and may not necessarily represent actual transactions.
FISCAL YEAR HIGH LOW DISTRIBUTIONS ----------- ---- --- ------------- 1993: 1st quarter . . . . . . . . . . 2 3/4 2 .03 2nd quarter . . . . . . . . . . 3 3/4 2 5/16 .03 3rd quarter . . . . . . . . . . 4 3 .03 4th quarter . . . . . . . . . . 4 1/8 3 5/8 .03 1994: 1st quarter . . . . . . . . . . 4 1/8 2 3/4 .03 2nd quarter . . . . . . . . . . 3 1/2 2 7/8 .04 3rd quarter . . . . . . . . . . 3 1/2 2 3/4 .04 4th quarter . . . . . . . . . . 3 1/8 2 5/8 .04 1995: 1st quarter . . . . . . . . . . 3 3/8 2 7/8 .04 2nd quarter . . . . . . . . . . 3 5/16 2 5/8 .04 3rd quarter . . . . . . . . . . 3 3/4 3 1/4 .04 4th quarter (through 8/17/95) . 3 7/8 3 3/8 .04
On August 17, 1995, the last full trading day on the NASDAQ prior to the announcement of the Offer, the closing per share price was $3.546875 as reported by NASDAQ. The bid and asked prices on August 17, 1995 were $3.50 and $3.875 respectively. 8 13 SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER The Board of Trustees of the Company has determined to make this Offer because it believes that the Offer is an attractive investment, and because the Company believes that the current market price of the Shares does not adequately reflect the value of the Company's business, assets and prospects, and that the purchase of the Shares at this time is an attractive opportunity that will benefit the Company and its continuing shareholders. The Offer gives shareholders who are considering the sale of all or a portion of their Shares an opportunity to sell such Shares for a higher price than that available in the open market immediately prior to the announcement of the Offer, without the usual transaction costs associated with market sales. To the extent that the purchase of Shares in the Offer results in a reduction in the number of Shareholders of record, the costs of the Company for services to shareholders may be reduced. Shareholders whose Shares are not purchased in the Offer will realize an increase in their percentage ownership interest in the Company and thus, in the Company's future earnings and assets. Because of the smaller number of Shares outstanding after consummation of the Offer, increases or decreases in net earnings will result in proportionately greater increases or decreases in earnings per Share. See Section 11. The Company does not have any current plans to acquire or dispose of additional Shares. The company may in the future acquire Shares (in addition to those purchased pursuant to the Offer) on the open market, in privately negotiated transactions, through tender offers, mergers or otherwise, in such amounts, at such prices and at such times as the Company may determine. Rule 13e-4 under the Exchange Act generally prohibits the Company and its affiliates from purchasing any Shares, other than pursuant to the Offer, until at least ten business days after the Expiration Date. The Company will not acquire any additional Shares until at least ten business days after the Expiration Date. Future acquisitions of Shares, if any, may be on the same terms as, or on terms more or less favorable than, those of the Offer. Any possible future purchases of Shares by the Company will depend on many factors, including the market price of the Shares, the results of the Offer, the Company's business and financial position and general economic and market conditions. The Company currently intends to propose at the next annual meeting of shareholders, to be held in February 1996, that its shareholders approve a reverse stock split of up to one for five of the Company's outstanding Shares. Management of the Company believes that such action will result in greater marketability for the Company's Shares as it should result in a reduced spread between the bid and asked prices sought by the market makers in the Company's Shares when measured as a percentage of such prices. At the close of business on August 17, 1995, the Company had an aggregate of 5,456,696 Shares outstanding . A reverse stock split of one to five would reduce this number of the Shares outstanding to approximately 1,091,300, subject to further reduction based on fractional shares. Except as disclosed in this Offer to Purchase, the Company has no present plans or proposals which relate to or would result in the following: (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation; (c) a sale or transfer of a material amount of assets of the Company; (d) any change in the present Board of Trustees or Management of the Company, including but not limited to, any plan or proposal to change the number or the term of office of trustees, or to change any material term of the employment contract of any executive officer (except for the annual election of trustees at the Company's 1996 Annual Meeting of Shareholders); (e) any material change in the present distribution policy or indebtedness or capitalization of the Company (other than as described in Section 9 hereof); (f) any other material change in the Company's corporate structure or business; or (g) any change in the Company's Second Amended and Restated Declaration of Trust or By-Laws. NEITHER THE COMPANY NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S SHARES AND NEITHER HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. Shares that the Company acquires pursuant to the Offer will be retired by the Company. The Company's purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and is likely to reduce the number of shareholders. Nonetheless, it is a condition to the Offer that the number of beneficial owners of Shares after acceptance of tendered Shares pursuant to the terms of the Offer be at least 400 9 14 and that the Company otherwise continue to qualify for quotation on the NASDAQ National Market System. See Section 6. The Shares are registered under the Exchange Act which requires, among other things, that the Company furnish certain information to its shareholders and to the Commission and comply with the Commission's proxy rules in connection with meetings of the Company's shareholders. 9. SOURCE AND AMOUNT OF FUNDS Assuming that the Company purchases 500,000 Shares pursuant to the Offer at a Purchase Price of $4.00 per Share, the Company expects the maximum aggregate cost of the Offer, including estimated fees and expenses applicable to the Offer, to be be approximately $2,070,000. The funds necessary to purchase the Shares pursuant to the Offer will come from borrowings under the Company's Credit Agreement, dated as of November 30, 1994 by and among the Company, National City Bank, a national banking association ("NCB") and the Banks identified therein. Copies of such Credit Agreement are filed as exhibits to the Schedule 13E-4 and are incorporated herein by reference. See Section 11 "Certain Information Concerning the Company -- Additional Information". The NCB Credit Agreement is for up to $25,000,000 (but is limited by the value of the collateral provided). Of this amount a maximum of $15,000,000 is currently available and $10,000,000 will be available upon payment of an activation fee of 3/4 of 1% on the $10,000,000. Loans made under the Credit Agreement will be at either i) 1/4 of 1% over the prime rate of NCB; ii) 250 basis points over the London inter-bank offered rate ("LIBOR"); or iii) NCB's fixed interest rate available from time to time. Additionally a commitment fee of 3/8 of 1% is due on any funds available but not borrowed. Prime Rate means the fluctuating rate of interest which is publicly announced from time to time by NCB at its principal place of business as being its "prime rate" or "base rate". The interest rate for LIBOR loans varies with the interest period chosen by the Company, which may be from one month to a period which corresponds with the balance of the term of the Credit Agreement. The current rate on Prime Rate Loans would be 9%, the current rate for LIBOR loans for a three month interest period would be approximately 8.625% and the current rate on NCB's fixed interest rate loans is 8.625%. The initial loan term under the Credit Agreement is for three years with an annual review and extension for an additional year at the option of NCB. The Credit Agreement also includes representations and warranties, covenants, events of default and other terms customary to financings of this type. The Company expects to repay the borrowings used to purchase Shares pursuant to the Offer through, depending on business and market conditions, internally generated funds, net sales proceeds from the disposition of assets, public or private offerings of securities, additional bank borrowings or refinancings of assets, or other financings or such combination of the foregoing as the Company may deem appropriate. Although the Company currently does not have any specific plans to refinance such borrowings, the Company may replace all or a portion of the borrowings under the Credit Agreement with other borrowings, which may include intermediate or long-term borrowings at fixed rates, which may be higher than the rates under the NCB Credit Agreement. 10. SHARES OUTSTANDING AND SIGNIFICANT SHAREHOLDERS As of August 17, 1995 the Company had issued and outstanding 5,456,696 Shares of Beneficial Interest and had reserved 315,100 Shares for issuance upon exercise of outstanding stock options. The aggregate of 500,000 shares that the Company is offering to purchase pursuant to the Offer represents approximately 9.16% of the shares outstanding as of such date. The Company has been advised that no trustee or executive officer of the Company intends to tender any shares pursuant to the Offer. On the assumption that no Shares will be tendered by officers and trustees of the Company, and that an aggregate of 500,000 Shares are tendered and accepted by the Company, after completion of the Offer, the Shares and options held by the officers and trustees will be a higher percentage (an increase from 70.48% to 77.30% of all the outstanding Shares on a fully-diluted basis) than it was prior to commencement of the Offer. 10 15 11. CERTAIN INFORMATION CONCERNING THE COMPANY DESCRIPTION OF BUSINESS The Company is a business trust organized under the laws of Massachusetts and commenced operations in 1971. The Company's principal offices are located at 2001 Crocker Road, Suite #400, Westlake, Ohio 44145, telephone: (216) 899-0909. The Company principally owns equity investments in real estate. The Company directly manages all of its improved properties. The Company's investment portfolio consists primarily of ownership interests in seven multi-tenanted office buildings, four multi-tenanted shopping centers, and two retail centers. The Company currently has 22 full time employees. The Company intends to acquire additional ownership interests in suburban office buildings located in the Midwest and/or Southwest United States. SELECTED HISTORICAL FINANCIAL INFORMATION Set forth below is certain consolidated historical financial information of the Company. The financial information included in this Offer to Purchase at and for the nine months ended June 30, 1995 and 1994 is derived from the Company's financial statements in the Company's Quarterly Report on Form 10-Q for the quarters ended June 30, 1995 and 1994. The financial information included in this Offer to Purchase at and for the fiscal years ended September 30, 1994 and 1993 is derived from the Company's audited financial statements. The following selected historical financial information should be read in conjunction with, and is qualified in its entirety by reference to, such unaudited and audited financial statements and their related notes. See "Index to Financial Statements". Additional information concerning the Company, including copies of its most recent annual and quarterly reports to the Securities and Exchange Commission may be obtained as set forth under "Additional Information," below.
NINE MONTHS ENDED YEAR ENDED JUNE 30, SEPTEMBER 30, -------- ------------- 1995 1994 1994 1993 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) Operations: Rental income $ 7,698 $ 7,217 $ 9,650 $ 9,348 Interest income 47 44 76 263 Other income 21 19 29 41 ------- ------- ------- ------- Operating revenues 7,766 7,280 9,755 9,652 Funds from operations (1) 1,805 1,285 1,857 1,417 Operating income (loss) 416 (197) (115) (732) Gains on sales of real estate 2,499 361 445 563 Extraordinary items 52 0 253 286 Net income 2,967 164 583 117 Per Share of Beneficial Interest: Operating income (loss) 0.08 (0.04) (0.02) (0.22) Gains on sales of real estate 0.46 0.08 0.09 0.17 Extraordinary items 0.01 0.00 0.05 0.09 ------- ------- ------- ------- Net income 0.55 0.04 0.12 0.04 Weighted average number of Shares of Beneficial Interest outstanding 5,468 4,787 4,959 3,292 Financial Condition: Total assets $43,121 $46,161 $51,004 $45,499 Mortgage notes payable 9,309 16,755 11,111 17,126 Bank notes payable 5,600 3,511 11,180 8,800 Shareholders' equity 25,414 22,926 23,150 17,669 Shareholders' equity per Share of Beneficial Interest 4.66 4.19 4.23 4.75 (1) "Funds from operations" means net income (computed in accordance with generally accepted accounting principles), plus depreciation and excluding the gains on the sales of real estate and extraordinary items. The funds from operations are computed in accordance with the definition adopted by the National Association of Real Estate Investment Trusts ("NAREIT").
11 16 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
NINE MONTHS ENDED YEAR ENDED JUNE 30, SEPTEMBER 30, -------- ------------- 1995 1994 1994 1993 ---- ---- ---- ---- (IN THOUSANDS) FIXED CHARGES Interest expense $1,392 $1,613 $2,120 $2,650 Rent expense representing interest 40 39 53 51 ------ ------ ------ ------ Total fixed charges 1,432 1,652 2,173 2,701 Operating income (loss) 416 (197) (115) (732) Add back fixed charges 1,432 1,652 2,173 2,701 ------ ------ ------ ------ Earnings, for computational purposes 1,848 1,455 2,058 1,969 Ratio of earnings to fixed charges (b) 1.30 ---(a) ---(a) ---(a) (a) For the years ended September 30, 1994 and 1993 and the nine month period ended June 30, 1994, fixed charges exceeded earnings; the coverage deficiency for these periods was $115,000, $732,000 and $197,000, respectively. (b) The Company has not included gains on sales of real estate in operating income used in its computation of ratio of earnings to fixed charges. If these gains were included, the ratio of earnings to fixed charges would be: 1.15 for the year ended September 30, 1994 and 1.10 for the nine months ended June 30, 1994. For the year ended September 30, 1993 fixed charges would exceed earnings; the coverage deficiency for that period would have been $169,000.
UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information sets forth historical information as adjusted to give effect to the purchase of 500,000 Shares in this Offer at a Purchase Price of $4.00 per Share. The pro forma adjustments assume that the transaction occurred, for purposes of income statement data, as of the first day of the period presented, and for purposes of balance sheet data, as of the balance sheet date. The pro forma information does not purport to be indicative of the results that may be obtained in the future or that would actually have been obtained had the transaction occurred during the periods indicated. The pro forma information should be read in conjunction with the Company's financial statements and related notes set forth in this Offer to Purchase.
NINE MONTHS ENDED JUNE 30, 1995 YEAR ENDED SEPTEMBER 30, 1994 ------------------------------- ------------------------------ HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- ---------- ----------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Operations: Revenues $ 7,766 $ --- $ 7,766 $ 9,755 $ --- $ 9,755 Expenses 7,350 144(a) 7,494 9,870 176(a) 10,046 Operating income 416 (144) 272 (115) (176) (291) Net income 2,967 (144) 2,823 583 (176) 407 Net income per share 0.55 (0.03) 0.52 0.12 (0.04) 0.08 Weighted average number of Shares of Beneficial Interest outstanding 5,468 (500)(b) 4,968 4,959 (500)(b) 4,459 Ratio of earnings to fixed charges 1.30 (0.08) 1.22 ---(d) --- ---(d) Financial Condition: Total assets $43,121 $ --- $43,121 $51,004 $ --- $51,004 Mortgage notes payable 9,309 --- 9,309 11,111 --- 11,111 Bank notes payable 5,600 2,070(c) 7,670 11,180 2,070(c) 13,250 Shareholders' equity 25,414 (144) 25,270 23,150 (176) 22,974 Shareholders' equity per share outstanding 4.66 (0.03) 4.63 4.23 (0.04) 4.19
12 17 NOTES TO ACCOMPANY PRO FORMA FINANCIAL INFORMATION (a) The increase in expenses for both the nine month period ended June 30, 1995 and the twelve month period ended September 30, 1994 is due to increased interest expense as a result of the increase in bank notes payable attributed to the borrowing of the total funds needed to purchase the Shares and pay for all costs associated with the purchase of the Shares pursuant to the Offer as if the purchase had occurred at the beginning of each of the periods. (b) To reflect the Trust's purchase of the Shares pursuant to the Offer. (c) To reflect the borrowing of the funds necessary to purchase the Shares and pay all costs pursuant to the Offer. (d) For the year ended September 30, 1994 fixed charges exceeded earnings; the coverage deficiency was $115,000. The pro forma coverage deficiency for the year ended September 30, 1994 was $291,000. 13 18 ADDITIONAL INFORMATION The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, files periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's trustees and officers, their compensation, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. The Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4 with the Commission. Such material and other information may be inspected at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and (except for the Issuer Tender Offer Statement) also should be available for inspection and copying at the following regional offices of the Commission: Seven World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained by mail, upon paying the Commission's customary charges, by writing to the Public Reference Section at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. 12. INTEREST OF TRUSTEES AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES Neither the Company, nor any executive officer or trustee of the Company, any person controlling the Company, any executive officer or director of any person controlling the Company or any associate or subsidiary of any such person (including any executive officer or trustee of any such subsidiary), has engaged in any transaction involving Shares during the period of forty business days prior to the date hereof. The Company has been advised that no trustee or executive officer of the Company intends to tender any Shares pursuant to the Offer. See Section 8 entitled "Purpose of the Offer; Certain Effects of the Offer" for a discussion of the reverse stock split intended to be proposed at the 1996 Annual Meeting of Shareholders. 13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS The Company is not aware of any license or regulatory permit that it believes is material to the Company's business that might be adversely affected by the Company's acquisition of shares as contemplated herein or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Company as contemplated herein. Should any such approval or other action be required, the Company will make a good faith effort to obtain such approval or other action. The Company is unable to predict whether it will be required to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial cost or that the failure to obtain any such approval or other action might not result in adverse consequences to the Company's business. The Company's obligations under the Offer to accept for payment and pay for Shares are subject to certain conditions. See Section 6. 14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following summary is a general discussion of certain of the United States federal income tax consequences of the Offer. This summary is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. No rulings as to any of the matters discussed in this summary have been requested or received from the Internal Revenue Service ("IRS"). EACH SHAREHOLDER IS URGED TO CONSULT AND RELY ON THE SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE SHAREHOLDER OF TENDERING SHARES PURSUANT TO THE OFFER. IN GENERAL. A shareholder's exchange of Shares for cash pursuant to the Offer will be a taxable transaction for federal income tax purposes, and may also be a taxable transaction under applicable state, local, or foreign tax laws. This summary does not discuss any aspects of state, local or foreign tax laws. Certain shareholders (including insurance companies, tax-exempt organizations, institutions, and broker dealers) may be subject to special rules not discussed below. Special rules apply in the case of Shares acquired pursuant to the exercise of options granted to employees under the Company's incentive compensation plans (see "Employee Plans" below). 14 19 TREATMENT AS A SALE OR EXCHANGE. Under Section 302 of the Internal Revenue Code of 1986, as amended (the "Code"), a transfer of Shares to the Company pursuant to the Offer will, as a general rule, be treated as a sale or exchange of the Shares (rather than as a dividend distribution) if the receipt of cash upon the sale (a) is "substantially disproportionate" with respect to the shareholder, (b) results in a "complete termination" of the shareholder's interest in the company or (c) is "not essentially equivalent to a dividend" with respect to the shareholder. These tests (the "Section 302 tests") are explained more fully below. If any of the Section 302 tests is satisfied, a tendering shareholder will ordinarily recognize gain or loss equal to the difference between the amount of cash received by the shareholder pursuant to the Offer and the shareholder's basis in the Shares sold pursuant to the Offer. If the Shares are held as capital assets, the gain or loss will be capital gain or loss, which will be long-term capital gain or long-term capital loss if the Shares have been held for more than one year. A shareholder will not be permitted to recognize loss on the sale of a Share pursuant to the Offer if the shareholder purchases a Share within a period beginning 30 days prior to and ending 30 days after the completion of the Offer. TREATMENT AS A DIVIDEND. If none of the Section 302 tests is satisfied and, as anticipated, the Company has sufficient earnings and profits for the current fiscal year (even though it has no accumulated earnings and profits), a tendering shareholder will be treated as having received a dividend includible in gross income in an amount equal to the entire amount of cash received by the shareholder pursuant to the Offer. This amount will not be reduced by the shareholder's basis in the Shares sold pursuant to the offer, and (except as described below for corporate shareholders eligible for the dividends received deduction) the shareholder's basis in those Shares will be added to the shareholder's basis in his remaining Shares. No assurance can be given that any of the Section 302 tests will be satisfied as to any particular shareholder, and thus no assurance can be given that any particular shareholder will not be treated as having received a dividend taxable as ordinary income. TAX RATES. Net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) of individuals, trusts and estates is currently taxed at a maximum federal income tax rate of 28%. Short-term capital gains of individuals, trusts and estates are taxed at ordinary income rates. Ordinary income is currently taxable to individuals, trusts and estates at a maximum federal income tax rate of 39.6% (although it may be taxed at higher marginal rates due to the phase-out of certain exemptions and deductions). Capital gains and ordinary income of corporations are both taxed at the same federal income tax rate, currently a maximum of 35% (although they may be taxed at higher marginal rates due to the phase-out of the 15%, 25% and 34% brackets). Shareholders are urged to consult their own tax advisors concerning the possible impact of the receipt of cash from the Company pursuant to the Offer on their obligation to make estimated tax payments. CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the Section 302 tests is satisfied, a shareholder must take into account not only Shares actually owned by the shareholder, but also Shares that are constructively owned within the meaning of Section 318 of the Code. Under Section 318, a Shareholder may constructively own Shares actually owned, and in some cases constructively owned, by certain related individuals and certain entities in which the shareholder has an interest, as well as any Shares the shareholder has a right to acquire by exercise of an option or by the conversion or exchange of a security. It is unclear whether Shares constructively owned by a shareholder by reason of such shareholder's right to acquire the shares from the Company are to be considered outstanding for purposes of applying the Section 302 tests to other shareholders. THE SECTION 302 TESTS. One of the following tests must be satisfied in order for the exchange of Shares pursuant to the Offer to be treated as a sale rather than as a dividend distribution. a. SUBSTANTIALLY DISPROPORTIONATE TEST. The receipt of cash by a shareholder will be substantially disproportionate with respect to the shareholder if the percentage of the outstanding Shares actually and constructively owned by the shareholder immediately following the exchange of Shares pursuant to the Offer (treating shares exchanged pursuant to the Offer as not outstanding) is less than 80% of the percentage of the outstanding Shares actually and constructively owned by the shareholder immediately before the exchange (treating Shares exchanged pursuant to the Offer as outstanding). b. COMPLETE TERMINATION TEST. The receipt of cash by a shareholder will be a complete termination of the shareholder's interest if either (i) all of the Shares actually and constructively owned by the shareholder are sold pursuant to the Offer or (ii) all of the Shares actually owned by the shareholder are sold pursuant to the Offer, the shareholder is eligible to waive, and effectively waives, the attribution of Shares constructively owned by the shareholder in accordance with the procedures described in Section 302(c)(2) of the Code (relating to the waiver of family attribution), and the shareholder is not considered to own any other shares pursuant to other attribution rules contained in Section 318 of the Code. 15 20 c. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. The receipt of cash by a shareholder will not be essentially equivalent to a dividend if the shareholder's exchange of Shares pursuant to the Offer results in a "meaningful reduction" of the shareholder's proportionate interest in the Company. Whether the receipt of cash by a shareholder will result in a meaningful reduction of the shareholder's proportionate interest will depend on the shareholder's particular facts and circumstances. However, in the case of a small minority shareholder, even a small reduction may satisfy this test where, as with the Offer, payments will not be pro rata with respect to all outstanding Shares. The IRS has indicated in a published ruling that, in the case of a small minority shareholder of a publicly-held corporation who exercises no meaningful control over corporate affairs, a reduction in the shareholder's proportionate interest in the corporation from .0001118% to .0001081% (which represented only a 3.3% reduction in the shareholder's percentage ownership of outstanding shares for purposes of the substantially disproportionate test) would constitute a meaningful reduction. Shareholders should consult their tax advisors concerning the application of the Section 302 tests to their particular circumstances. Under certain circumstances, it may be possible for a tendering shareholder to satisfy one of the Section 302 tests by contemporaneously selling or otherwise disposing of all or some of the Shares that are actually or constructively owned by the shareholder but that are not exchanged pursuant to the Offer. Correspondingly, a shareholder may not be able to satisfy any of the Section 302 tests because of contemporaneous acquisitions of Shares by the shareholder or by a related party whose Shares are constructively owned by the shareholder. Shareholders should consult their tax advisors regarding the consequences of such sales or acquisitions in their particular circumstances. In the event that the Offer is oversubscribed, the Company's purchase of Shares pursuant to the Offer will be prorated. Thus, even if all of the Shares actually and constructively owned by a shareholder are tendered pursuant to the Offer, not all of the Shares will be purchased by the Company, which in turn may affect the shareholder's ability to satisfy the Section 302 tests described above. See Section 3 for information regarding each shareholder's option to make a conditional tender of a minimum number of Shares. A SHAREHOLDER WHO DECIDES TO MAKE A CONDITIONAL TENDER IS URGED TO CALCULATE THE MINIMUM NUMBER OF SHARES IN CONSULTATION WITH HIS TAX ADVISOR. SPECIAL RULES FOR CORPORATE SHAREHOLDERS. If the exchange of Shares by a corporate shareholder does not satisfy any of the Section 302 tests and is therefore treated as a dividend, the shareholder may be entitled to a dividends-received deduction equal to 70% of the dividend. There are a number of limitations on the availability of the dividends-received deduction, however. Section 246(c) of the Code disallows the dividends-received deduction with respect to stock that is held for 45 days or less. For this purpose, the length of time a corporation is considered to have held stock may be reduced by periods during which the corporation's risk of loss with respect to the stock is diminished due to the existence of certain options or other transactions. Further, under Section 246A of the Code, if a corporate shareholder has incurred indebtedness directly attributable to an investment in Shares, the 70% dividends received deduction may be reduced by a percentage generally computed based on the amount of the indebtedness and the corporation's adjusted tax basis in the Shares. Finally, because the Company's payments of cash pursuant to the Offer will not be pro rata with respect to all of the outstanding Shares, any amount that is received by a corporate shareholder that is treated as a dividend will constitute an "extraordinary dividend" under Section 1059 of the Code to a corporate shareholder that has held the shares for less than two years. As a result, such a corporate shareholder will be required to reduce its tax basis in its Shares (but not below zero) by the non-taxed portion of the dividend (that is, the portion of the dividend equal to the dividends-received deduction). If the non-taxed portion of the dividend exceeds the corporate shareholder's tax basis in its Shares, the excess must be treated as gain from the sale of the Shares for the taxable year in which a sale or disposition of the Shares occurs. It is unclear whether, if the non-taxed portion of the dividend exceeds the corporate shareholder's tax basis in its Shares, the excess is only treated as gain upon a later disposition that requires treatment of such excess as gain, despite treatment of the cash received as a dividend pursuant to Section 302. EMPLOYEE PLANS. Special rules govern the taxation of cash received in exchange for Shares acquired pursuant to the exercise of an incentive stock option granted to an employee under an incentive compensation plan. An employee who exchanges Shares acquired pursuant to the exercise of an incentive option granted under a stock option plan of the Company will be taxed in accordance with the rules described in the preceding sections unless the disposition of a Share pursuant to the Offer occurs before the end of the required holding period for the Share. The required holding period for a Share ends on the later of (i) two years after the date the option with respect to the Share was granted or (ii) one year after the date the Share was acquired pursuant to the exercise of the option. If an exchange occurs before the end of the required holding period for a Share and one of the Section 302 tests is 16 21 satisfied, the employee will be required to recognize ordinary income in an amount equal to the excess of the fair market value of the Share at the time the option was exercised over the exercise price of the option (the "spread"). Any remaining gain will be capital gain, which will be long-term capital gain if the Share has been held for more than one year. If an exchange occurs before the end of the required holding period for a Share and none of the Section 302 tests is satisfied, the employee may be required to treat the exchange of the Share as a disposition that requires inclusion of the spread in ordinary income as well as including in income the total amount of cash received as a dividend pursuant to Section 302. If an employee exercises a nonqualified stock option granted under a stock option plan of the Company in order to acquire Shares to tender pursuant to the Offer, the employee will be required to recognize as ordinary income an amount equal to the excess of the fair market value of the Shares on the date the option is exercised over the exercise price. The employee's basis in the Shares will be equal to the fair market value of the Shares on the date the option is exercised, and the employee's holding period for purposes of determining eligibility for long-term capital gain will begin after the option is exercised. The exchange of the Shares pursuant to the Offer will be taxed in accordance with the rules described in the preceding sections. BACKUP WITHHOLDING. See Section 3 concerning the potential application of federal backup withholding. FOREIGN SHAREHOLDERS. The Company will assume that the exchange is a dividend as to foreign shareholders and will therefore withhold federal income tax at a rate equal to 30% of the gross proceeds paid to a foreign shareholder or his agent pursuant to the Offer, unless the Depositary determines that a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because the gross proceeds are effectively connected with the conduct of a trade or business by the foreign shareholder within the United States. For this purpose, a foreign shareholder is any shareholder that is not (a) a citizen or resident of the United States, (b) a corporation, partnership or other entity created or organized in or under laws of the United States or any political subdivision thereof, or (c) any estate or trust the income of which is subject to United States federal income taxation regardless of the source of such income. Generally, the determination of whether a reduced rate of withholding is applicable is made by reference to a foreign shareholder's address or to a properly completed Form 1001 furnished by the shareholder, and the determination of whether an exemption from withholding is available on the grounds that gross proceeds paid to a foreign shareholder are effectively connected with a United States trade or business is made on the basis of a properly completed Form 4224 furnished by the shareholder. The Depositary will determine who is a foreign shareholder unless facts and circumstances indicate that such reliance is not warranted or unless applicable law requires some other method for determining whether a reduced rate of withholding is applicable. These forms can be obtained from the Depositary. See the instructions to the Letter of Transmittal. A foreign shareholder with respect to whom tax has been withheld may be eligible to obtain a refund of all or a portion of the withheld tax if the shareholder satisfies one of the Section 302 tests for capital gain treatment or is otherwise able to establish that no tax or a reduced amount of tax was due. Foreign shareholders are urged to consult their own tax advisers regarding the application of United States federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedure. 15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS The Company expressly reserves the right, in its sole discretion, and regardless of whether or not any of the conditions specified in Section 6 shall have occurred, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary, followed by a public announcement thereof no later than 9:00 a.m., eastern daylight savings time, on the next business day after the previously scheduled Expiration Date. There can be no assurance that the Company will exercise its right to extend the Offer. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer. The Company expressly reserves the right, in its sole discretion, (i) to delay payment for any Shares not theretofore paid for, or to terminate the Offer and not to accept for payment any Shares not theretofore accepted for payment, upon the occurrence of any of the conditions specified in Section 6, or (ii) at any time or from time to time to amend the Offer in any respect, including increasing or decreasing the number of Shares the Company may purchase or the price it may pay pursuant to the Offer. Any such extension, delay, termination or amendment will be followed as promptly as practicable by a public announcement thereof. Without limiting the manner in which the Company may choose to make any public 17 22 announcement, except as provided by applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Company makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) under the Exchange Act, which require that the minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer (other than a change in price or a change in percentage of securities sought) will depend upon the facts and circumstances, including the relative materiality of such terms or information. The Company confirms that its reservation of the right to delay payment for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5) under the Exchange Act, which requires that an issuer pay consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer. If (i) the Company increases or decreases the price to be paid for Shares, or the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, or the Company decreases the number of Shares being sought and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such decrease is first published, sent or given, the Offer will be extended until the expiration of such period of ten business days. 16. FEES AND EXPENSES The Company has retained Beacon Hill Partners, Inc. to act as Information Agent and American Stock Transfer & Trust Company to act as Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary will each receive reasonable and customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. The Depositary has also rendered transfer services to the Company in the past for which it has received customary compensation, and can be expected to continue to render similar services to the Company in the future. NEITHER THE DEPOSITARY NOR THE INFORMATION AGENT HAS BEEN RETAINED TO, OR IS AUTHORIZED TO, MAKE RECOMMENDATIONS IN CONNECTION WITH THE OFFER. The Company will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent and the Depositary) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by the Company for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. 17. MISCELLANEOUS The Company is not aware of any jurisdiction in which the making of the Offer or the acceptance for payment of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Company becomes aware of any jurisdiction where the making of the Offer would not be in compliance with such laws, the Company will make a good faith effort to comply with such laws or seek to have such laws declared inapplicable to the Offer. If after such good faith effort the Company cannot comply with any such laws, the Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Shares in any such jurisdictions. CLEVETRUST REALTY INVESTORS August 21, 1995 18 23 CLEVETRUST REALTY INVESTORS INDEX TO FINANCIAL STATEMENTS UNAUDITED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1995 Statement of Financial Condition -- June 30, 1995 and September 30, 1994 . . . . . . . . . . . . F-1 Statement of Operations -- Three Months and Nine Months ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Statement of Cash Flows -- Nine Months ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . F-3 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4 AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1994 (1) Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 Statement of Financial Condition -- September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . F-8 Statement of Operations -- Years ended September 30, 1994, 1993 and 1992 . . . . . . . . . . . . F-9 Statements of Cash Flows -- Years ended September 30, 1994, 1993 and 1992 . . . . . . . . . . . . F-10 Statement of Changes in Shareholders' Equity --Years ended September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12 Financial Statement Schedules: Schedule IX -- Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24 Schedule X -- Supplemental Income Statement Information . . . . . . . . . . . . . . . . . . F-25 Schedule XI -- Real Estate and Accumulated Information . . . . . . . . . . . . . . . . . . . F-26 Schedule XII -- Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . . F-28 (1) Included in Item 14(a)(1) and (2) of the Trust's Annual Report on Form 10K for the year ended September 30, 1994.
24 CLEVETRUST REALTY INVESTORS STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1995 SEPTEMBER 30, 1994 ------------- ------------------ (IN THOUSANDS) ASSETS -------------------------------------------------- Invested assets - NOTE B: Investments in real estate: Improved properties $ 63,018 $ 70,715 Less: Accumulated Depreciation 22,087 25,648 --------- --------- 40,931 45,067 Land held for sale or development 202 313 --------- --------- 41,133 45,380 Real estate mortgage loans 325 236 --------- --------- 41,458 45,616 Cash and cash equivalents 421 251 Certificates of deposit 0 500 Insurance settlement proceeds - NOTE B 0 3,341 Other assets 1,242 1,296 --------- --------- TOTAL ASSETS $ 43,121 $ 51,004 ======== ======== LIABILITIES -------------------------------------------------- Mortgage notes payable - NOTE C $ 9,309 $ 11,111 Bank notes payable - NOTE D 5,600 11,180 Accrued interest on notes payable 22 27 Accrued fire repairs - NOTE B 1,006 3,341 Accrued expenses and other liabilities 1,770 2,195 --------- --------- TOTAL LIABILITIES 17,707 27,854 SHAREHOLDERS' EQUITY -------------------------------------------------- Shares of Beneficial Interest, par value $1 per Share - NOTE E: Authorized - - Unlimited Issued and outstanding shares (6/30/95 - 5,456,696; 9/30/94 - 5,470,696) 5,457 5,471 Additional paid-in capital 39,760 39,794 Accumulated deficit (19,803) (22,115) -------- -------- TOTAL SHAREHOLDERS' EQUITY 25,414 23,150 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 43,121 $ 51,004 ======== ========
See notes to financial statements. F-1 25 CLEVETRUST REALTY INVESTORS STATEMENT OF OPERATIONS The following statement of operations of CleveTrust Realty Investors for the three-month and nine-month periods ended June 30, 1995 and 1994, respectively, are unaudited, but in the opinion of management include all adjustments necessary to present fairly the results of operations. All such adjustments were of a normal recurring nature. The results of operations of the three-month and nine-month periods ended June 30, 1995 are not necessarily indicative of the results of operations for succeeding periods.
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- 6/30/95 6/30/94 6/30/95 6/30/94 ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME Real estate operations: Rental Income $ 2,477 $ 2,412 $ 7,698 $ 7,217 Less: Real estate operating expenses 1,232 1,253 3,956 3,752 Less: Depreciation expense 432 498 1,389 1,482 ------- ------- ------- ------- 1,664 1,751 5,345 5,234 ------- ------- ------- ------- Income from real estate operations 813 661 2,353 1,983 Interest income 7 18 47 44 Other 2 2 21 19 -------- -------- ------- ------- 822 681 2,421 2,046 EXPENSES Interest: Mortgage notes payable - NOTE C 231 412 766 1,245 Bank notes payable - NOTE D 150 73 626 368 ------- -------- ------- ------- 381 485 1,392 1,613 General and administrative 186 176 613 630 ------- ------- ------- ------- 567 661 2,005 2,243 ------- ------- ------- ------- OPERATING INCOME (LOSS) 255 20 416 (197) Gains on sales of real estate - NOTE B 91 0 2,499 361 -------- -------- ------- ------- INCOME BEFORE EXTRAORDINARY ITEM 346 20 2,915 164 Extraordinary item - NOTE C 52 0 52 0 -------- -------- ------- ------- NET INCOME $ 398 $ 20 $ 2,967 $ 164 ======= ======= ======= ======= Per Share of Beneficial Interest - NOTE G: Operating income (loss) $ 0.05 $ 0.00 $ 0.08 $ (0.04) Gains on sales of real estate 0.02 0.00 0.46 0.08 ------- ------- ------- ------- INCOME BEFORE EXTRAORDINARY ITEM 0.07 0.00 0.54 0.04 Extraordinary item 0.01 0.00 0.01 0.00 ------- ------- ------- ------- NET INCOME PER SHARE $ 0.08 $ 0.00 $ 0.55 $ 0.04 ======= ======= ======= ======= Weighted Average Number of Shares of Beneficial Interest Outstanding 5,462 5,573 5,468 4,787 ======= ======= ======= =======
See notes to financial statements. F-2 26 CLEVETRUST REALTY INVESTORS STATEMENT OF CASH FLOWS
NINE MONTHS ENDED ----------------- 6/30/95 6/30/94 ------- ------- (IN THOUSANDS) CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 2,967 $ 164 Non-cash revenues and expenses included in income: Depreciation expense 1,389 1,482 Decrease in other assets 54 114 Decrease in accrued interest on notes payable (5) (33) (Decrease) increase in accrued expenses and other liabilities (425) 98 Reconciliation to net cash flow from operating activities: Gains on sales of real estate (2,499) (361) Extraordinary item (52) 0 ------- ------- Cash Flow From Operating Activities 1,429 1,464 CASH FLOW FROM INVESTING ACTIVITIES: Equity investments: Improvements to existing properties (401) (496) Proceeds from properties sold 5,546 507 Net insurance proceeds 1,006 1,000 Real estate mortgage loan repayments 123 156 ------- ------- Cash Flow From Investing Activities 6,274 1,167 CASH FLOW FROM FINANCING ACTIVITIES: Mortgage notes payable: Principal amortization payments (287) (371) Principal prepayments (1,463) 0 Bank notes payable: Repayments (5,549) (5,174) Principal amortization payments (31) (115) Certificates of deposit 500 0 Shares of beneficial interest: Shares issued pursuant to rights offering 0 5,905 Shares purchased and subsequently retired (48) (297) Distributions to shareholders (655) (515) ------- ------- Cash Flow Used In Financing Activities (7,533) (567) ------- ------- Increase in cash and short-term investments 170 2,064 Balance at beginning of year 251 315 ------- ------- Balance at end of period $ 421 $ 2,379 ======= =======
See notes to financial statements. F-3 27 CLEVETRUST REALTY INVESTORS NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 NOTE A - INCOME TAXES Commencing with fiscal 1993 the Trust no longer qualified as a REIT with the change in status to a taxable entity retroactive to October 1, 1992. As of October 1, 1992 the Trust adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109 had no effect on net income. The Trust had no income tax expense for the nine-month periods ended June 30, 1994 and 1995 or for the fiscal year ended September 30, 1994, and it expects to have no income tax expense for the fiscal year ended September 30, 1995. The Trust had a net deferred tax asset position at June 30, 1995 and September 30, 1994 of approximately $3,057,000 and $4,066,000, respectively. The Trust maintains a valuation reserve equal to its net deferred tax asset as there is doubt as to whether the net deferred tax will be realized. NOTE B - INVESTED ASSETS On February 28, 1995 the Trust completed a $2,650,000 sale of the 197 room Quality Hotel located at the airport in St. Louis, Missouri. This sale resulted in a gain of $452,000. On March 15, 1995 the Trust completed a $2,595,000 sale of the 124 unit Parkwood Place Apartments located in Greeley, Colorado. This sale resulted in a gain of $1,859,000. On March 20, 1995 the Trust completed an $800,000 sale of the 51,000 square foot Walnut Hill West office building located in Dallas, Texas. This sale resulted in a gain of $97,000. On May 31, 1995 the Trust completed a $212,000 sale of 17.7697 acres of vacant land located in Akron, Ohio. This sale resulted in a gain of $91,000. The Trust received a purchase money mortgage for the total $212,000 purchase price in connection with the sale. On March 7, 1994 the Trust completed an $834,000 sale of 69.96 acres of vacant land located in Akron, Ohio. This sale resulted in a gain of $361,000. The Trust received a purchase money mortgage for $290,000 of the purchase price in connection with the sale. On January 18, 1994 the Trust's Petroleum Club Building, located in Tulsa, Oklahoma, sustained a major fire. In July, 1994 the Trust and its insurance company agreed on a settlement. The total settlement of $6,025,000 has been remitted to the Trust by the insurance company. Building repairs and other costs associated with the fire are currently estimated to be adequately covered by the settlement. At June 30, 1995 the Trust had $1,006,000 accrued for repairs and other costs related to the fire. The Trust used $1,006,000 of the settlement proceeds to make a paydown on its 1994 Credit (see Note D). The Trust has the ability, subject to the conditions of the loan agreement, to borrow these funds back, when needed, to make payments for the fire repair work and other costs associated with the fire. F-4 28 CLEVETRUST REALTY INVESTORS NOTES TO FINANCIAL STATEMENTS - (CONTINUED) NOTE C - MORTGAGE NOTES PAYABLE On March 16, 1995 the Trust repaid a $498,000 first mortgage loan on its shopping center located in Ardmore, Oklahoma. This loan had a maturity date of June 16, 1996. On May 1, 1995 the Trust settled at a discount, a $1,017,000 first mortgage loan on its office building located in Englewood, Colorado, which had a maturity date of February 1, 1999. This settlement resulted in an extraordinary gain of $52,000. NOTE D - BANK NOTES PAYABLE On September 30, 1994 the Trust borrowed $7,689,000 under the terms of a demand note from National City Bank of Cleveland, Ohio ("NCB"). The funds were used to repay a maturing mortgage loan. This demand note had an interest rate of prime. This demand note was converted to a revolving line of credit ("1994 Credit") issued by NCB and M & T Bank of Buffalo, New York ("M&T"), which was signed effective November 30, 1994. The 1994 Credit is for up to $25,000,000 (but is limited by the value of the collateral provided). Of this amount a maximum of $15,000,000 is currently available and $10,000,000 will be available upon payment of an activation fee of 3/4 of 1% on the $10,000,000. Interest, which is at the option of the Trust, will be at either i) 1/4 of 1% over the prime rate; ii) 250 basis points over the LIBOR rate; or iii) NCB's fixed interest rate available from time to time. Additionally, a commitment fee of 3/8 of 1% is due on any funds available but not borrowed. Each year the lenders will review the 1994 Credit with the right to extend it for one additional year. At June 30, 1995 the outstanding balance was $5,600,000. The 1994 Credit is secured by certain of the Trust's real estate and contains certain covenants including a covenant for a minimum shareholders' equity. At June 30, 1995 the amount of shareholders' equity free from such restrictions was approximately $5,414,000. On February 28, 1995 with the proceeds from the sale of the hotel located in St. Louis, Missouri (see Note B) the Trust made a $2,200,000 paydown on a loan it had with another bank. On March 15, 1995 with a portion of the proceeds from the sale of the apartments located in Greeley, Colorado (see Note B) the Trust paid off the $1,260,000 balance on this loan. This loan had a maturity date of December 25, 1997. The interest rate was prime plus 1% with a minimum rate of 7.5%. The Trust was required to make monthly amortization payments based on a twenty year amortization schedule. Effective December 31, 1994 the Trust terminated the December 31, 1990 Credit Agreement ("1990 Credit") it had with Society National Bank. Effective January 1, 1994 the Trust and the lender had amended the 1990 Credit by converting the loan to a revolving line of credit. During January and February, 1994 the Trust paid down the $4,508,000 balance of the 1990 Credit. There were no borrowings outstanding when the 1990 Credit was terminated. NOTE E - SHARES OF BENEFICIAL INTEREST On November 23, 1993 the Trust mailed a prospectus and certificate of rights to all shareholders of record as of November 12, 1993. The certificate entitled the shareholder the right to purchase one share of beneficial interest of the Trust for every two shares that the shareholder owned at a price of $3.25 per share. Additionally, this offering also provided for an oversubscription privilege that entitled each holder of a right to subscribe for shares not purchased by other holders of rights. Oversubscription was to be allocated prorata based on the number of shares owned should oversubscription requests exceed the number of shares available. The offering expired January 28, 1994. All 1,857,969 shares available in the offering were sold. The Trust received $6,038,000 less estimated expenses of $133,000 or net proceeds of $5,905,000. F-5 29 CLEVETRUST REALTY INVESTORS NOTES TO FINANCIAL STATEMENTS - (CONTINUED) NOTE E - SHARES OF BENEFICIAL INTEREST (CONTINUED) On June 24, 1994 the Trust purchased 103,210 of its Shares of Beneficial Interest at a price of $2.875 per share. All 103,210 shares were retired by the Trust. On April 17, 1995 the Trust purchased 14,000 of its Shares of Beneficial Interest at a price of $3.40 per share. All 14,000 shares were retired by the Trust. NOTE F - DISTRIBUTIONS The Trustees at their April 25, 1995 meeting declared a quarterly cash distribution of $.04 per share payable July 21, 1995 to shareholders of record as of July 7, 1995. The Trustees at their July 25, 1995 meeting declared a quarterly cash distribution of $.04 per share payable on October 20, 1995 to shareholders of record as of October 6, 1995. NOTE G - NET INCOME PER SHARE Net income per Share of Beneficial Interest has been computed using the weighted average number of Shares of Beneficial Interest outstanding each period. F-6 30 [LOGO] ERNST & YOUNG LLP - 1300 Huntington Building - Phone: 216 861 5000 925 Euclid Avenue Cleveland, Ohio 44115-1405 Report of Independent Auditors Trustees and Shareholders CleveTrust Realty Investors Westlake, Ohio We have audited the accompanying statement of financial condition of CleveTrust Realty Investors as of September 30, 1994 and 1993, and the related statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended September 30, 1994. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CleveTrust Realty Investors at September 30, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP ----------------------------- December 2, 1994 F-7 31 STATEMENT OF FINANCIAL CONDITION CLEVETRUST REALTY INVESTORS
SEPTEMBER 30, ------------- 1994 1993 ---- ---- (IN THOUSANDS) ASSETS Invested assets - - NOTE A: Investments in real estate - - NOTES C and I: Improved properties $ 70,715 $ 72,482 Less: Accumulated depreciation 25,648 23,902 -------- -------- 45,067 48,580 Land held for sale or development 313 814 -------- -------- 45,380 49,394 Real estate mortgage loans - - NOTES D and I 236 150 -------- -------- 45,616 49,544 Less allowance for possible investment losses - - NOTE E 0 6,089 -------- -------- 45,616 43,455 Cash and cash equivalents - - NOTE A 251 315 Certificates of deposit 500 500 Insurance settlement proceeds - - NOTE C 3,341 0 Other assets 1,296 1,229 -------- -------- TOTAL ASSETS $ 51,004 $ 45,499 ======== ======== LIABILITIES Mortgage notes payable - - NOTE F $ 11,111 $ 17,126 Bank notes payable - - NOTE G 11,180 8,800 Accrued interest on notes payable - - NOTE G 27 60 Accrued fire repairs - - NOTE C 3,341 0 Accrued expenses and other liabilities 2,195 1,844 -------- -------- TOTAL LIABILITIES 27,854 27,830 SHAREHOLDERS' EQUITY Shares of Beneficial Interest, par value $1 per Share - - NOTE H: Authorized - - Unlimited Issued and outstanding shares (9/30/94 - 5,470,696; 9/30/93 - 3,715,937) 5,471 3,716 Additional paid-in capital 39,794 35,916 Accumulated deficit (22,115) (21,963) -------- -------- TOTAL SHAREHOLDERS' EQUITY 23,150 17,669 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 51,004 $ 45,499 ======== ======== See notes to financial statements.
F-8 32 STATEMENT OF OPERATIONS CLEVETRUST REALTY INVESTORS
YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1993 1992 ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME Real estate operations: Rental income $ 9,650 $ 9,348 $ 9,400 Less: Real estate operating expenses - - NOTE J 4,981 4,797 5,079 Depreciation expenses 1,972 2,149 2,197 --------- -------- -------- 6,953 6,946 7,276 -------- -------- -------- Income from real estate operations 2,697 2,402 2,124 Interest income 76 263 325 Other 29 41 60 --------- -------- -------- 2,802 2,706 2,509 EXPENSES Interest: Mortgage notes payable - - NOTE F 1,678 1,734 1,875 Bank notes payable - - NOTE G 442 916 1,235 --------- -------- -------- 2,120 2,650 3,110 General and Administrative 797 788 739 --------- -------- -------- 2,917 3,438 3,849 --------- -------- -------- OPERATING INCOME (LOSS) (115) (732) (1,340) Gains on sales of real estate - - NOTE I 445 563 51 --------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 330 (169) (1,289) Extraordinary items - - NOTES C and F 253 286 0 --------- -------- -------- NET INCOME (LOSS) $ 583 $ 117 $ (1,289) ========= ======== ======== Per Share of Beneficial Interest - - NOTE A: Operating income (loss) $ (0.02) $ (0.22) $ (0.68) Gains on sales of real estate 0.09 0.17 0.02 --------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 0.07 (0.05) (0.66) Extraordinary items 0.05 0.09 0.00 --------- -------- -------- NET INCOME (LOSS) PER SHARE $ 0.12 $ 0.04 $ (0.66) ========= ======== ======== Weighted average number of Shares of Beneficial Interest outstanding 4,959 3,292 1,957 ========= ======== ======== See notes to financial statements.
F-9 33 STATEMENT OF CASH FLOWS CLEVETRUST REALTY INVESTORS
YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1993 1992 ---- ---- ---- (IN THOUSANDS) Cash flow from operating activities: Net income (loss) $ 583 $ 117 $(1,289) Non-cash revenues and expenses included in income: Depreciation 1,972 2,149 2,197 (Decrease) in accrued interest on notes payable (33) (26) (44) Increase (decrease) in accrued expenses and other liabilities 351 (172) 264 (Increase) decrease in other assets (67) 392 (51) Reconciliation to net cash flow from operating activities: Gains on sales of real estate (445) (563) (51) Extraordinary items (253) (286) 0 Amortization of purchase money mortgage discounts 0 (14) (16) ------- ------- ------- CASH FLOW FROM OPERATING ACTIVITIES 2,108 1,597 1,010 Cash flow from investing activities: Equity investments: Improvements to existing properties (853) (657) (517) Purchase of property (3,918) (220) 0 Proceeds from properties sold 879 1,257 830 Net insurance proceeds 253 0 0 Real estate mortgage loans: Repayments 204 2,000 0 ------- ------- ------- NET CASH (USED IN) FROM INVESTING ACTIVITIES (3,435) 2,380 313 Cash flow from financing activities: Mortgage notes payable: Principal amortization payments (496) (454) (442) Principal repayments (7,689) (941) (45) Principal borrowings 2,170 0 0 Bank notes payable: Principal amortization payments (147) (228) 0 Principal repayments (5,162) (6,598) (117) Principal borrowings 7,689 0 0 Distributions to shareholders (735) (393) (117) Shares issued pursuant to rights offerings 5,929 4,231 0 Shares repurchased and subsequently retired (296) 0 0 ------- ------- ------- NET CASH FROM (USED IN) FINANCING ACTIVITIES 1,263 (4,383) (721) ------- ------- ------- (Decrease) increase in cash and cash equivalents (64) (406) 602 Balance at beginning of year 315 721 119 ------- ------- ------- Balance at end of year $ 251 $ 315 $ 721 ======= ======= ======= See notes to financial statements.
F-10 34 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY CLEVETRUST REALTY INVESTORS YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
SHARES OF BENEFICIAL INTEREST ADDITIONAL TOTAL ------------------- PAID-IN ACCUMULATED SHAREHOLDERS' NUMBER AMOUNT CAPITAL DEFICIT EQUITY ------ ------ ------- ------- ------ (IN THOUSANDS, EXCEPT ACTUAL SHARES) Balance October 1, 1991 1,956,772 $1,957 $33,444 $(20,281) $15,120 Net (loss) for the year ended September 30, 1992 (1,289) (1,289) Cash distributions declared and paid -- $.06 per share (117) (117) --------- ------ ------- -------- ------- Balance September 30, 1992 1,956,772 1,957 33,444 (21,687) 13,714 Net income for the year ended September 30, 1993 117 117 Cash distributions declared and paid -- $.12 per share (393) (393) Shares issued pursuant to rights offering -- NOTE H 1,759,165 1,759 2,472 4,231 --------- ------ ------- -------- ------- Balance September 30, 1993 3,715,937 3,716 35,916 (21,963) 17,669 Net income for the year ended September 30, 1994 583 583 Cash distributions declared and paid -- $.15 per share (735) (735) Shares issued pursuant to rights offering -- NOTE H 1,857,969 1,858 4,071 5,929 Shares repurchased and subsequently retired -- NOTE H (103,210) (103) (193) (296) --------- ------ ------- -------- ------- Balance September 30, 1994 5,470,696 $5,471 $39,794 $(22,115) $23,150 ========= ====== ======= ======== ======= See notes to financial statements.
F-11 35 NOTES TO FINANCIAL STATEMENTS CLEVETRUST REALTY INVESTORS YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992 NOTE A - - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Income Recognition: Rental income from improved properties is generally recorded as it accrues. Interest on mortgage loans is recognized as income as it accrues during the period the loans are outstanding except where collection of interest is considered doubtful. Contingent rents and interest are recognized as income when determinable. Accrual of income is suspended on any investment when the collection of rent, principal, or interest is doubtful. Investments in Real Estate: Real estate acquired by the Trust for investment purposes pursuant to normal real estate purchase transactions is recorded at cost. Real estate acquired by foreclosure, deed in lieu of foreclosure, or cancellation of land leases is recorded at estimated fair value at the date of acquisition, but not in excess of the unpaid balance of the related loan or land lease plus costs of securing title to and possession of the property. Depreciation: Depreciation on equity investments is computed by the straight-line method at rates based upon the expected economic lives of the assets which range from 31 to 40 years for buildings, 5 to 40 years for other property and the specific length of the tenant lease for tenant improvements. Additionally, one building and its permanent improvements is depreciated over a life of 55 years. Repairs and Capital Improvements: Expenditures for repairs and maintenance which do not add to the value or prolong the useful life of property owned are charged to expense as incurred; those expenditures for improvements which do add to the value or extend the useful life are capitalized. Allowance for Possible Investment Losses: The Trust regularly evaluates the recoverability of each investment in the portfolio. When appropriate, an allowance for possible investment losses is provided for properties acquired through foreclosure or deed in lieu of foreclosure. Cash and Cash Equivalents: The Trust defines cash and cash equivalents as cash in bank accounts and investments in marketable securities, primarily short-term commercial paper with original maturities of three months or less. Income Taxes: The Trust filed its federal income tax return for fiscal 1992 as a real estate investment trust (a "REIT") as defined in the Internal Revenue Code. For fiscal 1992 the Trust had no taxable income. Accordingly, no provision for federal income taxes was made. Commencing with fiscal 1993 the Trust no longer qualified as a REIT. Therefore, with the change in status to a taxable entity for fiscal 1993, the Trust adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". F-12 36 NOTES TO FINANCIAL STATEMENTS - - CONTINUED NOTE A - - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES - - CONTINUED Net Income Per Share: Net income per Share of Beneficial Interest has been computed using the weighted average number of Shares of Beneficial Interest outstanding each year. Reclassification: Certain items in previously issued financial statements have been reclassified to conform to 1994 presentations. NOTE B - - INCOME TAXES Commencing with fiscal 1993 the Trust no longer qualifies as a REIT with the change in status to a taxable entity retroactive to October 1, 1992. As of October 1, 1992 the Trust adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109 had no effect on net income. The Trust's deferred tax assets and liabilities under SFAS 109 at September 30, 1994 and 1993 are as follows:
1994 1993 ---- ---- (IN THOUSANDS) Deferred tax assets: Provision for possible investment losses $ 2,070 $ 2,070 Net Operating loss carryforwards 2,953 2,837 Other 503 656 Deferred tax liabilities: Depreciation (1,460) (1,303) ------- ------- 4,066 4,260 Valuation allowance (4,066) (4,260) ------- ------- Net deferred tax asset/(liability) $ -0- $ -0- ======= =======
The Trust maintains a valuation reserve equal to its net deferred tax asset as there is doubt as to whether the net deferred tax asset will be realized. F-13 37 NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE B -- INCOME TAXES -- CONTINUED The Trust had no income tax expense for the fiscal years ended September 30, 1994 or 1993. A reconciliation between these results and the amount of income tax expense that would result from applying Federal statutory rates to pretax income is as follows:
9/30/94 9/30/93 ------- ------- (IN THOUSANDS) Expected income tax expense at Federal statutory tax rate $ 198 $ 39 Increase (decrease) in taxes resulting from: Effect of temporary differences (310) (97) Unrecognized net operating loss carryforward 107 58 Other 5 0 ------ ------ Income Tax Expense $ -0- $ -0- ====== ======
At September 30, 1994 the Trust had, for federal tax purposes, a net operating loss carryforward of approximately $8.7 million. The use of net operating loss carryforwards is limited by Section 382 of the Internal Revenue Code. In future years, the Trust can use approximately $ 298,000 per year of net operating loss carryforwards, plus any prior years' unused portion (limited by carryforward periods). These carryforwards of approximately $5.3 million expire through 2008. The remaining carryforwards of $3.4 million may be recognized for a period through fiscal 1998 against gains on sales of properties, if any, to the extent that fair market values of these properties exceeded their tax bases as of December 28, 1992. F-14 38 NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE C - - INVESTMENTS IN REAL ESTATE The following is a summary of the Trust's investments in real estate and accumulated depreciation and related indebtedness at September 30, 1994:
INCOME FROM AMOUNT OF INITIAL COST OF TOTAL ACCUMULATED CARRYING REAL ESTATE CLASSIFICATION INDEBTEDNESS COST(1) IMPROVEMENTS COST DEPRECIATION VALUE OPERATIONS -------------- ------------ ------- ------------ ----- ------------ -------- ----------- Office Buildings $ 4,613 $31,054 $ 6,967 $38,021 $16,033 $21,988 $ 673 Commercial Properties 6,498 26,700 4,017 30,717 8,350 22,367 1,862 Apartments and other rental units 0 1,202 775 1,977 1,265 712 165 Land held for sale or development 0 313 0 313 0 313 (3) ------- ------- ------- ------- ------- ------- ------ $11,111 $59,269 $11,759 $71,028 $25,648 $45,380 $2,697 ======= ======= ======= ======= ======= ======= ====== (1) Included is the application of the allowance for possible investment losses. See NOTE E.
F-15 39 NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTES C -- INVESTMENTS IN REAL ESTATE -- CONTINUED Following is a summary of activity in investments in real estate for the three years ended September 30, 1994:
1994 1993 1992 ------- ------- ------- (IN THOUSANDS) Balance, beginning of year $49,394 $51,510 $54,113 Capitalized improvements 853 657 517 Purchase of property 3,918 220 -0- Sales of real estate - NOTE I (724) (844) (923) Application of allowance for investment losses - NOTE E (6,089) -0- -0- Depreciation (1,972) (2,149) (2,197) ------- ------- ------- Balance, end of year $45,380 $49,394 $51,510 ======= ======= =======
On January 18, 1994 the Trust's Petroleum Club Building located in Tulsa, Oklahoma sustained a major fire. In July, 1994 the Trust and its insurance company agreed on a settlement. Of the total settlement, $525,000 is payable to the Trust contingent upon the completion of certain repairs and additions to the building within a set time frame. $5,500,000 has been remitted to the Trust by the insurance company. Building repairs and other costs associated with the fire are currently estimated to be adequately covered by the settlement. At September 30, 1994 the Trust had $3,341,000 accrued for repairs and other costs related to the fire. In addition $253,000 was the cost of building improvements made as part of the building restoration. This $253,000 has been capitalized as building improvements and has also been recorded as an extraordinary income item in fiscal 1994. On August 26, 1994 the Trust purchased a 104,000 square foot office building located in Dallas, Texas for $3,918,000. Of this amount $2,170,000 was provided by a first mortgage loan on the property, which the Trust obtained at the time of the purchase. NOTE D -- REAL ESTATE MORTGAGE LOANS At September 30, 1994 the Trust had one real estate mortgage loan. This loan is a second mortgage the Trust received in the sale of a land parcel during 1994. At September 30, 1993 the Trust had one real estate mortgage loan. This loan was a second mortgage the Trust received in the sale of a land parcel during 1993. See Note I. On July 1, 1993 the Trust sold its first mortgage loan on an apartment complex in Orlando, Florida for the total principal and interest ($2,362,000) due on that date, to the second mortgage lender on this property. The proceeds were used to repay bank debt. See Note G. F-16 40 NOTES TO FINANCIAL STATEMENTS - - CONTINUED NOTE E - - ALLOWANCE FOR POSSIBLE INVESTMENT LOSSES In fiscal 1994 the Trust applied the allowance for possible investment losses to the three previously foreclosed properties for which it had been provided. In connection with the Trust's annual evaluation of its portfolio of properties, the Trust concluded that it was unlikely that the value of these properties would recover. Therefore, they have been written down to their net realizable value through application of the allowance. Activity in the allowance for possible investment losses for the three years ended September 30, 1994 was as follows:
1994 1993 1992 ------- ------ ------ (IN THOUSANDS) Balance, beginning of year $ 6,089 $6,089 $6,233 Applied to properties (6,089) -0- -0- Amounts charged off -0- -0- (144) ------- ------- ------- Balance, end of year $ -0- $6,089 $6,089 ======= ====== ======
The $144,000 charged off in fiscal 1992 represents a loss incurred as a result of an installment sale of vacant land in New York, New York which was completed September 30, 1992. The allowance for possible investment losses was determined through evaluation of individual investments on the basis of the lower of (1) cost or (2) estimated fair value or net realizable value, whichever was appropriate. Estimated net realizable value was determined by estimating future fair market value after adjustment, when appropriate, for direct selling expenses, costs of improvements, direct holding costs during the projected holding period, including taxes, maintenance and insurance, and the cost of money to the Trust over the projected holding period. The Trust's cost of money was determined by taking into consideration all sources of financing utilized by the Trust, including shareholders' equity. In arriving at the allowance for possible investment losses, numerous estimates and indicators of value were utilized. Although Management believes appropriate assumptions were utilized, there can be no assurance that the projected events will actually occur. The components of the allowance for possible investment losses at September 30, 1993 were primarily attributable to principal loss ($4,430,000) and the estimated cost of money during the expected holding period ($1,652,000). F-17 41 NOTES TO FINANCIAL STATEMENTS - - CONTINUED NOTE F - - MORTGAGE NOTES PAYABLE At September 30, 1994 the mortgage notes payable of the Trust are non-recourse mortgages except the $1,121,000 loan maturing February 1, 1999 which is a recourse mortgage and the first $750,000 of the $2,168,000 loan maturing August 19, 2000 which is recourse to the Trust. The following data pertains to the mortgage notes payable as of September 30, 1994.
BOOK VALUE OF THE INVESTMENT MORTGAGE SECURING BASE INTEREST NOTES PAYABLE THE DEBT MATURITY RATE ------------- -------- -------- ---- $ 1,121 $ 2,029 Feb. 1, 1999 10.500% 1,324 1,817 July 1, 2003 8.125 5,947 6,380 May 7, 1997 9.500 551 3,203 June 16, 1996 10.000 2,168 3,910 Aug. 19, 2000 9.500 -------- -------- $11,111 $17,339 ======= =======
Required payments on the Trust's mortgage notes payable for the succeeding five years are as follows:
YEAR ENDING SEPTEMBER 30, PRINCIPAL INTEREST TOTAL ------------- --------- -------- ----- (IN THOUSANDS) 1995 $ 519 $1,028 $1,547 1996 847 975 1,822 1997 6,104 715 6,819 1998 394 316 710 1999 218 282 500
On September 30, 1994 the Trust repaid a $7,689,000 first mortgage loan on its two shopping centers located in Iowa. This loan had a maturity date of October 1, 1994. On January 28, 1993 the Trust settled a $240,000 second mortgage on one of its properties at a discount. This settlement resulted in the cancellation of the second mortgage and an extraordinary gain of $24,000. On February 10, 1993 the Trust settled a $987,000 first mortgage on the same property at a discount. This settlement resulted in the cancellation of the first mortgage and an extraordinary gain of $262,000. Total interest expense on mortgage notes payable did not differ materially from interest expense paid. F-18 42 NOTES TO FINANCIAL STATEMENTS - - CONTINUED NOTE G - - BANK NOTES PAYABLE At September 30, 1994 the bank notes payable included $7,689,000 of borrowings under a demand note and $3,491,000 of borrowings under a 1986 bank loan. At September 30, 1993 the bank notes payable included $4,548,000 of borrowings under the 1990 Credit Agreement and $4,252,000 of borrowings under a 1986 bank loan. On September 30, 1994 the Trust borrowed $7,689,000 under the terms of a demand note from a new lender. The funds were used to repay a mortgage loan. See Note F. This demand note, which had an interest rate of prime, will be converted to a revolving line of credit ("1994 Credit") which was signed effective November 30, 1994. With the execution of the 1994 Credit the Trust intends to cancel the 1990 Credit the Trust had with its previous lender (see below). The 1994 Credit will be for up to $25,000,000 (but is limited by the value of the collateral provided). Of this amount a maximum of $15,000,000 will be available immediately and $10,000,000 will be available at the Trust's discretion upon payment of an activation fee of 3/4 of 1% on the $10,000,000. The initial term of the 1994 Credit is three years. Interest only payments at a rate of 1/4 of 1% over the prime lending rate are due monthly in arrears. Additionally, a commitment fee of 3/8 of 1% is due on any funds available but not borrowed. Each year the lender will review the 1994 Credit with the right to extend it for one additional year. The 1994 Credit is secured by certain of the Trust's real estate investments and contains certain covenants including a covenant for a minimum shareholders' equity. At September 30, 1994 the amount of shareholders' equity free from such restriction would be approximately $3,150,000. On October 27, 1992 the Trust and its lender executed a second amendment to the December 31, 1990 Credit Agreement ("1990 Credit"). The second amendment divided the loan into two segments: A and B. Segment A was for $2,350,000. The $2,350,000 was repaid in full during December, 1992. Segment B was for $8,000,000. This loan was for a period of five years and effective January 1, 1993 required a monthly amortizing payment based on an amortization period of fifteen years at a fixed interest rate of 8.5% per annum. On January 5, 1993 the Trust made a principal payment of $1,000,000. On July 1, 1993 the Trust made a principal payment of $2,300,000. Effective January 1, 1994 the Trust and its lender executed a third amendment to the 1990 Credit. The third amendment converted the Segment B portion of the loan to a revolving line of credit. During January and February, 1994 the Trust paid down the $4,508,000 balance of the 1990 Credit. At September 30, 1994 there were no borrowings outstanding under the 1990 Credit. The 1990 Credit is secured by certain of the Trust's real estate investments and contains certain covenants including a property operating cash flow to debt ratio. The Trust also has a loan with another bank which was scheduled to mature December 25, 1993 but, under the terms of a loan modification agreement effective March 31, 1993, the maturity has been extended to December 25, 1997. The interest rate was prime plus 1/2 of 1%; however, effective April 1, 1993 the interest rate was changed to prime plus 1% with a minimum rate of 7.5%. The Trust is required to make monthly amortization payments based on a twenty-year amortization schedule. On October 2, 1992 the Trust made a principal payment of $226,000. On January 5, 1993 the Trust made a principal payment of $722,000. This payment satisfies the required principal payment of $341,000 due December 1, 1993 and $381,000 due December 1, 1994, in accordance with the loan modification agreement. On March 8, 1994 the Trust made the third required payment of $666,000 which was due by December 1, 1995. The loan, which is prepayable at any time in whole or in part, is secured by certain of the Trust's real estate investments. F-19 43 NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE G -- BANK NOTES PAYABLE -- CONTINUED The scheduled amortization payments for the above referenced loans for the next fiscal years are: 1995, $78,000; 1996, $85,000; 1997, $93,000; and 1998, $25,000. The Trust also had a $500,000 revolving line of credit with a bank which was secured by a certificate of deposit and on which the Trust paid interest at the rate of 4.75%. This revolving line of credit matured October 3, 1994 and was not renewed by the Trust. Total interest expense on bank notes payable did not differ materially from interest expense paid. NOTE H -- SHARES OF BENEFICIAL INTEREST On November 23, 1993 the Trust mailed a prospectus and certificate of rights to all shareholders of record as of November 12, 1993. The certificates entitled the shareholder to the right to purchase one Share of Beneficial Interest of the Trust for every two Shares that the shareholder owned at a price of $3.25 per Share. Additionally, this offering also provided for an oversubscription privilege which entitled each holder of a right to subscribe for Shares not purchased by other holders of rights. Oversubscriptions were allocated prorata based on the number of Shares owned. The offering expired on January 28, 1994. All 1,857,969 Shares available were sold. The net proceeds to the Trust totaled $5,929,000. On June 26, 1994 the Trust repurchased 103,210 of its Shares of Beneficial Interest for $296,000. These shares were retired by the Trust. On November 17, 1992 the Trust mailed a prospectus and certificate of rights to all shareholders of record as of November 12, 1992. The certificates entitled the shareholder to the right to purchase one Share of Beneficial Interest of the Trust for each Share that the shareholder owned at a price of $ 2.50 per Share. Additionally, the offering provided for an oversubscription privilege which entitled each holder of a right to subscribe for Shares not purchased by other holders of rights. The offering also provided that if any shares were not purchased by shareholders, they could be sold to third-party investors. The offering expired on December 28, 1992. The Trust sold 1,759,165 shares of the 1,956,772 shares available in the offering. The net proceeds of $4,231,000 were used to repay debt. On February 21, 1992 the shareholders of the Trust approved the amended and extended 1983 Incentive Stock Option Plan, now titled the 1992 Stock Option Plan ("1992 Plan"). Under the 1992 Plan, an additional 200,000 Shares of Beneficial Interest of the Trust are reserved and made available for issuance of options to officers and employees of the Trust at the discretion of the Board of Trustees. The original plan had reserved 100,000 Shares. The 1992 Plan is extended to October 21, 2011. The option price is the fair market value on the date of the grant and no option shall be exercisable for less than 100% of this value. Under the 1992 Plan, the share appreciation rights granted previously will be unaffected; however, no share appreciation rights will be issued with grants of the 200,000 new Shares or the 17,500 Shares remaining from the original 100,000 Shares. Share appreciation rights entitle the holder to receive the difference between the market value on the date of exercise and the option price in Shares, cash or a combination thereof, at the discretion of the Board of Trustees. F-20 44 NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE H -- SHARES OF BENEFICIAL INTEREST -- CONTINUED As of September 30, 1994 options and share appreciation rights granted and remaining exercisable are as follows: January 20, 1986 - 21,750 Shares at $17.88 per Share granted, 13,750 Shares exercisable; January 16, 1989 - 44,250 Shares at $5.13 per Share granted, 31,600 Shares exercisable; January 1, 1993 - 125,000 Shares at $2.625 per Share granted, 125,000 Shares exercisable; and January 1, 1994 -37,500 Shares at $3.0625 per share granted, 37,500 Shares exercisable. NOTE I -- REAL ESTATE SALES The fiscal 1994 gains on sales of real estate totaling $445,000 includes the following: (i) $361,000 which represents the gain the Trust realized on its March, 1994 $834,000 sale of 70 acres of vacant land located in Akron, Ohio. The Trust received a purchase money mortgage for $290,000 of the purchase price in connection with the sale; and (ii) $84,000 which represents the gain the Trust realized on its August, 1994 $198,000 sale of 16.6 acres of vacant land located in Akron, Ohio. The fiscal 1993 gains on sales of real estate totaling $563,000 include the following: (i) $337,000 which represents the gain the Trust realized on its November, 1992 $950,000 sale of four single-story office-warehouse buildings containing 42,162 square feet on 2.68 acres of land within the Walnut Stemmons Office Park, Dallas, Texas; and (ii) $226,000 which represents the gain the Trust realized on its April, 1993 $541,000 sale of 46.4 acres of vacant land located in Akron, Ohio. The Trust received a purchase money mortgage note for $150,000 of the purchase price in connection with the sale. The fiscal 1992 gains on sales of real estate totaling $51,000 include the following: (i) $43,000 which represents the gain the Trust realized on its September, 1992 $240,000 sale of 43 acres of land in Brunswick, Ohio; and (ii) $8,000 which represents the gain the Trust realized on the August, 1992, $15,000 sale of one-fourth of an acre of land in Dubuque, Iowa. Also during fiscal 1992, the Trust recorded the completion of an installment sale of a parcel of land in New York, New York in which the Trust was a 25% participant and which resulted in a loss as described in Note E above. NOTE J -- REAL ESTATE OPERATING EXPENSES In July, 1992 the Trust terminated the lease it had with the operator of the Trust's hotel in St. Louis, Missouri and executed a new lease with a new operator. The Trust held two notes from the former operator totaling $241,000. The former operator was unable to repay these notes and as such, the Trust wrote off the notes in the fiscal year ended September 30, 1992. NOTE K -- LITIGATION The Trust is involved in a number of legal proceedings arising in the usual course of its business activities, none of which in the opinion of Management, is expected to have a material adverse effect on the financial statements. F-21 45 NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE L -- PENSION PLAN Effective October 1, 1985 the Trust established a defined contribution pension plan covering all full-time employees of the Trust. Contributions are determined as a set percentage of each covered employee's annual cash compensation. Contributions by the Trust are to be accrued during the year and paid prior to the filing of the Trust's federal income tax return for said year. For fiscal 1993 the Trust accrued $31,000 for contributions to the pension plan (for fiscal 1993 - $29,000 and fiscal 1992 - $29,000). NOTE M -- OPERATING LEASES Minimum future rentals due the Trust on noncancelable leases for the succeeding five fiscal years and thereafter are as follows: 1995, $7,429,000; 1996, $5,507,000; 1997, $4,046,000; 1998, $3,218,000; 1999, $2,737,000; and $13,606,000 thereafter. Certain leases provide for contingent rentals and the Trust received $131,000 of said contingent rentals for 1994 ($202,000 for 1993 and $163,000 for 1992). The Trust's carrying amount at September 30, 1994 of these real estate investments is comprised of land of $7,535,000 and improvements of $61,203,000, less accumulated depreciation of $24,383,000. In addition, one apartment complex and certain other properties owned by the Trust are rented to a large number of tenants under various operating lease agreements having expiration dates ranging from one month to one year. The Trust's carrying amount at September 30, 1994 of these real estate investments is comprised of land of $100,000 and improvements of $1,877,000, less accumulated depreciation of $1,265,000. NOTE N -- SUBSEQUENT EVENTS The Trustees, at their July 26, 1994 meeting, declared a quarterly cash distribution of $.04 per Share of Beneficial Interest payable October 21, 1994 to shareholders of record as of October 7, 1994. At their October 25, 1994 meeting, the Trustees declared a quarterly cash distribution of $.04 per Share payable January 20, 1995 to shareholders of record as of January 6, 1995. F-22 46 NOTES TO STATEMENTS -- CONTINUED NOTE O -- QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for the years ended September 30, 1994 and 1993 is as follows:
QUARTER ENDED DEC. 31 MAR. 31 JUNE 30 SEPT. 30 ------------- ------- ------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 ---- Operating revenues $ 2,409 $ 2,440 $ 2,432 $ 2,474 Operating income (loss) before extraordinary item (111) (106) 20 82 Extraordinary item 0 0 0 253 Net Income (loss) (111) 255 20 419 Operating income (loss) per share before extraordinary item (1) (.03) (.02) .00 .01 Extraordinary item per share (1) .00 .00 .00 .05 Net Income (loss) per share (1) (.03) .05 .00 .08 1993 ---- Operating revenues $ 2,471 $ 2,418 $ 2,441 $ 2,322 Operating income (loss) before extraordinary item (236) (164) (134) (198) Extraordinary item 0 286 0 0 Net income (loss) 101 122 92 (198) Operating income (loss) per share before extraordinary item (1) (.12) (.04) (.04) (.06) Extraordinary item per share (1) .00 .07 .00 .00 Net income (loss) per share (1) .05 .03 .02 (.06) (1) Per Share calculations for each of the quarters is based on a weighted average number of shares outstanding for each period and, therefore, the sum of the quarters may not necessarily equal full-year amounts.
F-23 47 SCHEDULE IX -- SHORT-TERM BORROWINGS CLEVETRUST REALTY INVESTORS September 30, 1994
MAXIMUM PRINCIPAL AVERAGE WEIGHTED WEIGHTED AMOUNT AMOUNT AVERAGE AVERAGE OUTSTANDING OUTSTANDING RATE INTEREST INTEREST DURING DURING DURING CATEGORY OF AGGREGATE BALANCE AT RATE AT END THE THE THE SHORT-TERM BORROWINGS END OF PERIOD OF PERIOD PERIOD(4) PERIOD(5) PERIOD(6) --------------------- ------------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PERCENTAGES) Year ended September 30, 1994: Notes payable to bank (1) (2) (3) $ 7,689 7.75% $7,689 $ 21 7.75% Year ended September 30, 1993: Notes payable to bank (2) (3) $ -0- 4.60% $2,350 $ 451 6.75% Year ended September 30, 1992: Notes payable to bank (2) (3) $2,350 6.75% $2,400 $2,387 7.90% (1) At September 30, 1994 the outstanding balance represents a $7,689,000 loan made to the Trust by National City Bank of Cleveland ("NCB") under terms of a demand note. The interest rate on this loan was NCB's prime rate, which was 7.75% at September 30, 1994. (2) The Trust had a $500,000 revolving line of credit with a bank which was secured by a certificate of deposit and on which the Trust paid interest at the rate of 4.75%. This revolving line of credit matured October 3, 1994 and was not renewed. There were no borrowings outstanding at September 30, 1994, 1993, or 1992. (3) At September 30, 1992 the outstanding balance represents $2,350,000 or Segment A of the $10,350,000 1990 Credit Agreement balance. Per the second amendment to the 1990 Credit Agreement which was executed October 27, 1992, the $2,350,000 was due as follows: $1,200,000 was due on or before December 31, 1992 and the balance was due on or before March 31, 1993. A $865,000 payment was made November 24, 1992. The balance of $1,485,000 was paid December 31, 1992 through funds generated via the 1992 Right's Offering which expired December 28, 1992. Interest on Segment A was the prime rate plus 3/4 of 1%. Segment B ($8,000,000) is to be paid based on a 15 year amortization schedule at a rate of 8.5%, with the unpaid balance due on December 31, 1997. This loan was converted to a revolving line of credit effective January, 1994. During January and February, 1994 this loan was repaid in full. At September 30, 1994 there were no borrowings outstanding. (4) The maximum period amount outstanding during the period represents the maximum principal amount outstanding at any month-end during the said period. (5) The average amount outstanding during the period represents the daily weighted average borrowings outstanding which was determined by first determining the average monthly balance (total of the daily balances divided by the number of days in said month) and then multiplying the average monthly balances by the number days in the respective months; the total of these is then divided by the total number of days in that year. (6) The weighted average interest rate during the period was determined by dividing the annual interest expense by the weighted average daily borrowings.
F-24 48 SCHEDULE X --- SUPPLEMENTAL INCOME STATEMENT INFORMATION CLEVETRUST REALTY INVESTORS
YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1993 1992 ---- ---- ---- (IN THOUSANDS) Maintenance and repairs $ 720 $ 681 $ 737 Taxes, other than payroll and income taxes: Real Estate $1,055 $1,097 $1,131
Amounts for advertising, depreciation and amortization of intangibles assets, preoperating costs and similar deferrals, personal property taxes, other taxes, and royalties are not presented, as such amounts are less than 1% of total sales and revenues. F-25 49 SCHEDULE XI -- REAL ESTATE AND ACCUMULATED DEPRECIATION CLEVETRUST REALTY INVESTORS As of September 30, 1994
AMOUNT AT WHICH CARRIED AT INITIAL CLOSE OF AMOUNT OF COST TO COST OF PERIOD ACCUMULATED CONSTRUCTION DEPRECIATION CLASSIFICATION ENCUMBRANCES TRUST(1) IMPROVEMENTS (1)(3) DEPRECIATION(2) COMPLETED ACQUIRED LIVES(4) -------------- ------------ -------- ------------ --------- --------------- ------------ -------- ------------ (IN THOUSANDS) (2) Office Buildings: Englewood, Colorado: Building (5) $ 4,328 $ 489 $ 4,817 $ 2,788 Various, ranging ------- ------- ------- ------- from 5 to $1,121 4,328 489 4,817 2,788 1970 1971 40 years. Tulsa, Oklahoma: Land 648 648 Building 3,306 2,841 6,147 3,943 Various, ranging ------- ------- ------- ------- from 5 to -0- 3,954 2,841 6,795 3,943 1963 1972 40 years. Denver, Colorado Land 165 165 Building 2,834 1,370 4,204 2,629 Various, ranging ------- ------- ------- ------- from 5 to -0- 2,999 1,370 4,369 2,629 1971 1972 40 years. Dallas, Texas: Land 1,500 1,500 Building 8,439 859 9,298 2,917 1981 1983 Various, ranging ------- ------- ------- ------- from 5 to -0- 9,939 859 10,798 2,917 40 years. Dallas, Texas: Land 335 335 Building 3,583 -0- 3,583 7 1980 1994 40 years ------- ------- ------- ------- 2,168 3,918 -0- 3,918 7 Commercial: St. Louis, Missouri: Land 287 287 Building 2,715 2,098 4,813 3,167 Various, ranging ------- ------- ------- ------- from 5 to -0- 3,002 2,098 5,100 3,167 1971 1976 35 years. Austin, Texas: Land 874 874 Building 6,758 518 7,276 1,770 Various, ranging ------- ------- ------- ------- from 5 to 5,947 7,632 518 8,150 1,770 1981 1987 40 years. Davenport, Iowa (5): Land 1,013 1,013 Building 4,373 105 4,478 830 Various, ranging ------- ------- ------- ------- from 5 to -0- 5,386 105 5,491 830 1980 1987 40 years. Dubuque, Iowa (5): Land 401 401 Building 4,800 133 4,933 905 Various, ranging ------- ------- ------- ------- from 5 to -0- 5,201 133 5,334 905 1980 1987 40 years. Ardmore, Oklahoma: Land 684 684 Building 2,847 356 3,203 684 Various, ranging ------- ------- ------- ------- from 10 to 551 3,531 356 3,887 684 1975 1989 31 years. Miscellaneous Investments: Land 2,040 2,040 Building 7,339 2,990 10,329 6,008 ------- ------- ------- ------- 1,324 9,379 2,990 12,369 6,008 ------- ------- ------- ------- ------- TOTALS $11,111 $59,269 $11,759 $71,028 $25,648 ======= ======= ======= ======= ======= Summary: Land $ 7,947 Buildings 63,081 ------- $71,028 =======
F-26 50 SCHEDULE XI - - REAL ESTATE AND ACCUMULATED DEPRECIATION - - CONTINUED CLEVETRUST REALTY INVESTORS
YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1993 1992 ---- ---- ---- (IN THOUSANDS) (1) Reconciliation of real estate: Balance of real estate at October 1, 1993, 1992 and 1991, respectively $73,296 $73,689 $74,095 Additions during period: Other capital improvements 853 657 517 Purchase of Property 3,918 220 -0- -------- -------- --------- TOTAL ADDITIONS 4,771 877 517 -------- -------- -------- 78,067 74,566 74,612 Application of allowance for investment losses 6,089 -0- -0- Less carrying amount of real estate sold or disposed 950 1,270 923 -------- -------- -------- Balance of real estate at September 30, 1994, 1993 and 1992, respectively $71,028 $73,296 $73,689 ======= ======= ======= (2) Reconciliation of allowances for depreciation: Balance of allowance for depreciation at October 1, 1993, 1992 and 1991, respectively $23,902 $22,179 $19,982 Provisions for depreciation for the period 1,972 2,149 2,197 -------- -------- -------- 25,874 24,328 22,179 Less allowance for depreciation on real estate sold or disposed 226 426 -0- -------- -------- --------- Balance of allowance for depreciation at September 30, 1994, 1993, and 1992, respectively $25,648 $23,902 $22,179 ======= ======= ======= (3) The Trust aggregate cost for federal tax purposes as of September 30, 1994 was $78,840,000. The Trust's tax return for the year ended September 30, 1994 has not yet been filed. (4) Depreciation lives exclude tenant improvements which are depreciated over the specific lease term involved. (5) The Trust owns the building improvements subject to a long term ground lease.
F-27 51 SCHEDULE XII - - MORTGAGE LOANS ON REAL ESTATE CLEVETRUST REALTY INVESTORS September 30, 1994
CARRYING AMOUNT OF MORTGAGES FINAL AS OF MATURITY SEPTEMBER DATE/RANGE 30, FINAL PERIODIC AMOUNT OF FACE 1994 RATE/RANGE MATURITY PAYMENT PRIOR AMOUNT OF CLASSIFICATION (1)(2) OF RATES DATES TERMS LIENS MORTGAGES -------------- ------ -------- ----- ----- ----- --------- (IN (IN THOUSANDS) THOUSANDS) Second mortgage loan on vacant land in Akron, Ohio $236 10.00% August, 1996 (3) $1,180 $290 Accrued interest 0 ----- TOTAL $236 ====
F-28 52 SCHEDULE XII -- MORTGAGE LOANS ON REAL ESTATE -- CONTINUED CLEVETRUST REALTY INVESTORS (1) Reconciliation of carrying amount of mortgage loans:
YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1993 1992 ---- ---- ---- (IN THOUSANDS) Balance as of October 1, 1993, 1992 and 1991, respectively $155 $2,291 $2,213 Additions during the year: Mortgage received in connection with sale of property 290 150 -- Amortization of purchase money mortgage discounts -- 14 16 Increase in accrued interest -- 62 62 ---- ------ ------ TOTAL ADDITIONS 290 78 78 ---- ------ ------ 445 2,517 2,291 Less Deductions during the year: Mortgage loan principal repayments 204 2,000 -- Accrued Interest 5 362 -- ---- ------ ------ TOTAL DEDUCTIONS 209 2,362 -0- ---- ------ ------ Balance as of September 30, 1994, 1993 and 1992, respectively $236 $ 155 $2,291 ==== ====== ====== (2) The carrying amount at September 30, 1994 of the mortgage loans for federal income tax purposes was $236,000. (3) Interest only payments are due quarterly in the arrears on the 1st day of each March, June, September and December for all interest accrued to such date. Principal payments of $5,375.00 per lot are to be made from the proceeds of the sale of each lot of the vacant land securing this loan until all principal is paid or August, 1996 at which time all unpaid principal is due. Notwithstanding anything to the contrary, provided Borrower is not otherwise in default, this loan shall be interest free for the first eighteen (18) months of the term of the loan.
F-29 53 Copies of the Letter of Transmittal may be delivered by facsimile transmission from Eligible Institutions. The Letter of Transmittal and certificates for shares and any other required documents should be sent or delivered by each tendering shareholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at address set forth below The Depositary is: American Stock Transfer & Trust Company By Mail: Facsimile Transmission By Hand or Overnight Courier: (Eligible Institutions Only): American Stock Transfer American Stock Transfer & Trust Company (718) 234-5001 & Trust Company 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor New York, NY 10005 Confirm by Telephone: New York, NY 10005 Attention: Reorganization Dept. (718) 921-8200 For Information Call: (718) 921-8200
Any questions or requests for assistance or for additional copies of the Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone numbers and address set forth below. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the offer. To confirm the delivery of your shares, you are directed to contact the Depositary. The Information Agent is: Beacon Hill Partners, Inc. 90 Broad Street New York, NY 10004 (212) 843-8500 or 1-800-755-5001 (212) 843-4384 (fax) August 21, 1995 EX-2.A 3 CLEVETRUST EX (A)(2) 1 EXHIBIT (a)(2) FORM OF LETTER OF TRANSMITTAL. 2 LETTER OF TRANSMITTAL TO TENDER SHARES OF BENEFICIAL INTEREST OF CLEVETRUST REALTY INVESTORS PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 21, 1995 THIS OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS TIME, ON SEPTEMBER 22, 1995, UNLESS THE OFFER IS EXTENDED. To: AMERICAN STOCK TRANSFER & TRUST COMPANY By Mail: Facsimile Transmission: By Hand or Overnight Courier: (Eligible Institutions Only) American Stock Transfer (718) 234-5001 American Stock Transfer & Trust Company & Trust Company 40 Wall Street, 46th Floor Confirmation by Telephone: 40 Wall Street, 46th Floor New York, NY 10005 (718) 921-8200 New York, NY 10005 Attention: Reorganization For Information Call: Attention: Reorganization Department (718) 921-8200 Department
------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4) ------------------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN EXACTLY AS CERTIFICATE(S) TENDERED APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY) ------------------------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES CERTIFICATE REPRESENTED BY NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ TOTAL SHARES TENDERED..................................... ------------------------------------------------------------------------------------------------------------------------------- Indicate above the order (by certificate number) in which Shares are to be purchased in event of proration. (Attach additional signed list if necessary):*** See Instruction 9. =============================================================================================================================== * Need not be completed if Shares are delivered by book-entry transfer. ** If you desire to tender fewer than all of the Shares evidenced by any certificates listed above, please indicate in this column the number of Shares you wish to tender. Otherwise, all Shares evidenced by such certificates will be deemed to have been tendered. See Instruction 4. *** If you do not designate an order, in the event less than all Shares tendered are purchased due to proration, Shares will be selected for purchase by the Depositary. -------------------------------------------------------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN ONE AS SHOWN ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS LISTED ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This Letter of Transmittal is to be used only if (a) certificates for Shares (as defined below) are to be forwarded with it or (b) a tender of Shares is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company, the Midwest Securities Trust Company, or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility") pursuant to Section 3 of the Offer to Purchase. 3 Shareholders who desire to tender Shares pursuant to the Offer and who cannot deliver their certificates for their Shares (or who are unable to comply with the procedures for book-entry transfer on a timely basis) and all other documents required by this Letter of Transmittal to the Depositary at or before the Expiration Date (as defined in the Offer to Purchase) may tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ / / CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ___________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution that Guaranteed Delivery: ______________________________ Window Ticket Number (if available): _______________________________________ If Delivery is by Book-Entry Transfer: Account Number: __________________________________________________________ Transaction Code Number: _________________________________________________ ODD LOTS (SEE INSTRUCTION 7) This section is to be completed ONLY if Shares are being tendered by or on behalf of a person owning beneficially as of the close of business on August 17, 1995, and continuing to own beneficially until the Expiration Date, an aggregate of fewer than 100 Shares. The undersigned either (check one box): / / was the beneficial owner as of the close of business on August 17, 1995 and will continue to be the beneficial owner until the Expiration Date, of an aggregate of fewer than 100 Shares, all of which are being tendered or / / is a broker, dealer, commercial bank, trust company or other nominee that (i) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owned beneficially as of the close of business on August 17, 1995 and will continue to own beneficially until the Expiration Date, an aggregate of fewer than 100 Shares, and is tendering all of such Shares, and, in either case, hereby represents that the above indicated information is true and correct as to the undersigned. ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED CONDITIONAL TENDER (SEE INSTRUCTION 8) / / CHECK HERE IF TENDER OF SHARES IS CONDITIONED ON THE COMPANY PURCHASING ALL OR A MINIMUM NUMBER OF THE TENDERED SHARES, AND COMPLETE THE FOLLOWING: Minimum Number of Shares to be sold: ______________________________________ 4 LADIES AND GENTLEMEN: The undersigned hereby tenders to CleveTrust Realty Investors, a Massachusetts business trust (the "Company"), the above-described shares of the Company's Shares of Beneficial Interest, par value $1.00 per share ( the "Shares"), at the price of $4.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Company's Offer to Purchase dated August 21, 1995, receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Offer"). Subject to and effective upon acceptance for payment of the Shares tendered hereby in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Company all right, title and interest in and to all Shares tendered hereby or orders the registration of such Shares tendered by book-entry transfer that are purchased pursuant to the Offer to or upon the order of the Company and hereby irrevocably constitutes and appoints the Depositary as attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), to: (a) deliver certificates for Shares, or transfer ownership of such Shares on the account books maintained by a Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Company, upon receipt of the Depositary, as the undersigned's agent, of the Purchase Price (as defined below) with respect to such Shares; (b) present certificates for such Shares for cancellation and transfer on the Company's books; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, subject to the next paragraph, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants to the Company that: (a) the undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that (i) the undersigned has a net long position in Shares or equivalent securities at least equal to the Shares tendered within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (ii) such tender of Shares complies with Rule 14e-4; (b) when and to the extent the Company accepts the Shares for purchase, the Company will acquire good, marketable and unencumbered title to them, free and clear of all security interests, liens, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the undersigned will execute and deliver any additional documents the Depositary or the Company deems necessary or desirable to complete the assignment, transfer and purchase of the Shares tendered hereby; and (d) the undersigned has read, understands and agrees with all of the terms of the Offer. The names and addresses of the registered holders should be printed, if they are not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificate numbers, the number of Shares represented by such certificates, and the number of Shares that the undersigned wishes to tender, should be set forth in the appropriate boxes above. The undersigned understands that, if he tenders all of his Shares, he may condition his tender of Shares upon the acceptance by the Company of all or a minimum number of Shares tendered hereby, as described in Section 3 of the Offer to Purchase. SUCH A CONDITIONAL TENDER MAY BE MADE BY COMPLETING THE SECTION UNDER THE HEADING "CONDITIONAL TENDER" ABOVE. IF SUCH SECTION IS NOT COMPLETED, THE TENDER WILL BE DEEMED UNCONDITIONAL. 5 The undersigned understands that the Company seeks to purchase 500,000 of its Shares at the price of $4.00 per Share. The undersigned understands that Shares properly tendered and not withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including its proration provisions, NASDAQ Continued Listing Condition and conditional tender provisions, and that the Company will return all other Shares, including Shares not purchased because of proration or conditional tenders. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered or may accept for payment fewer than all of the Shares tendered hereby. In either event, the undersigned understands that certificates for any Shares not tendered or not purchased will be returned to the undersigned at the address indicated above unless otherwise indicated under the "Special Payment Instructions" or "Special Delivery Instructions" below. The undersigned recognizes that the Company has no obligation, pursuant to the Special Payment Instructions, to transfer any certificate for Shares from the name of their registered holder, or to order the registration or transfer of such Shares tendered by book-entry transfer, if the Company purchases none of the Shares represented by such certificate or tendered by such book-entry transfer. The undersigned understands that acceptance of Shares by the Company for payment will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The check for the Purchase Price for such of the tendered Shares as are purchased will be issued to the order of the undersigned and mailed to the address indicated above unless otherwise indicated under the Special Payment Instructions or the Special Delivery Instructions below. All authority conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligations of the undersigned under this Letter of Transmittal shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. 6 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. -------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 5, 6, 8, AND 10) To be completed ONLY if certificate(s) for Shares not tendered or not purchased and/or any check for the Purchase Price of Shares purchased are to be issued in the name of someone other than the undersigned, or if shares delivered by book-entry transfer that are not purchased are to be returned by credit to an account maintained by the Book-Entry Transfer Facility. Issue: / / Check / / Certificate(s) to: Name: .......................................................................... (Please Print) Address: ....................................................................... ................................................................................ (Include Zip Code) ................................................................................ (Taxpayer Identification or Social Security Number) Credit Shares tendered by book-entry transfer and not purchased to the account set forth below: Name of account party: ......................................................... Account number: ................................................................ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 5, 6, 8, AND 10) To be completed ONLY if certificate(s) for Shares not tendered or not purchased and/or any check for the Purchase Price of Shares purchased are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. Deliver: / / Check / / Certificate(s) to: Name: .......................................................................... (Please Print) Address: ....................................................................... ................................................................................ (Include Zip Code) ................................................................................ (Taxpayer Identification or Social Security Number) -------------------------------------------------------------------------------- ------------------------------------------------------ SHAREHOLDER(S) SIGN HERE (SEE INSTRUCTIONS 1 AND 5) (PLEASE COMPLETE ENCLOSED FORM W-9) Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted with this Letter of Transmittal. If signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the full title. See Instruction 5. SIGN ...................................................... SIGN HERE HERE ARROW ...................................................... ARROW (SIGNATURE(S) OF OWNER(S)) Name(s): ............................................. ...................................................... (PLEASE PRINT) Capacity, if applicable (full title): ................ Address: ............................................. ...................................................... (INCLUDE ZIP CODE) Area Code and Telephone Number: ...................... Dated: ........................................., 1995 Tax ID No. or Social Security No.: ................... GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature: ................................ Name(s): ............................................. (PLEASE PRINT) Title: ............................................... Name of Firm: ........................................ Address: ............................................. (INCLUDE ZIP CODE) Area Code and Telephone Number: ...................... Dated: ........................................., 1995 ------------------------------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either: (a) this Letter of Transmittal is signed by the registered holder of the Shares exactly as the name of the registered holder appears on the certificate (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered with this Letter of Transmittal and payment and delivery are to be made directly to such owner unless such owner has completed either the box entitled "Special Payment Instructions" or "Special Delivery Instructions" above; or (b) such Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc. (each such entity, an "Eligible Institution"). In all other cases, an Eligible Institution must guarantee all signatures on this Letter of Transmittal. See Instructions 5 and 6. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be used only if certificates are delivered with it to the Depositary (or such certificates are being delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary) or if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Certificates for all physically tendered Shares or confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of Shares tendered electronically, together in each case with a facsimile of the Letter of Transmittal and any other documents required by this Letter of Transmittal, should be mailed or delivered to the Depositary at the appropriate address set forth herein and must be delivered to the Depositary on or before the Expiration Date. Shareholders whose certificates are not immediately available or who cannot deliver Shares and all other required documents to the Depositary before the Expiration Date, or whose Shares cannot be delivered on a timely basis pursuant to the procedures for book-entry transfer, may tender their Shares by or through any Eligible Institution by properly completing and duly executing and delivering a Notice of Guaranteed Delivery (or facsimile of it) and by otherwise complying with the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure, the certificates for all physically tendered Shares or book-entry confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the Depositary within five business days after receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by a telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. For Shares to be tendered validly pursuant to the guaranteed delivery procedure, the Depositary must receive the Notice of Guaranteed Delivery on or before the Expiration Date. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. The Company will not accept any alternative or contingent tenders, nor will it purchase any fractional Shares, except as expressly provided in the Offer to Purchase. All tendering shareholders, by execution of this Letter of Transmittal (or a photocopy of it), waive any right to receive any notice of the acceptance of their tender. 8 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Shares Tendered" is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule and attached to this Letter of Transmittal. 4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders who tender by book-entry transfer.) If fewer than all of the Shares evidenced by any certificate are to be tendered, fill in the number of Shares which are to be tendered in the column entitled "Number of Shares Tendered." In such case, if any tendered Shares are purchased, a new certificate for the remainder of the Shares evidenced by the old certificate(s) will be issued and sent to the registered holder(s), unless otherwise specified in either the "Special Payment Instructions" or "Special Delivery Instructions" box in this Letter of Transmittal, as soon as practicable after the Expiration Date. Unless otherwise indicated, all Shares represented by the certificates listed and delivered to the depositary will be deemed to have been tendered. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. (a) If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without any change whatsoever. (b) If the Shares are registered in the names of two or more joint holders, each such holder must sign this Letter of Transmittal. (c) If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or photocopies of it) as there are different registrations of certificates. (d) When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of certificate(s) representing such Shares or separate stock powers are required unless payment is to be made, or the certificate(s) for Shares not tendered or not purchased are to be issued, to a person other than the registered holder(s). Signatures on such certificates or powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by any person other than the registered holder(s) of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate(s), and the signatures(s) on such certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. (e) If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing and must submit proper evidence satisfactory to the Company of their authority so to act. 6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no stock transfer tax stamps or funds to cover such stamps need accompany this Letter of Transmittal. The Company will pay or cause to be paid any stock transfer taxes payable on the transfer to it of Shares purchased pursuant to the Offer. If, however: (a) payment of the Purchase Price is to be made to any person other than the registered holder(s); (b) Shares not tendered or not accepted for purchase are to be registered in the name of any person other than the registered holder(s); or (c) tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal; 9 then the Depositary will deduct from the Purchase Price the amount of any stock transfer taxes (whether imposed on the registered holder, such other person or otherwise) payable on account of the transfer to such person unless satisfactory evidence of the payment of such taxes or an exemption from them is submitted. 7. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the Company is to purchase fewer than all Shares tendered before the Expiration Date and not withdrawn, the Shares purchased first will, under certain circumstances, consist of all Shares tendered by any shareholder who owned of record or owned beneficially, as of the close of business on August 17, 1995, an aggregate of fewer than 100 Shares, and who tenders all of his Shares (an "Odd Lot Owner"). This preference will not be available unless the Section captioned "Odd Lots" in this Letter of Transmittal is completed. 8. CONDITIONAL TENDERS. As described in Section 3 of the Offer to Purchase, shareholders may condition their tenders on all or a minimum number of their tendered Shares being purchased ("Conditional Tenders"). If the effect of accepting tenders on a pro rata basis is to reduce the number of Shares to be purchased from any shareholder below the minimum number specified, such tender will automatically be deemed withdrawn, except as provided in the Offer to Purchase. All tendered Shares shall be deemed unconditionally tendered unless the Conditional Tender section is completed. Odd Lot Shares, in order to be eligible for preferential treatment, cannot be conditionally tendered. It is the tendering shareholder's responsibility to calculate the minimum number of Shares he wishes to tender, and each shareholder is urged to consult his own tax advisor in this regard. 9. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of the Offer to Purchase, shareholders may designate the order in which their Shares are to be purchased in the event of proration. The order of purchase may have an effect on the amount and classification for federal income tax purposes of any gain or loss on the Shares purchased. See Sections 1 and 14 of the Offer to Purchase. 10. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares not tendered or not purchased and/or check(s) are to be issued in the name of a person other than the signer of the Letter of Transmittal or if such certificate(s) and/or check(s) are to be sent to someone other than the person signing the Letter of Transmittal or to the signer at a different address, the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" in this Letter of Transmittal should be completed as applicable and signatures must be guaranteed as described in Instruction 1. 11. IRREGULARITIES. All questions as to the number of Shares to be accepted and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company in its sole discretion, which determinations shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of Shares it determines not to be in proper form or the acceptance of which or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares, and the Company's interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of Shares will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine. None of the Company, the Depositary, the Information Agent (as defined in the Offer to Purchase) or any other person is or will be obligated to give notice of any defects or irregularities in tenders and none of them will incur any liability for failure to give any such notice. 12. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to, or additional copies of the Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of Transmittal may be obtained from, the Information Agent at its address and telephone number set forth at the end of this Letter of Transmittal or from your broker, dealer, commercial bank or trust company. 10 13. FORM W-9 AND FORM W-8. Shareholders other than corporations and certain foreign individuals may be subject to backup federal income tax withholding. Each such tendering shareholder or other payee who does not otherwise establish to the satisfaction of the Depositary an exemption from backup federal income tax withholding is required to provide the Depositary with a correct taxpayer identification number ("TIN") on Form W-9 which is provided with this Letter of Transmittal, and to indicate that the shareholder or other payee is not subject to backup withholding. For an individual, his TIN will generally be his social security number. Failure to provide the information on the form may subject the tendering shareholder or other payee to 31% backup federal income tax withholding on the payments made to the shareholder or other payee with respect to Shares purchased pursuant to the Offer and to a penalty imposed by the Internal Revenue Service. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. You may submit the form if you have applied for, but have not yet received a TIN. If the Depositary is not provided a TIN within sixty (60) days, the Depositary will withhold 31% on all payments thereafter until a TIN is provided to the Depositary. Shareholders who are foreign individuals should submit Form W-8 to certify that they are exempt from backup withholding, unless Instruction 14 applies. Form W-8 may be obtained from the Depositary. For additional information concerning Form W-9, see the accompanying instructions thereto. 14. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depositary will withhold federal income tax equal to 30% of the gross proceeds payable to a foreign shareholder or his agent unless the Depositary determines that a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business in the United States. For this purpose, a foreign shareholder is any shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of the source of such income. In order to apply for a reduced rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver to the Depositary a properly completed Form 1001. In order to apply for exemption from withholding on the basis that the gross proceeds are effectively connected with the conduct of a trade or business in the United States, a foreign shareholder must deliver to the Depositary a properly completed Form 4224 and furnish such other information as the Depositary shall request. (Exemption from backup withholding does not exempt a foreign shareholder from the 30% withholding.) These forms can be obtained from the Depositary or the Information Agent. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to the shareholder's address and to any submitted certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding, unless facts and circumstances indicate that reliance is not warranted or applicable law requires some other method for determining eligibility for determining whether a reduced rate of withholding is applicable. A foreign shareholder with respect to whom tax has been withheld may be eligible to obtain a refund of all or a portion of the withheld tax if such shareholder meets one of the exceptions for capital gain or loss treatment described in Section 14 of the Offer to Purchase or is otherwise able to establish that no tax or a reduced amount of tax was due. Foreign shareholders are urged to consult their tax advisors regarding the application of federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedures. 11 PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY ------------------------------------------------------------------------------------------------------------------------------------ | | SUBSTITUTE | | ______________________________________ | PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX | Social Security Number | AT THE RIGHT AND CERTIFY | FORM W-9 | BY SIGNING AND DATE BELOW | or_____________________________________ | | Employer Identification Number | | |----------------------------------------------------------------------------------------------------- Department of the Treasury, | PART 2--Certification--Under penalties of perjury, I certify that: Internal Revenue Service | | (1) The number shown on this form is my correct Taxpayer Identification PAYER'S REQUEST FOR | Number (or I am waiting for a number to be issued to me) and TAXPAYER IDENTIFICATION | NUMBER (TIN) | (2) I am not subject to backup withholding because: (a) I am exempt from | backup withholding, or (b) I have not been notified by the Internal Revenue | Service (the "IRS") that I am subject to backup withholding as a result of a | failure to report all interest or dividends, or (c) the IRS has notified me that | I am no longer subject to backup withholding. | | Certification Instructions--You must cross out item (2) above if you have | been notified by the IRS that you are currently subject to backup withholding | because of under-reporting interest or dividends on your tax return. However, | if after being notified by the IRS that you were subject to backup withholding | you received another notification from the IRS that you are no longer subject | to backup withholding, do not cross out such Item (2). |----------------------------------------------------------------------------------------------------- | | PART 3 -- | | SIGN HERE ARROW | Signature ________________________________ | Awaiting TIN / / | Date________________________________, 1995 | | | ------------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER. I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature___________________________ Date____________________________, 1995 -------------------------------------------------------------------------------- 12 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. --------------------------------------------------------- --------------------------------------------------------- GIVE THE GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- NUMBER OF-- --------------------------------------------------------- --------------------------------------------------------- 1. An individual's account The individual 7. Corporate The corporation 2. Two or more individuals The actual owner of 8. Association, club, religious, The organization (joint account) the account or, if charitable, educational or combined funds, any other tax- one of the individu- exempt organization als(1) 9. Partnership The partnership 3. Custodian account of a minor The minor(2) 10. A broker or registered The broker or (Uniform Gift to Minors Act) nominee nominee 4. a. The usual revocable The grantor- 11. Account with the Department The public entity savings trust account trustee(1) of Agriculture in the name of (grantor is also trustee) a public entity (such as a b. So-called trust account The actual owner(1) State or local government, that is not a legal or school district, or prison) valid trust under State law that receives agricultural 5. Sole proprietorship account The owner(3) program payments 6. A valid trust, estate, or Legal entity (Do not pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) --------------------------------------------------------- ---------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the name of the owner. (4) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 13 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING The following lists payees that are exempt from backup withholding and information reporting. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13), and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except that a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an individual retirement plan (IRA), or a custodial account under 403(b)(7). (3) The United States or any agency or instrumentality thereof. (4) A state, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. (5) A foreign government or a political subdivision, agency or instrumentality thereof. (6) An international organization or any agency or instrumentality thereof. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the U.S. or a possession of the U.S. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664(c) or described in section 4947(a)(1). Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresidential partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interests on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid by you. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Payments are not subject to information reporting and are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N and the regulations thereunder. PRIVACY ACT NOTICE.--Section 6109 requires you to furnish your correct taxpayer identification number (TIN) to persons who must file information returns with IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an individual retirement arrangement (IRA). IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a TIN to a payer. Certain penalties may also apply. PENALTIES (1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN ITEMS ON YOUR TAX RETURN -- If you fail to properly include on your tax return certain items reported to IRS, such failure will be treated as being due to negligence and will be subject to a penalty equal to the sum of 20% on any portion of an underpayment of tax attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis that results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE 14 Copies of the Letter of Transmittal may be delivered by facsimile transmission from Eligible Institutions. The Letter of Transmittal and certificates for share and any other required documents should be sent or delivered by each tendering shareholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at its address set forth below. The Depositary is: American Stock Transfer & Trust Company By Mail: Facsimile Transmission By Hand or Overnight Courier: (Eligible Institutions Only): American Stock Transfer (718) 234-5001 American Stock Transfer & Trust Company & Trust Company 40 Wall Street, 46th Floor Confirm by Telephone: 40 Wall Street, 46th Floor New York, NY 10005 (718) 921-8200 New York, NY 10005 Attention: Reorganization Attention: Reorganization Department For Information Call: Department (718) 921-8200
Any questions or requests for assistance or for additional copies of the Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone numbers and addresses set forth below. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. To confirm the delivery of your shares, you are directed to contact the Depositary. The Information Agent is: Beacon Hill Partners, Inc. 90 Broad Street New York, NY 10004 (212) 843-8500 or 800-755-5001 (212) 843-4384 (fax) August 21, 1995 EX-3.A 4 CLEVETRUST EX (A)(3) 1 EXHIBIT (a)(3) FORM OF NOTICE OF GUARANTEED DELIVERY. 2 NOTICE OF GUARANTEED DELIVERY OF SHARES OF BENEFICIAL INTEREST OF CLEVETRUST REALTY INVESTORS A form substantially equivalent to that set forth below must be used to accept the Offer (as defined below) if certificates for shares of Shares of Beneficial Interest, par value $1.00 per share (the "Shares"), of CleveTrust Realty Investors, are not immediately available, or if the procedures for book-entry transfer, as set forth in the Offer to Purchase, cannot be completed on a timely basis, or time will not permit the Letter of Transmittal and other required documents to reach the Depositary by the Expiration Date (as defined in the Offer to Purchase). Such form may be delivered by hand, mail, telegram, telex or facsimile transmission to the Depositary. See Section 3, "Procedure for Tendering Shares", of the Offer to Purchase. TO THE DEPOSITARY: American Stock Transfer & Trust Company By Mail: Facsimile Transmission By Hand or Overnight Courier: (Eligible Institutions Only): American Stock Transfer American Stock Transfer & Trust Company (718) 234-5001 & Trust Company 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor New York, NY 10005 Confirm by Telephone: New York, NY 10005 Attention: Reorganization Attention: Reorganization Department (718) 921-8200 Department For Information Call: (718) 921-8200
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: The undersigned hereby tenders to CleveTrust Realty Investors, a Massachusetts business trust, upon the terms and subject to the conditions set forth in its Offer to Purchase dated August 21, 1995, and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, ________ Shares at the price of $4.00 per Share pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Share Certificate Nos. (if available) Signature(s): _____________________________________ ___________________________ _____________________________________ Name(s): ___________________________ (Please Print) ___________________________ 3 Address: ______________________________ ______________________________ If Shares will be delivered by book-entry transfer, provide account number at The ______________________________ Depository Trust Company, The Midwest Area Code and Telephone Number Securities Trust Company or the Philadelphia Depository Trust Company Account Number:______________________ GUARANTEE The undersigned, bank, broker, dealer, credit union, savings association, or other entity that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association Inc. (each, an "Eligible Institution"), hereby (i) represents that the undersigned has a net long position in Shares or equivalent securities within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, at least equal to the Shares tendered, (ii) represents that such tender of Shares complies with Rule 14e-4 and (iii) guarantees that either the certificates representing the Shares tendered hereby are in proper form for transfer, or timely confirmation of the book-entry of such Shares into the Depositary's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (pursuant to the procedures for book-entry tender set forth in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Depositary at its address set forth above within five business days after the date of receipt hereof by the Depositary. Firm: __________________________ Sign Here: __________________________ (Authorized Signature) (Title): __________________________ Name: __________________________ (Please Print or Type) Address: ___________________________________________ ___________________________________________ Area Code and Telephone Number: ___________________________________________ Dated: _________________, 1995 EX-4.A 5 CLEVETRUST EX (A)(4) 1 EXHIBIT (a)(4) FORM OF LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES DATED AUGUST 21, 1995. 2 CLEVETRUST REALTY INVESTORS 2001 CROCKER ROAD, SUITE 400 WESTLAKE, OHIO 44145 OFFER TO PURCHASE FOR CASH UP TO 500,000 OF ITS SHARES OF BENEFICIAL INTEREST, PAR VALUE $1.00 PER SHARE ( THE "SHARES"), AT A PURCHASE PRICE OF $4.00 PER SHARE THE OFFER AND PRORATION PERIOD EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS TIME, ON SEPTEMBER 22, 1995 UNLESS THE OFFER IS EXTENDED DATE: AUGUST 21, 1995 To: Brokers, Dealers, Commercial Banks, Trust Companies, and Other Nominees CleveTrust Realty Investors, a Massachusetts business trust (the "Company"), is offering to purchase up to 500,000 Shares at a price of $4.00 per share, net to the seller in cash, upon the terms and subject to the conditions set forth in its Offer to Purchase dated August 21, 1995 and the related Letter of Transmittal (which together constitute the "Offer"). All Shares properly tendered and not withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration terms thereof. See Section 1 of the Offer to Purchase. THE OFFER IS CONDITIONED UPON THERE BEING AT LEAST 400 BENEFICIAL OWNERS OF THE COMPANY'S SHARES OF BENEFICIAL INTEREST FOLLOWING COMPLETION OF THE OFFER, AND ON CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE OFFER TO PURCHASE. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee). Please bring the Offer to their attention as promptly as possible. In connection with the Offer, enclosed for your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee are copies of the following documents: 1. Offer to Purchase dated August 21, 1995; 2. Letter of Transmittal for your use and for the information of your clients (together with instructions for IRS Form W-9); 3. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares and all other required documents cannot be delivered by the Expiration Date or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such client's instructions with regard to the Offer; and 5. Letter dated August 21, 1995 from the Chairman and President of the Company to the Company's shareholders. 3 WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, SEPTEMBER 22, 1995 UNLESS THE OFFER IS EXTENDED. No fees or commissions will be payable to brokers, dealers or any person for soliciting tenders of Shares pursuant to the Offer. The Company will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to the beneficial owners of Shares held by you as a nominee or in a fiduciary capacity. The Company will pay your costs and will pay any stock transfer taxes applicable to its purchase of Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Fees will be paid to the Depositary and the Information Agent as described in the Offer to Purchase for their services in connection with the Offer. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal and any other required documents should be sent to the Depositary with either the certificates representing the tendered Shares, or confirmation of their book-entry transfer, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. As described in Section 3, "Procedure for Tendering Shares," of the Offer to Purchase, tenders may be made without the concurrent deposit of stock certificates or concurrent compliance with the procedure for book-entry transfer if such tenders are made by or through a bank, broker, dealer, credit union, savings association, or other entity that is a member in good standing of a recognized Medallion Program approved by the The Securities Transfer Association Inc. Certificates for Shares so tendered (or confirmation of a book-entry transfer of such Shares to the Depositary or deposited to its account at the book-entry transfer facility described in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal, must be received by the Depositary within five (5) business days after timely receipt by the Depositary of a properly completed and duly executed Notice of Guaranteed Delivery. Any questions or requests for assistance or additional copies of the Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent. Very truly yours, /s/John C. Kikol Chairman and President NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES, THE DEPOSITARY OR THE INFORMATION AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENTS OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH. EX-5.A 6 CLEVETRUST EX (A)(5) 1 EXHIBIT (a)(5) FORM OF LETTER TO CLIENTS FOR USE BY BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES DATED AUGUST 21, 1995 2 CLEVETRUST REALTY INVESTORS OFFER TO PURCHASE FOR CASH UP TO 500,000 SHARES OF BENEFICIAL INTEREST, PAR VALUE $1.00 PER SHARE (THE "SHARES"), AT A PURCHASE PRICE OF $4.00 PER SHARE DATE: AUGUST 21, 1995 To Our Clients: Enclosed for your consideration are the Offer to Purchase dated August 21, 1995 and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by CleveTrust Realty Investors, a Massachusetts business trust (the "Company"), to purchase for cash up to an aggregate of 500,000 Shares at a price, net to the seller in cash, of $4.00 per Share, upon the terms and subject to the conditions of the Offer. The Offer is conditioned upon there being at least 400 beneficial owners of each of the Shares following completion of the Offer, and on certain other conditions. WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, WE ARE THE ONLY ONES WHO CAN TENDER YOUR SHARES, AND THEN ONLY PURSUANT TO INSTRUCTIONS. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION ONLY; YOU CANNOT USE IT TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT. Please instruct us whether you wish us to tender any or all of the Shares we hold for your account on the terms and subject to the conditions of the Offer. We call your attention to the following: 1. You may condition your tender of Shares on the Company purchasing all or a minimum number of your Shares. 2. You may designate the priority in which your Shares shall be purchased in the event of proration. 3. The Offer and proration period will expire at 5:00 P.M. Eastern Daylight Savings time, on Friday, September 22, 1995, unless the Company extends the Offer. 4. The Offer is for up to 500,000 Shares, constituting approximately 9.16% of the Shares outstanding as of August 17, 1995. 5. Tendering Shareholders will not be obligated to pay any brokerage commissions, solicitation fees or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant to the Offer. 6. If you beneficially held, as of the close of business on August 17, 1995, an aggregate of fewer than 100 Shares, and you instruct us to tender on your behalf all such Shares before the Expiration Date and check the box captioned "Odd Lots" in the attached Instruction Form, the Company upon the terms and subject to the conditions of the Offer, may accept all such Shares for purchase before proration, if any, of the purchase of other Shares properly tendered as described below. 7. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the attached Instruction Form. An envelope to return your instructions to us is enclosed. If you authorize us to tender your Shares, we will tender all such Shares unless you specify otherwise on the attached Instruction Form. 3 YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER. THE OFFER AND PRORATION PERIOD EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, SEPTEMBER 22, 1995, UNLESS THE OFFER IS EXTENDED. As described in Section 1 of the Offer to Purchase, the Company will accept Shares for purchase at the Purchase Price in the following order of priority: (a) first, all Shares properly tendered prior to the Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined in the Offer to Purchase) who; (1) tenders all Shares beneficially owned by such Odd Lot Owner (partial tenders and conditional tenders will not qualify for this preference); and (2) completes the section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) then, after purchase of all the foregoing Shares, all other Shares properly and unconditionally tendered, and all other Shares properly and conditionally tendered for which the condition is satisfied on the basis of the number of Shares tendered and the conditions thereto, in each case before the Expiration Date (and not withdrawn), on a pro rata basis, if necessary (with adjustments to avoid purchases of fractional Shares). (c) If the effect of accepting tenders on a pro rata basis is to reduce the number of Shares to be purchased from any shareholder below the minimum number specified by such shareholder, such tender will automatically be deemed withdrawn, except as provided below in this paragraph, and Shares tendered by such shareholder will be returned as soon as practicable after the Expiration Date. If any conditional tenders would be deemed withdrawn, then to the extent feasible, the Company will select enough of such conditional tenders, which would otherwise have been deemed withdrawn, to purchase that number of Shares remaining from the maximum number to be purchased. In selecting among such conditional tenders, the Company will select by random lot and will limit its purchase in each case to the designated minimum number of Shares to be purchased. Conditional tenders will be selected by lot only from shareholders who tender all of their Shares. Notwithstanding the foregoing, the Company reserves the right not to accept Shares tendered by Odd Lot Owners on a preferential basis (and instead to accept such Shares on a pro rata basis with Shares tendered by other owners) if the Company, in its sole discretion, determines that accepting such Shares on a preferential basis would cause the NASDAQ Continued Listing Condition described in the Offer to Purchase not to be satisfied. You may condition your tender on the Company purchasing a minimum number of your tendered Shares. In such case, if as a result of the number of Shares tendered, the Company would purchase less than the minimum number of your Shares specified, then the Company will not purchase any of your Shares. The Offer is not being made to, nor will the Company accept tenders from, owners of Shares in any jurisdiction in which the Offer or its acceptance would not comply with the securities or Blue Sky law of such jurisdiction. The Company is not aware of any jurisdiction in which the making of the Offer or the tender of Shares would not be in compliance with the laws of such jurisdiction in which it is asserted that the Offer cannot lawfully be made. So long as the Company makes a good faith effort to comply with any state law deemed applicable to the Offer, the Company believes that the exclusion of holders residing in such jurisdiction is permitted under the rules promulgated under the Securities Exchange Act of 1934. 4 CLEVETRUST REALTY INVESTORS INSTRUCTION FORM WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 500,000 SHARES OF BENEFICIAL INTEREST, AT A PURCHASE PRICE OF $4.00 PER SHARE The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated August 21, 1995, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by CleveTrust Realty Investors, a Massachusetts business trust (the "Company"), to purchase up to an aggregate of 500,000 Shares of Beneficial Interest, par value $1.00 per share ( the "Shares"), at a price, net to the seller in cash, of $4.00 per Share, upon the terms and subject to the conditions of the Offer. The undersigned understands that shares properly tendered and not withdrawn will be purchased at the Purchase Price of $4.00 per Share, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration terms and the NASDAQ Continued Listing Condition described in the Offer to Purchase. The Company will return all other Shares, including Shares not purchased because of proration or conditional tenders. See Section 1 of the Offer to Purchase. The undersigned hereby instruct(s) you to tender to the Company the number of Shares indicated below, or if no number is indicated, all Shares you hold for the account of the undersigned, pursuant to the terms and subject to the conditions of the Offer. The undersigned understands that the Company will return Shares not purchased because of proration. AGGREGATE NUMBER OF SHARES TO BE TENDERED BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED; _______________ SHARES Unless otherwise indicated, all of the Shares held for the account of the undersigned will be tendered. ODD LOTS [ ] By checking this box, the undersigned represents that the undersigned owned beneficially as of the close of business on August 17, 1995 an aggregate of fewer than 100 Shares and is instructing the holder to tender all such Shares. SHARES TENDERED PURSUANT TO THE FOREGOING PROCEDURE CANNOT BE CONDITIONALLY TENDERED CONDITIONAL TENDER SEE INSTRUCTION 8 TO THE LETTER OF TRANSMITTAL [ ] Check here if tender of Shares is conditioned on the Company purchasing all or a minimum number of the tendered Shares, and complete the following: Minimum number of Shares to be sold: ________________ SIGNATURE BOX Signature(s): _______________________________________ Dated: _______________________________________ Name(s) and Address(es): _______________________________________ _______________________________________ 5 Area Code and Telephone Number: _______________________________________________ Taxpayer Identification or Social Security Number: ____________________________ YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER. THE OFFER AND PRORATION PERIOD EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, SEPTEMBER 22, 1995, UNLESS THE OFFER IS EXTENDED. As described in Section 1 of the Offer to Purchase, the Company will accept Shares for purchase at the Purchase Price in the following order of priority: (a) first, all Shares properly tendered prior to the Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined in the Offer to Purchase) who; (1) tenders all Shares beneficially owned by such Odd Lot Owner (partial tenders and conditional tenders will not qualify for this preference); and (2) completes the section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) then, after purchase of all the foregoing Shares, all other Shares properly and unconditionally tendered, and all other Shares properly and conditionally tendered for which the condition is satisfied on the basis of the number of Shares tendered and the conditions thereto, in each case before the Expiration Date (and not withdrawn), on a pro rata basis, if necessary (with adjustments to avoid purchases of fractional Shares). (c) If the effect of accepting tenders on a pro rata basis is to reduce the number of Shares to be purchased from any shareholder below the minimum number specified by such shareholder, such tender will automatically be deemed withdrawn, except as provided below in this paragraph, and Shares tendered by such shareholder will be returned as soon as practicable after the Expiration Date. If any conditional tenders would be deemed withdrawn, then to the extent feasible, the Company will select enough of such conditional tenders, which would otherwise have been deemed withdrawn, to purchase that number of Shares remaining from the maximum number to be purchased. In selecting among such conditional tenders, the Company will select by random lot and will limit its purchase in each case to the designated minimum number of Shares to be purchased. Conditional tenders will be selected by lot only from shareholders who tender all of their Shares. Notwithstanding the foregoing, the Company reserves the right not to accept Shares tendered by Odd Lot Owners on a preferential basis (and instead to accept such Shares on a pro rata basis with Shares tendered by other owners) if the Company, in its sole discretion, determines that accepting such Shares on a preferential basis would cause the NASDAQ Continued Listing Condition described in the Offer to Purchase not to be satisfied. You may condition your tender on the Company purchasing a minimum number of your tendered Shares. In such case, if as a result of the number of Shares tendered, the Company would purchase less than the minimum number of your Shares specified, then the Company will not purchase any of your Shares. The Offer is not being made to, nor will the Company accept tenders from, owners of Shares in any jurisdiction in which the offer or its acceptance would not comply with the securities or Blue Sky law of such jurisdiction. The Company is not aware of any jurisdiction in which the making of the offer or the tender of Shares would not be in compliance with the laws of such jurisdiction in which it is asserted that the offer cannot lawfully be made. So long as the Company makes a good faith effort to comply with any state law deemed applicable to the Offer, the Company believes that the exclusion of holders residing in such jurisdiction is permitted under the rules promulgated under the Securities Exchange Act of 1934. EX-6.A 7 CLEVETRUST EX-(A)(6) 1 EXHIBIT (a)(6) FORM OF LETTER TO SHAREHOLDERS FROM THE CHAIRMAN AND PRESIDENT OF THE COMPANY DATED AUGUST 21, 1995. 2 [Company Letterhead] August 21, 1995 Dear CleveTrust Shareholder: Enclosed you will find an Offer from CleveTrust Realty Investors (the "Trust") to purchase up to 500,000 Shares of Beneficial Interest. Please read the enclosed document very carefully to assist you in making your decision on whether or not to participate in this Offer. Management neither encourages nor discourages your participation in this Offer. The Offer gives shareholders who are considering the sale of all or a portion of their Shares an opportunity to sell such Shares for a higher price than that available in the open market immediately prior to the announcement of the Offer, without the usual transaction costs associated with market sales. To the extent that the purchase of Shares in the Offer results in a reduction in the number of Shareholders of record, the costs of the Trust for services to shareholders may be reduced. The Board of Trustees of the Trust has determined to make this Offer because it believes that the Offer is an attractive investment, and because the Trust believes that the current market price of the Shares does not adequately reflect the value of the Trust's business, assets and prospects, and that the purchase of the Shares at this time is an attractive investment that will benefit the Trust and its continuing shareholders. The Trust currently intends to propose at the next annual meeting of shareholders, to be held in February, 1996, that its shareholders approve a reverse stock split of up to one for five of the Trust's outstanding Shares. Management of the Trust believes that such action will result in greater marketability for the Trust's Shares as it should result in a reduced percentage spread between the bid and asked prices sought by the market makers in the Trust's Shares. This reverse stock split could have some effect on the price of the Shares and on the number of Shares traded, but Management believes such possible effect cannot be accurately predicted. Let me again encourage you to read the enclosed offer document before making any decision as to your shares. As always, we appreciate your continued interest in CleveTrust Realty Investors and welcome your questions and comments. Sincerely, ------------------------------------------- John C. Kikol Chairman & President EX-7.A 8 CLEVETRUST EX (A)(7) 1 EXHIBIT (a)(7) FORM OF PRESS RELEASE DATED AUGUST 21, 1995 2 CLEVETRUST REALTY INVESTORS OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 500,000 SHARES OF BENEFICIAL INTEREST, EACH AT A PURCHASE PRICE OF $4.00 PER SHARE WESTLAKE, OHIO, AUGUST 18, 1995: John C. Kikol, Chairman and President of CleveTrust Realty Investors (the "Trust") (CTRIS-NASDAQ), today announced that the Trust will commence an Offer on Monday, August 21, 1995 to buy from its shareholders approximately 9.16% of the Trust's outstanding Shares, or up to an aggregate of 500,000 Shares of Beneficial Interest, par value $1.00 per share ( the "Shares"), at a price of $4.00 per Share. The funds necessary to purchase the Shares pursuant to the Offer will come from borrowings under the Company's Credit Agreement dated as of November 30, 1994 with National City Bank, and M&T Bank of Buffalo. The Offer is conditioned on there being at least 400 beneficial owners of the Trust's Shares of Beneficial Interest after purchase of the Shares and that the Shares will otherwise continue to be eligible for quotation on the NASDAQ National Market System. The Offer will also be subject to certain other conditions enumerated in the Offer to Purchase. Neither the Trust nor its Board of Trustees is making any recommendation to shareholders as to whether to tender or refrain from tendering shares. The Board of Trustees of the Trust has determined to make this Offer because it believes that the Offer is an attractive investment, and because the Trust believes that the current market price of the Shares does not adequately reflect the value of the Trust's business, assets and prospects, and that the purchase of the Shares at this time is an attractive opportunity that will benefit the Trust and its continuing shareholders. The Offer gives shareholders who are considering the sale of all or a portion of their Shares an opportunity to sell such Shares for a higher price than that available in the open market immediately prior to the announcement of the Offer, without the usual transaction costs associated with market sales. Shareholders of record will be receiving copies of the Offer to Purchase and associated forms and instructions shortly. Those shareholders who hold in street name will need to contact their broker or bank to instruct it concerning the Offer. American Stock Transfer & Trust Company will be the Depositary for the Offer. Beacon Hill Partners, Inc. will serve as the Information Agent.