<DOCUMENT>
<TYPE>EX-20
<SEQUENCE>2
<FILENAME>e500613_ex20.txt
<DESCRIPTION>LETTER FROM FIRST UNION
<TEXT>
[FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
LETTERHEAD]
May 18, 2005
Dear Fellow Shareholders of Sizeler Property Investors, Inc.:
Like many of you we have reviewed the Company's recent quarterly report on
Form 10-Q together with management's self-serving press release describing their
accomplishments under the "enhanced" strategic plan. Once again we believe it is
time for a reality check as to what the numbers truly indicate, especially in
view of the impact of the recent dilutive stock sale. While it should be
apparent to all that the private sale of the Company's stock at a price of
$10.75 a share while trading at $12.00 a share was dilutive to shareholders (a
position which even this management would have difficulty disputing), the
purported justification given was that the resultant reduction in debt would
enhance the Company's funds from operations ("FFO"). In fact, management's press
release touted an improvement to FFO as a result of its strategic plan. For
those of you unfamiliar with the term, FFO is a term utilized by real estate
investment trusts to measure their operating performance. As management stated
in its report, "FFO is a key operating measure used by the Company's management
in evaluating current operating performance as well as trends in operating
performance".
But has FFO improved from the perspective of the Company's common
shareholders? We think not. If one divides the stated first quarter FFO of
$2,879,000 by the number of common shares outstanding as of year end,
13,154,000, the FFO on a per share basis would be $.22. Since December 31, 2004,
all of the 9% convertible debentures have been converted or redeemed, reducing
the annual interest expense to the Company by $5,094,000 or $1,273,500 per
quarter. In so doing, the Company issued approximately 7,833,000 new shares
bringing the total number of shares outstanding to approximately 20,987,000. If
one adds the first quarter interest savings of $1,273,500 to the announced FFO
of $2,879,000, the Company's aggregate FFO for the quarter would have increased
to $4,152,500. If this projected FFO of $4,152,500 is then divided by the number
of shares now outstanding, 20,987,000, the resulting FFO per share is $.20,
lower than the per share FFO reported for the same quarter last year. The
calculation is as provided below:
<PAGE>
<TABLE>
<CAPTION>
FFO Per Share FFO Per Share
Calculation Before After Giving
Giving Effect to Effect to
Dilution Dilution
<S> <C> <C>
First Quarter 2005 FFO $ 2,879,000 $ 2,879,000
Adjustment to Reflect Reduction in Interest Expense from
Debenture Conversion/Redemption N/A $ 1,273,500
----------- -----------
(1) First Quarter 2005 FFO After Adjustment for Debenture
Redemption/Conversion $ 2,879,000 $ 4,152,500
=========== ===========
Common Shares Outstanding at December 31, 2004 13,154,000 13,154,000
Additional Shares Issued Subsequent to 2004 N/A 7,833,000
----------- -----------
(2) Current Common Shares Outstanding 13,154,000 20,987,000
=========== ===========
FFO Per Common Share [(1)/(2)] $ .22 $ .20
=========== ===========
</TABLE>
Not only was the transaction dilutive to shareholder equity but it now
appears to have been non-accretive to FFO. From our standpoint as common
shareholders, dilutive plus non-accretive equals failed.
Should we have expected anything other than a failed outcome in view of
the sale's surreptitious occurrence and inherent inequity? According to Roget's
Thesaurus "surreptitious" refers to "clandestine, secretive or covert activity"
and that is a fair characterization of management's behavior. On the very day
that agreements were executed to sell almost 20% of the Company at a price more
than 10% below its then market value, a sale which would be of obvious concern
to the Company's shareholders, management filed its annual report on Form 10K
with the SEC in which no mention of the intended sale was made. Rather, the
intention to sell was announced at 9:30 AM the following day and the sale closed
approximately one hour later, further evidencing management's desire to prevent
the Company's shareholders from raising any objection or concerns they might
harbor. Since there were no legitimate business reasons requiring such haste and
<PAGE>
secrecy, the only apparent objective of management's covert conduct was to
-prevent shareholders from proposing more rational and less abusive
alternatives. None other. Moreover, the inherent inequity of the sale is also
manifest in its execution. To our knowledge only one existing shareholder was
offered the opportunity to purchase the below market shares - Palisades Capital,
an investment fund which we believe to have been a known supporter of
management. Since the shares offered were fully registered when sold pursuant to
an existing shelf registration, all shareholders of the Company could have been
offered the same opportunity to purchase the below market shares. The only
explanation we can infer for offering below market fully registered shares to
one shareholder and not to the rest of us is that management believed it could
count on their support and not ours.
While we are pleased to learn from management's press release of the
Company's improved apartment occupancy rate (89% to 95% on a year to year
basis), we were unable to find similar touting with respect to the Company's
retail portfolio. Was this some unintentional oversight as retail occupancies
have been improving nationwide for several years? Unfortunately not. A close
reading of the 2004 Annual Report together with this quarterly report indicates
that management neglected to mention that retail occupancy at the Company's
properties has fallen from 91% to 89% during this quarter. Based on their
approach to disclosure as evinced by the below market stock sale, we are not
surprised by this selective omission.
We have appended to this letter copies of four recent press releases
issued by us. All but one release reflect our core concern with providing value
realization to shareholders through a liquidation of the Company. As you may be
aware, in the upcoming proxy contest we will be advocating a liquidation of the
Company by way of a sale of its assets through specifically defined proposals
which we are in the process of finalizing. The fourth press release sets forth
our view on the circumstance under which management finally acceded to holding
the annual meeting, albeit at least five months belated - although they have yet
to set a specific date.
<PAGE>
We continue to welcome your calls of encouragement and support. As always,
if you should have any questions or comments, please feel free to contact me
directly at (516) 822-0022.
On behalf of First Union Real Estate Equity
and Mortgage Investments
Very truly yours,
/s/ Michael L. Ashner
Michael L. Ashner
Chairman and Chief Executive Officer
IMPORTANT
YOU ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE
AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (the "SEC") BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You will
be able to obtain the documents free of charge at the SEC's website,
www.sec.gov. You may also obtain information relevant to the solicitation of
proxies by First Union by contacting MacKenzie Partners, Inc. by mail at 105
Madison Avenue, New York, New York 10016 or by calling toll free at (800)
322-2855. First Union and Messrs. Ashner, Braverman and Zalkind may be deemed to
be participants in the solicitation of proxies from the shareholders of Sizeler
in connection with the annual meeting. Information about these participants is
set forth in the preliminary proxy statement filed by First Union with the SEC.
Investors may obtain additional information regarding the interests of such
participants by reading the definitive proxy statement when it becomes
available.
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