-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EeiItIEEVeVedKIi+OPYkqopA+cDRGozYRkXpGt/m6VHyMwtVmlhRRXuU42QTUMi NJNSqvEaFSgblAr48K+w/Q== /in/edgar/work/20000630/0000950123-00-006251/0000950123-00-006251.txt : 20000920 0000950123-00-006251.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950123-00-006251 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000628 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-06249 FILM NUMBER: 665928 BUSINESS ADDRESS: STREET 1: 551 FIFTH AVE STREET 2: STE 1416 CITY: NEW YORK STATE: NY ZIP: 10176 BUSINESS PHONE: 2167814030 MAIL ADDRESS: STREET 1: 551 FIFTH AVE STREET 2: SUITE 1416 CITY: NEW YORK STATE: NY ZIP: 10176 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 8-K 1 e8-k.txt FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVEST. 1 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------------------- Date of Report June 29, 2000 -------------- First Union Real Estate Equity and Mortgage Investments - ------------------------------------------------------------------------------ (Exact name of Registrant as Specified in Its Charter) Ohio 1-6249 34-6513657 - -------------------------- ------------------------ ------------------ (State or Other (Commission File Number) (I.R.S. Employer Jurisdiction of Identification No.) Incorporation)
551 Fifth Avenue, Suite 1416 New York, New York 10176-1499 - ----------------------------------------- -------------------- (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 905-1104 ------------------- - ------------------------------------------------------------------------------ Former Name or Former Address, if Changed Since Last Report. Total number of pages in report: 3 2 ITEM 5. OTHER EVENTS On June 21, 2000, the Registrant issued a press release announcing a letter of intent for a significant asset sale to Radiant Partners, LLC. The press release included a pro forma combined balance sheet as of March 31, 2000. On June 26, 2000, the Registrant issued a press release announcing a lawsuit by a shareholder regarding the letter of intent with Radiant Partners. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements of Businesses Acquired Not applicable b. Pro Forma Financial Information Not applicable. c. Exhibits 99.1 Press release dated June 21, 2000 regarding announcement of a letter of intent for a significant asset sale to Radiant Partners. 99.2 Letter of intent between the Registrant and Radiant Partners, LLC. 99.3 Press release dated June 26, 2000 announcing a suit by a shareholder regarding letter of intent with Radiant Partners. 99.4 Class action complaint filed by Brickell Partners. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. First Union Real Estate Equity and Mortgage Investments -------------------------------- (Registrant) Date: June 29, 2000 By:/S/ Brenda J. Mixson ------------- ---------------------- Brenda J. Mixson Chief Financial Officer EX-99.1 2 ex99-1.txt PRESS RELEASE 1 EXHIBIT 99.1 FIRST UNION REAL ESTATE INVESTMENTS - ------------------------------------------------------------------------------ AT THE COMPANY Brenda J. Mixson Chief Financial Officer (212) 905-1104 FOR IMMEDIATE RELEASE FIRST UNION ANNOUNCES LETTER OF INTENT FOR SIGNIFICANT ASSET SALE TO RADIANT PARTNERS NEW YORK, NEW YORK, JUNE 21, 2000 --- FIRST UNION REAL ESTATE INVESTMENTS (NYSE: FUR) announced today that it has signed a non-binding (except in certain respects as noted below) letter of intent outlining the terms of a potential transaction involving the sale (and the assumption of certain liabilities) of a significant portion of First Union's real estate assets (the "Purchase Assets") to Radiant Partners, LLC, which currently administers and oversees the business and financial affairs of First Union and its affiliates and is owned and controlled by Daniel P. Friedman, David Schonberger, and Anne Zahner, each an executive officer of First Union. Mr. Friedman is also a trustee of First Union. The potential transaction outlined in the letter of intent contemplates the sale of the Purchase Assets for approximately $205.0 million (approximately $79.9 million in cash and approximately $125.1 million in assumed mortgage debt). The assets to be purchased by Radiant Partners would include: - 55 Public Square Office Building - Cleveland, Ohio - 55 Public Square Garage - Cleveland, Ohio - North Valley Tech Center - Thornton, Colorado - Two Rivers Business Center - Clarksville, Tennessee - Westgate Shopping Center - Abilene, Texas - Pecanland Mall - Monroe, Louisiana - Huntington Garage - Cleveland, Ohio - Long Street Garage - Columbus, Ohio - Madison and Wells Garage - Chicago, Illinois - Printers Alley Garage - Nashville, Tennessee - 5th and Marshall Garage - Richmond, Virginia, - Club Associates' note receivable, face amount of approximately $1.5 million - Ancillary assets including FF&E, and reserve and escrow accounts of the Purchase Assets - NOI from all of the Purchase Assets from June 1, 2000 less capital expenditures committed subsequent to May 9, 2000 further reduced by 66.6% of asset management fees paid to Radiant Partners, LLC from June 1, 2000 until the closing of the transaction 2 First Union would retain ownership of the following assets: - Unrestricted cash and Treasury bills - Convertible preferred investment in HQ Global Workplaces - Severance and prior trustees escrow account - Park Plaza Mall - Little Rock, Arkansas - Circle Tower - Indianapolis, Indiana - Temple Mall 50% partnership interest and loan - Temple, Texas - VenTek International, Inc.- Petaluma, California subject to 20% contingent ownership to Radiant Partners - Peachtree Mall legal claim First Union will remain liable for the following obligations: - 8.2% convertible perpetual preferred shares; $33,725,000 approximate face amount - 8.875% Publicly-traded senior notes; $12,500,000 approximate face amount - Dallas management office lease - Certain liabilities arising out of the Purchase Assets arising prior to June 1, 2000, except for certain potential liabilities of the Westgate Shopping Center - Corporate expenses and liabilities not related to the Purchase Assets - Property level mortgage debt on retained assets - Other ordinary course liabilities Radiant Partners would continue to manage First Union's remaining assets for $250,000 per year. Radiant would also receive, as an additional management fee, a 20% interest in VenTek International contingent upon First Union's release from various performance bonds and subject to First Union Management Inc.'s board approval. This interest will be subordinate to a $2.5 million line of credit the Company has made available to VenTek. The letter of intent provides that if Radiant Partners obtains a mutually satisfactory mezzanine financing commitment of approximately $31.0 million for the transaction by July 5, 2000, First Union will not, for a period of 45 days thereafter, solicit or initiate any competing transaction proposals. During these 45 days, First Union and Radiant Partners expect to negotiate a definitive purchase and sale agreement while Radiant Partners concurrently secures equity financing. An affiliate of PaineWebber Real Estate Securities, Inc. has indicated a willingness to negotiate and issue the mezzanine commitment. UBS Warburg LLC and PaineWebber Incorporated are acting as financial advisors to Radiant. Also, both PaineWebber Incorporated and UBS Warburg LLC will serve as equity placement agents for Radiant. First Union is being advised by Lazard Freres & Co. The letter of intent further provides that if, after a mutually satisfactory mezzanine commitment is obtained, First Union enters into a definitive agreement in connection with a competing transaction proposal with respect to at least $30.0 million of assets, First Union will reimburse Radiant Partners for certain of its reasonable fees and expenses, subject to a cap of $750,000. 3 The letter of intent is not a definitive agreement with respect to the proposed transaction with Radiant Partners and there can be no assurance that a definitive agreement will be successfully negotiated, that Radiant Partners will obtain financing for the proposed transaction or that the proposed transaction will close after execution of a definitive agreement. In addition, the transaction will require shareholder approval. A proforma March 31, 2000 balance sheet adjusted for this transaction as well as events subsequent to March 31 is attached as an exhibit. A conference call to discuss the potential transaction will be held at 11:15 a.m. Eastern Time this morning. There will be a question and answer session moderated by Bill Ackman. All interested parties are welcome to participate in the conference call by dialing (212) 748-2220. Please refer to the password "First Union" conference call." There will be a taped replay of the conference call beginning at 2:00 p.m. eastern time today through Wednesday, June 28th at 5:00 p.m. Eastern Time. You may listen to this taped replay by dialing (913) 385-6780 and referring to PIN number 2180. Certain statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, changes in local real estate conditions and markets, actions by competitors, interest rate movements and general economic conditions. Further information about these matters can be found in the information included in the Annual Report filed by the Company with the SEC on Form 10K/A. First Union Real Estate Equity and Mortgage Investments is a NYSE-listed stapled-stock real estate investment trust (REIT) headquartered in New York, New York. 4 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS PRO FORMA COMBINED BALANCE SHEET AS OF MARCH 31, 2000 (IN THOUSANDS)
Park Cash March 31, Sale of Plaza Westgate from 2000 St. Cloud Financing Financing Sale -------------- -------------- ------------ ----------- ----------- ASSETS Investment in real estate Land 53,028 (5,490) Building and improvements 273,571 (30,126) -------------- -------------- ------------ ----------- ----------- 326,599 (35,616) Less - Accumulated depreciation (77,987) 14,637 -------------- -------------- ------------ ----------- ----------- Total investment in real estate 248,612 (20,979) Investment in joint venture 1,758 Mortgage loans and notes receivable 2,712 Other assets Cash and cash equivalents - unrestricted 14,262 1,946 41,400 7,300 77,600 (1) - restricted 5,031 (704) Accounts receivable and prepayments, net of allowances 7,886 (253) Investments 99,579 Inventory 3,904 Unamortized debt issue costs, net 4,118 (2,409) 600 200 Other 1,304 -------------- -------------- ------------ ----------- ----------- Total assets 389,166 (22,399) 42,000 7,500 77,600 ============== ============== ============ =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities Mortgage loans 193,616 (76,243) 42,000 7,500 Notes payable 65,120 Senior notes 12,538 Accounts payable and accrued liabilities 24,039 (2,986) Deferred items 3,817 (966) -------------- -------------- ------------ ----------- ----------- Total liabilities 299,130 (80,195) 42,000 7,500 - -------------- -------------- ------------ ----------- ----------- Shareholder's equity Preferred shares of beneficial interest 31,737 Shares of beneficial interest 42,472 Additional paid in capital 218,167 Undistributed loss from operations (202,338) 57,796 77,600 (1) Deferred compensation (2) -------------- -------------- ------------ ----------- ----------- Total shareholder's equity 90,036 57,796 - - 77,600 -------------- -------------- ------------ ----------- ----------- Total liabilities and shareholder's equity 389,166 (22,399) 42,000 7,500 77,600 ============== ============== ============ =========== ===========
March 31, Sale of Other 2000 Properties Adjustments Pro Forma ----------- ----------- -------------- ASSETS Investment in real estate Land (40,653) 6,885 Building and improvements (180,878) 62,567 ----------- ----------- -------------- (221,531) 69,452 Less - Accumulated depreciation 56,545 (6,805) ----------- ----------- -------------- Total investment in real estate (164,986) 62,647 (4) Investment in joint venture - 1,758 Mortgage loans and notes receivable (1,512) 1,200 Other assets Cash and cash equivalents - unrestricted (2,905) (3) (35,000) (2) 104,606 - restricted (2,895) 1,432 (5) Accounts receivable and prepayments, net of allowances (43) 7,590 Investments - 110,000 (2) 209,579 Inventory - 3,904 Unamortized debt issue costs, net (1,571) 938 Other - 1,304 ----------- ----------- -------------- Total assets (173,912) 75,000 394,955 =========== =========== ============== LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities Mortgage loans (124,873) 42,000 Notes payable - 75,000 (2) 140,120 Senior notes - 12,538 Accounts payable and accrued liabilities - 21,053 Deferred items (2,380) 471 ----------- ----------- -------------- Total liabilities (127,253) 75,000 216,182 ----------- ----------- -------------- Shareholder's equity Preferred shares of beneficial interest - 31,737 Shares of beneficial interest - 42,472 Additional paid in capital - 218,167 Undistributed loss from operations (46,659) (113,601) Deferred compensation - (2) ----------- ----------- -------------- Total shareholder's equity (46,659) - 178,773 ----------- ----------- -------------- Total liabilities and shareholder's equity (173,912) 75,000 394,955 =========== =========== ==============
1) Will receive $79.6 million from sale, assumed $2 million spent on expenses related to sale 2) Used $35 million from Park Plaza financing and an additional $75 million in reverse repos to purchase a $10 million investment in HQ Holdings and an additional $100 million Treasury Bill 3) The $2.9 million consists of $2.4 million in cash for construction for the Richmond Garage and $.5 million of proceeds from outparcel sale at Pecanland Mall. 4) The balance consists of fixed assets at Circle Tower of $2.184 million and at Park Plaza of $60.463 million. 5) The balance of this account consists of a severanc escrow account. EX-99.2 3 ex99-2.txt LETTER OF INTENT 1 EXHIBIT 99.2 RADIANT PARTNERS LLC June 20, 2000 William A. Ackman, Chairman First Union Real Estate Equity and Mortgage Investments 110 E. 42nd Street, 18th Floor New York, NY 10017 William A. Scully, Vice Chairman First Union Real Estate Equity and Mortgage Investments 1301 Avenue of the Americas, 38th Floor New York, NY 10019 Gentlemen: On behalf of an affiliate of Radiant Partners LLC ("Radiant"), we are pleased to outline the terms of a potential transaction (the "Transaction") for the acquisition of the majority of the assets and associated liabilities of First Union Real Estate Equity and Mortgage Investments ("First Union" or the "Company") by Radiant. Assets to be Purchased Radiant will acquire the assets (the "Purchase Assets") and assume the liabilities (the "Assumed Liabilities") listed on Schedule A from the Company. In addition, Radiant would assume all income and expenses for the Purchase Assets from June 1, 2000 until the date of closing the Transaction, as well as capital expenditures approved by Radiant and committed to subsequent to May 9, 2000. Radiant will not acquire the assets and liabilities listed on Schedule B from First Union. Price and Consideration Radiant will pay total consideration to the Company of $ 205.0 million (the "Consideration") consisting of approximately $79.9 million in cash (the "Cash") and the assumption of the first mortgage financing, estimated to be $125.1 million, which is secured by the Purchase Assets (the "Assumed Debt") Assumed Debt assumption costs (including prepayment and refinancing costs), transfer taxes, title insurance, survey and recording fees shall be jointly paid by First Union and Radiant on a 50/50 basis. First Union's obligation due to these costs shall be capped at $2 million. 2 Additional Consideration Radiant will manage the following assets of First Union: Temple Mall Park Plaza Mall Circle Tower Property Accounts Receivable and Rent Settlements Ventek Radiant will receive a two year noncancellable asset management contract at a rate of $250,000 per year. Radiant will also receive 20% equity interest in Ventek that vests upon First Union being relieved of all obligations and/or guarantees under Ventek's current outstanding performance bonds. Radiant's equity interest will be junior to the Company's outstanding line of credit. (Approximately $2,000,000 outstanding as of June 5, 2000.) Process The Transaction will comprise the following process: 1. Upon First Union's signing of this letter, the Company acknowledges that Radiant will seek a commitment for mezzanine financing of the Transaction equal to the lesser of $40 million or an amount that provides the transaction with leverage not to exceed an 80% loan to value ratio (the "Mezzanine Commitment"). Radiant will have 10 business days to deliver the Mezzanine Commitment to the Company. First Union will cooperate with Radiant by providing information on the Purchase Assets and Assumed Liabilities to Radiant and its advisors upon request, in a timely manner. 2. For a period of 45 days commencing on the date (the "Exclusivity Commencement Date") of delivery by Radiant to the Company of a copy of a Mezzanine Commitment that is reasonably satisfactory to the Company, the Company shall not and it shall direct and use its reasonable best efforts to cause its officers, trustees, employees, investment bankers, consultants, attorneys, accountants, agents and other representatives (collectively, "Representatives") not to, directly or indirectly, (i) solicit or initiate the making of any Acquisition Proposal (as defined below) or any third party proposal or offer to acquire one or more of the Purchase Assets whether directly or indirectly, including by means of a business combination (a "Purchase Assets Proposal"), or (ii) disclose any nonpublic information or data to, any third party (other than the Company's Representatives) in connection with any Acquisition Proposal or Purchase Assets Proposal. This paragraph shall have no force or effect if the Company does not receive a Mezzanine Commitment that is reasonably satisfactory to it within 10 business days of the date hereof. For purposes of this Agreement, "Acquisition Proposal" means any third party proposal or offer (i) to engage in a merger, consolidation or similar business combination transaction with the Company, unless such Acquisition Proposal does not contemplate the acquisition of more than 50% of the Company's existing real estate assets (based on the fair market value of such assets) or (ii) to acquire more than 50% of the Company's assets (based on the fair market value of such assets). Clause (ii) of the immediately preceding paragraph shall not apply to (a) any bona fide Acquisition Proposal or Purchase Assets Proposal that the Board of Trustees of the Company or a committee thereof determines, after consultation with the Company's financial advisors, in its good faith 3 judgment, taking into account price, timing, closing conditions, the likelihood of completion and any other factors deemed relevant by the Board of Trustees of the Company or such committee, may be more favorable to the Company's common shareholders than the Transaction. 3. If after the Exclusivity Commencement Date the Company enters into a definitive agreement in connection with an Acquisition Proposal or one or more Purchase Assets Proposals having an aggregate purchase price of (or in which the Purchase Assets are valued at) $30.0 million or more (a "Material Property Sale"), the Company shall reimburse Radiant, within 30 days of receipt by the Company of appropriate written evidence thereof, for its reasonable legal fees and expenses, the reasonable legal fees and expenses of its financial advisors, including the entity providing the Mezzanine Commitment (the "Mezzanine Lender"), a reasonable commitment fee payable to the Mezzanine Lender and the reasonable cost of any third party reports, including environmental reports, in each case, to the extent such fees, expenses and costs relate to the Transaction and are incurred during the period ending on the date the Company notifies Radiant that it has entered into a definitive agreement in connection with an Acquisition Proposal or a Material Property Sale; provided, however, that such notification will not relieve the Company from its obligations pursuant to paragraph 2 above; provided, further, however, that the total reimbursement obligations of the Company pursuant to this paragraph shall not, in the aggregate, exceed $750,000. General Conditions The closing of any transaction would be structured to accommodate legal, tax, accounting, operational and timing issues of both Radiant and the Company, provided that such structure does not adversely affect the economic benefits of the Transaction. The Principals of Radiant have held discussions with advisors and financing sources indicating interest in the Transaction. This letter should be considered an indication of interest in a possible transaction on the terms described in this letter and does not create a legally binding obligation, except for the "Process" section of this letter which is legally binding This letter is intended to outline the general terms which could result in a definitive agreement between the Parties and supercedes any prior discussions or indication of interest by Radiant, including our letter to you dated May 31, 2000; provided, however, that the confidentiality letter agreement between First Union and Radiant dated April 28, 2000 remains in full force and effect. We look forward to discussing this transaction with you in more detail in the coming days. Very truly yours, Radiant Partners LLC /s/Daniel P. Friedman /s/David Schonberger /s/Anne N. Zahner - --------------------- -------------------- ----------------- Daniel P. Friedman David Schonberger Anne N. Zahner Managing Member Managing Member Managing Member 4 ACCEPTED AND AGREED TO: By: /s/William A. Ackman -------------------- William A. Ackman, Chairman First Union Real Estate Equity and Mortgage Investments /s/William A. Scully -------------------- William A. Scully, Vice Chairman First Union Real Estate Equity and Mortgage Investments 5 SCHEDULE A ASSETS 1. 55 Public Square Office Building - Cleveland, Ohio 2. 55 Public Square Garage - Cleveland, Ohio 3. North Valley Tech Center - Thornton, Colorado 4. Two Rivers Business Center - Clarksville, Tennessee 5. Westgate Shopping Center - Abilene, Texas 6. Pecanland Mall - Monroe, Louisiana (including excess land and proceeds of land sales, including Residence Inn) 7. Huntington Garage - Cleveland, Ohio 8. Long Street Garage - Columbus, Ohio 9. Madison and Wells Garage - Chicago, Illinois 10. Printers Alley Garage - Nashville, Tennessee 11. 5th and Marshall Garage - Richmond, Virginia 12. All restricted, reserve and escrow accounts as of March 31, 2000(excluding reserves and escrows for real estate taxes and insurance related to time periods prior to closing of the Transaction) on the Purchase Assets, including but not limited to: - 5th and Marshall Garage - North Valley Tech Call Center - 55 Public Square Office Building - 55 Public Square Garage - Madison and Wells Garage 13. Net operating income from all Purchase Assets (net of 2/3 of asset management fees paid to Radiant Partners) from June 1, 2000 forward 14. Furniture, fixtures and equipment of First Union 15. Club Associates note receivable 16. West Third Street Parking Lot - Cleveland, Ohio LIABILITIES 1. Mortgage debt balances as of the Transaction closing date (see Schedule A(i) for a complete list of mortgage debt to be assumed) 2. Liabilities arising out of the operations of the Purchase Assets from June 1, 2000 forward and Westgate environmental liability, to the extent not covered by offsetting insurance proceeds 3. New capital expenditures on the Purchase Assets committed from May 9, 2000 forward 4. 551 Fifth Avenue office lease, including offsetting security deposits and rights as tenant 6 SCHEDULE A(i) MORTGAGE DEBT
- ------------------------------------------------------------------------------------------------------------ March 31, Interest Maturity Property Lender 2000 Balance Rate Date Comment - ------------------------------------------------------------------------------------------------------------ 55 Public Square J.P. Morgan 21,100,000 LIBOR Sep-02 + 325 bp North Valley Tech Salomon 16,000,000 LIBOR Jul-02 Center Brothers + 295 bp Pecanland Mall TIAA 38,014,265 12.25% Dec-17 + participation Huntington Garage Lutherans 7,845,291 8.55% Jan-04 Long Street Midland Mutual 613,315 8.63% Apr-09 (1st Mortgage) Long Street Marwed 800,000 8.25% Oct-03 (2nd Mortgage) Corporation Madison and G.E. Capital 30,000,000 LIBOR Oct-01 Wells Garage +175 bp Printers Alley South Trust 4,000,000 LIBOR Jul-01 Garage Bank + 175 bp Westgate N/A 7,500,000 N/A N/A To be Shopping Center originated TOTAL MORTGAGE DEBT 125,872,871
7 SCHEDULE B ASSETS 1. Unrestricted Cash and "T" Bills 2. Park Plaza Mall - Little Rock, Arkansas 3. Impark Loan 4. Temple Mall Partnership Interest 5. Loan to Temple Mall Partnership 6. Severance and Trustees Escrow 7. Circle Tower - Indianapolis, Indiana 8. All Rent and property settlements including accounts receivable from owned and prior owned properties outstanding as of June 1, 2000 9. Peachtree Mall lawsuit claim 10. Ventek LIABILITIES 1. Convertible preferred equity 2. Senior Notes 3. Pending Oracle lawsuit 4. One Galleria Tower Dallas office lease, including offsetting security deposits 5. All liabilities arising out of the operation of the Purchase Assets prior to June 1, 2000, except the Westgate environmental liability 6. Corporate expenses and liabilities not related to Purchase Assets 7. Park Plaza mortgage from FUNB EX-99.3 4 ex99-3.txt PRESS RELEASE 1 EXHIBIT 99.3 FIRST UNION REAL ESTATE INVESTMENTS - ------------------------------------------------------------------------------- AT THE COMPANY Brenda J. Mixson Chief Financial Officer (212) 905-1104 FOR IMMEDIATE RELEASE FIRST UNION REAL ESTATE INVESTMENTS ANNOUNCES SUIT BY SHAREHOLDER REGARDING LETTER OF INTENT WITH RADIANT PARTNERS NEW YORK, NEW YORK, JUNE 26, 2000 --- FIRST UNION REAL ESTATE INVESTMENTS (NYSE:FUR) announced today that shortly after it had signed a letter of intent concerning a possible transaction with Radiant Partners, LLC, an entity called Brickell Partners commenced a self-styled class action lawsuit against First Union, all of its trustees, and Radiant in state court in New York City. The complaint, which seeks preliminary and permanent injunctive relief against the transaction, as well as unspecified damages, costs, and attorneys' fees, alleges that the terms of the proposed transaction are unfair to the Company's stockholders and represent a breach by the defendant trustees of their fiduciary duties. Although the complaint alleges that Brickell Partners is a stockholder, it does not say how many shares Brickell owns or when those shares were purchased. Nor does the complaint identify any party who Brickell believes would be willing to pay a price higher than that offered by Radiant or state that the terms of the letter of intent preclude or deter any third party from offering a higher price. William A. Ackman, Chairman of First Union commented on the lawsuit: "The proposed transaction with Radiant is the product of a nine-month exploration of alternatives by the Company and its advisors. No party has offered terms superior to those proposed by Radiant, but should any third party do so, the Board would consider such a proposal. In addition, any further transaction with Radiant is subject to the negotiation and execution of a definitive agreement, the receipt by Radiant of mezzanine and equity financing and approval of the Company's stockholders." "Accordingly, we view this lawsuit as utterly without merit. It represents an effort by one stockholder to divert value to itself at the expense of all stockholders, which is consistent with the pattern of numerous prior litigations Brickell Partners has brought against other parties. First Union and its Board will defend the matter vigorously." Certain statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, changes in local real estate conditions and markets, actions by competitors, interest rate movements and general economic conditions. Further information about these matters can be found in the information included in the Annual Report filed by the Company with the SEC on Form 10K/A. First Union Real Estate Equity and Mortgage Investments is a NYSE-listed stapled-stock real estate investment trust (REIT) headquartered in New York, New York. EX-99.4 5 ex99-4.txt CLASS ACTION COMPLAINT 1 Exhibit 99.4 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - ---------------------------------------x BRICKELL PARTNERS, Individually And : On Behalf Of All Others Similarly : Situated, : : Plaintiff, : Index No. 00-602643 - against - : : DANIEL P. FRIEDMAN, DAVID SCHONBERGER, : CLASS ACTION ANNE ZAHNER, WILLIAM A. ACKMAN, DANIEL : COMPLAINT J. ALTOBELLO, DAVID P. BERKOWITZ, : WILLIAM E. CONWAY, ALLEN H. FORD, : STEPHEN J. GARCHIK, RUSSELL R. GIFFORD, : DAVID S. KLAFTER, WILLIAM A. SCULLY, : DANIEL SHUCHMAN, STEPHEN S. SNIDER, : MARY ANN TIGHE, JAMES A. WILLIAMS, : FIRST UNION REAL ESTATE EQUITY AND : MORTGAGE INVESTMENTS, and RADIANT : PARTNERS, LLC, : : Defendants.: - ---------------------------------------x Plaintiff, by its attorneys, alleges upon personal knowledge as to its own acts and upon information and belief as to all other matters, as follows: NATURE OF THE ACTION 1. Plaintiff brings this action individually and as a class action on behalf of all persons, other than defendants and persons or entities related to them, who own the common stock of First Union Real Estate Equity and Mortgage Investments ("FUR" or the "Company") and thus are similarly situated (the "Class"), for injunctive and other relief. Plaintiff seeks injunctive relief herein to, inter alia, enjoin the implementation of an inherently unfair transaction whereby Radiant Partners, LLC ("Radiant"), a corporation owned and controlled by Daniel P. Friedman ("Friedman"), David Schonberger ("Schonberger"), and 2 Anne Zahner ("Zahner"), each until recently a former executive officer of FUR, will acquire certain valuable assets (the "Purchase Assets") of the Company for a grossly inadequate price. Alternatively, in the event that the proposed transaction is implemented, plaintiff seeks to recover damages caused by the breach of fiduciary duties owed by defendants. 2. The potential transaction contemplates the purchase by Radiant of the Purchase Assets for approximately $205 million (approximately $79.9 million in cash and approximately $125.1 million in assumed mortgage debt). The Purchase Assets are the prime assets of the Company and have been "cherry-picked" by Radiant, Friedman, Schonberger and Zahner for their benefit and to the detriment of the Class. PARTIES 3. Plaintiff is a Florida partnership and, at all relevant times, has been the owner of FUR common stock. 4. FUR is a corporation duly organized and existing under the laws of the State of Ohio. FUR is a real estate investment trust ("REIT") and maintains its principal executive offices at 551 Fifth Avenue, New York, New York. As of October 7, 1999, FUR had approximately 42.46 million shares of common stock outstanding and hundreds of stockholders of record. FUR stock trades on the New York Stock Exchange. 5. Radiant is a limited liability corporation and the adviser to FUR. 6. Defendant Friedman was, until June 1, 2000, Chief Executive Officer, President, and now a Trustee of FUR. On June 1, 2000, Friedman terminated his employment with FUR in accordance with his existing agreement and received a $1,001,000 severance payment. -2- 3 7. Defendant Schonberger was, until June 1, 2000, Executive Vice President of FUR. On June 1, 2000, Schonberger terminated his employment with FUR in accordance with his existing agreement and received a $630,000.00 severance payment. 8. Defendant Zahner was, until June 1, 2000, Executive Vice President of FUR. on June 1, 2000, Zahner terminated her employment with FUR in accordance with her existing agreement and received a $630,000 severance payment. 9. Defendants William A. Ackman, Daniel J. Altobello, David P. Berkowitz, William E. Conway, Allen H. Ford, Stephen J. Garchik, Russell R. Gifford, David S. Klafter, William A. Scully, Daniel Shuchman, Stephen S. Snider, Mary Ann Tighe, James A. Williams are trustees of FUR. 10. The defendants named in paragraphs 5 through 8 are hereinafter referred to as the "Individual Defendants." 11. Because of their positions first as officers /directors, and then as owners of the adviser to FUR, the Individual Defendants owe fiduciary duties of loyalty and due care to plaintiff and the other members of the Class. 12. Each defendant herein is sued individually as a conspirator, as well as in his/her capacity as an officer or trustee of the Company, or as an owner of Radiant, and the liability of each arises from the fact that each defendant has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. -3- 4 CLASS ACTION ALLEGATIONS 13. Plaintiff brings this action in his own behalf and as a class action, pursuant to Section 901 of the Civil Practice Law and Rules, on behalf of all shareholders of the Company, except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants, or any of the Company's principal shareholders, who will be threatened with injury arising from defendants' actions as described more fully below. 14. This action is properly maintainable as a class action. 15. The Class is so numerous that joinder of all members is impracticable. The Company has approximately 42.46 million shares of common stock. There are hundreds of record and beneficial stockholders. 16. There are questions of law and fact common to the Class including, inter alia, whether: a. defendants have breached and will continue to breach their fiduciary and other common law duties owed by them to plaintiff and the members of the Class; and b. plaintiff and the other members of the Class would be irreparably damaged by the transaction complained of herein. 17. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Plaintiff is an adequate representative of the Class. -4- 5 18. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 19. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ALLEGATIONS 20. By the acts, transactions, and courses of conduct alleged herein, defendants, individually and as part of a common plan and scheme and/or aiding and abetting one another in total disregard of their fiduciary duties, are attempting to deprive plaintiff and the Class unfairly of the opportunity to maximize the value of their investment in FUR. 21. On June 1, 2000, defendants Friedman, Schonberger and Zahner terminated their employment with FUR, receiving severance payments of $1,001,000, $630,000 and $630,000, respectively. 22. As a result of these terminations, the previously announced asset management agreement ("Agreement") between FUR and Radiant (which is owned and controlled by Friedman, Schonberger and Zahner) became effective and FUR became an externally managed REIT. -5- 6 23. As a result of the Agreement, Radiant became responsible for administering and overseeing the business and financial affairs of FUR and its affiliates and was to hire all FUR's remaining personnel, other than its Chief Financial officer, who will continue to be employed by FUR. 24. Under the Agreement, Radiant was to receive a monthly fee of $125,000 for its services. 25. On June 21, 2000, FUR and Radiant announced the proposed transaction, pursuant to which Radiant, based on the knowledge previously acquired by Friedman, Schonberger and Zahner, would cherry-pick certain of the Company's assets at a price beneficial to them. 26. In light of what has publicly been disclosed about Friedman, Schonberger and Zahner's termination payments and new adviser relationship with FUR, Radiant's proposal is grossly unfair, inadequate, and provides value to FUR' stockholders substantially below the fair or inherent value of the Company. The intrinsic value of the Purchase Assets is materially greater than the consideration contemplated by the proposed offer price. 27. The proposed transaction is wrong, unfair, harmful to FUR public shareholders, wholly inadequate, and will deny Class members their right to share proportionately in the true value of the Purchase Assets. 28. The proposed transaction is not the result of arm's-length negotiations but was fixed arbitrarily by the parties as part of its unlawful plan and scheme to permit Radiant to acquire the Purchase Assets at the lowest possible price. -6- 7 29. Defendants have violated fiduciary and other common law duties owed to plaintiff and the other members of the Class in that they have not and are not exercising independent business judgment, and have acted and are acting to the detriment of the Class. 30. As a result of defendants' actions, plaintiff and the Class have been and will be damaged by the breaches of fiduciary duty and, therefore, plaintiff and the Class will not receive the fair value of the Purchase Assets. 31. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the Class, and will succeed in their plan to exclude plaintiff and the Class from the fair proportionate share of the Purchase Assets, to the irreparable harm of the Class. 32. Plaintiff and the Class have no adequate remedy of law. JURY DEMAND Plaintiff hereby demands a jury trial. PRAYER FOR RELIEF WHEREFORE, plaintiff prays for judgment and relief as follows: a. declaring that this lawsuit is properly maintainable as a class action and certifying plaintiff as representative of the Class; b. declaring that defendants and each of them have committed a gross abuse of trust and have breached their fiduciary duties to plaintiff and the other members of the Class; -7- 8 c. preliminarily and permanently enjoining defendants and their counsel, agents, employees, and all persons acting under, in concert with, or for them, from proceeding with or implementing the transaction proposed by Radiant; d. In the event the transaction is consummated, rescinding it and setting it aside; e. awarding compensatory damages against defendants, jointly and severally, in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; f. awarding plaintiff and the Class their costs and disbursements and reasonable allowances for plaintiff's counsel and experts' fees and expenses; and g. granting such other and further relief as may be just and proper. Dated: June 22, 2000 Respectfully submitted, WECHSLER HARWOOD HALEBIAN & FEFFER LLP By:/s/Robert I.Harwood -------------------------- Robert I. Harwood 488 Madison Avenue New York, NY 10022 (212) 935-7400 Attorneys for Plaintiff -8- -----END PRIVACY-ENHANCED MESSAGE-----