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Logo
July 26, 2000
Dear Fellow Captec Shareholder:
Over the past few weeks, some of you have received several letters and phone
calls from Phil Goldstein, who runs a small money management firm called
Opportunity Partners, L.P. We have heard from many of you, and thank you for
your supporting our Board in rejecting Mr. Goldstein's baseless allegations and
his ill-conceived effort to remove our board of directors and take control of
the company without so much as a business plan, or the guidance of experienced
managers or directors. If you have not done so already, we urge you to vote the
WHITE proxy card FOR the election of Captec's director nominees (Proposal 1),
and AGAINST the two shareholder proposals (Proposals Two and Three).
DO NOT BE MISLED BY PHIL GOLDSTEIN
In his latest letter to shareholders, Mr. Goldstein ignores many of the
questions that shareholders are asking and raises disturbing questions about his
credibility:
DO PHIL GOLDSTEIN OR ANY OF HIS ASSOCIATES HAVE ANY IDEA HOW TO RUN A REIT?
> Mr. Goldstein didn't think it was important to enlighten Captec shareholders
about his or his nominees' complete lack of experience in any type of real
estate business. Instead, in his latest communication, Mr. Goldstein simply
continued his practice of quoting or paraphrasing messages posted on the
internet from unnamed sources. Goldstein now thinks he can run Captec
without any experience because an unnamed source told him that "triple net
leasing is not rocket science."
> In the most striking evidence of his lack of any sort of plan for Captec, he
states in his letter that he "already had expressions of interest from
qualified candidates...." Who are these "candidates"? Mr. Goldstein won't
tell us and he hasn't told you. It speaks volumes that Mr. Goldstein has
thus far failed to have a plan in place ONLY TWO WEEKS BEFORE HE HOPES TO
ASSUME CONTROL OF THE COMPANY AND REMOVE CURRENT MANAGEMENT. We believe that
turning over control of Captec's fundamentally strong operations to a mutual
fund investor with no experience is risky business at best. Asking
shareholders to replace an experienced board and management team with people
who have neither experience nor any business plan is entirely irresponsible
and will be destructive to shareholder value.
GOLDSTEIN MISLEADS SHAREHOLDERS ABOUT CAPTEC'S PERFORMANCE
> Actually, Mr. Goldstein doesn't want you to consider Captec's financial
performance at all. Goldstein knows that despite a depressed market for REIT
stocks, Captec's management deserves credit for generating increased
revenues and funds from operations, the measures by which REIT operations
are measured, and ultimately how REIT stocks are valued. But in his proxy
statement and two subsequent letters he never once refers to any aspect of
Captec's business or its performance, including the fact that SINCE 1997 OUR
COMPOUNDED ANNUAL GROWTH RATE IN REVENUES AND FFO PER SHARE ARE 47% AND 26%,
RESPECTIVELY.
> Mr. Goldstein plays fast and loose with his stock performance comparisons.
He asks shareholders to consider that our stock once traded as low as $6 per
share, but conveniently fails to mention that the stock is now trading at
$11. Mr. Goldstein acknowledges that REITs are in a tough market but uses
stock performance statistics that fail to mention whom he is comparing
Captec with and over what time period.
(continued on back of page)
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> Amazingly, Mr. Goldstein, who was unknown to many of our shareholders prior
to this proxy contest, attempts to take credit for the recent stock price
increase that occurred after our decision to retain our REIT status and not
merge with Captec Financial Group. Nothing could be further from the truth.
Our decision to retain our current corporate structure was made after
listening to both our institutional and individual holders from December
through early spring of this year. GOLDSTEIN ONLY BEGAN TO BUY SHARES IN
FEBRUARY, AND NEVER EXPRESSED HIS VIEWS TO MANAGEMENT BEFORE LAUNCHING HIS
HOSTILE CAMPAIGN. THE FACT IS THAT CAPTEC'S SHARES ARE TRADING APPROXIMATELY
27% HIGHER THAN THE LAST CLOSING PRICE ON THE DAY PRIOR TO THE ANNOUNCEMENT
OF THE PLAN OF MERGER.
We believe our stock price is now higher because of strong fundamental
performance and the fact that we have made clear to the market that we are
actively exploring all strategic alternatives for maximizing value, including a
possible sale of the company. Mr. Goldstein makes numerous false and misleading
allegations against Captec's management, insinuating that the stock price would
be higher except for the stock market's lack of trust in management. Nothing
could be further from the case. In fact, a highly respected investment firm
recently reiterated our stock as a "buy", and stated in its latest research
report:
"The company continues to be distracted by a highly publicized proxy fight,
which is being led by 2% shareholder Phillip Goldstein, in an attempt to replace
CRRR's current board with his hand-selected nine candidates. The conclusion of
this battle will be determined at its August 9 annual shareholder meeting. WE
REMAIN CONFIDENT IN CRRR'S CURRENT MANAGEMENT TEAM AND BOARD OF DIRECTORS." (No
emphasis added) Robertson Stephens Research Report, July 12, 2000*.
ACT NOW TO SUPPORT YOUR BOARD OF DIRECTORS TO PRESERVE AND MAXIMIZE VALUE
Mr. Goldstein is a short-term investor who attempts to produce immediate market
gains for his clients in highly-publicized campaigns by pressuring "closed-end"
mutual funds to switch to an open-end format so that its assets will trade at
their market values. But Captec is not a closed-end mutual fund. Increasing
value in our business requires the ability to maintain and build operations and
to grow its revenues and funds from operations over time. We continue to believe
that the best way for our company to maximize value is to continue our strong
financial performance as we explore ways of unlocking our underlying value,
including a possible sale of the company.
If you agree, the time to act is now. please take a moment now to sign, date and
return your WHITE proxy card. Management recommends that you vote FOR the Captec
nominees, and AGAINST the two shareholder proposals. If you previously voted a
green card and wish to change your vote, you may change your vote by voting the
WHITE card today. If you need assistance in voting your shares, please call
Georgeson Shareholder Communications Inc. at 1-800-223-2064. We thank you again
for your support.
Sincerely,
Patrick L. Beach
Chairman
Captec Net Lease Realty, Inc.
*Excerpted without permission of the author.