SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE PREL14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule.14a-12
First Union Real Estate Equity and Mortgage Investments
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(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant):
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
NOTICE OF ANNUAL MEETING OF BENEFICIARIES
TO BE HELD ON APRIL 15, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Beneficiaries (the
"Meeting") of FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS (the
"Trust"), an Ohio business trust, will be held at The Hilton Long
Island/Huntington, 598 Broad Hollow Road, Melville, New York 11747 on Thursday,
April 15, 2004 at 2:00 P.M., to consider and act upon the following:
1. To elect two Class II Trustees;
2. To ratify the selection of Xxx as independent auditors of the Trust
for the 2004 fiscal year;
3. To consider an amendment to the Trust's Declaration of Trust to
eliminate staggered terms for the Trustees;
4. To consider an amendment to the Trust's Declaration of Trust to
modify the provision relating to business activities of Trustees;
5. To consider an amendment to the Trust's Declaration of Trust to
eliminate the necessity of obtaining an appraisal prior to the Trust
purchasing any real estate property; and
6. To consider and act upon such other matters as may properly come
before the Meeting or any adjournment thereof.
Only Beneficiaries of common shares of beneficial interests of record
at the close of business on March 1, 2004 shall be entitled to receive notice
of, and to vote at, the Meeting, and at any adjournment or adjournments thereof.
All Beneficiaries are cordially invited to attend the Meeting. Whether
or not you plan to attend the Meeting, please complete, date and sign the
enclosed proxy, which is solicited by the Board of Trustees of the Trust, and
mail it promptly in the enclosed envelope to make sure that your shares in the
Trust are represented at the Meeting. In the event you decide to attend the
Meeting in person, you may, if you desire, revoke your proxy and vote your
shares in person.
By order of the Board of Trustees,
Carolyn B. Tiffany
Secretary
Boston, Massachusetts
March __, 2004
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL ENSURE THAT YOUR SHARES WILL BE
VOTED. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PROXY STATEMENT
ANNUAL MEETING OF BENEFICIARIES
APRIL 15, 2004
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Trustees (the "Board") of FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS (the "Trust"), an Ohio business trust, to be
voted at the Annual Meeting of Beneficiaries of the Trust (the "Meeting") which
will be held at The Hilton Long Island/Huntington, 598 Broad Hollow Road,
Melville, New York 11747, on Thursday, April 15, 2004 at 2:00 P.M., and at any
adjournment or adjournments thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Beneficiaries and in this Proxy
Statement.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Trust and not revoked, will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted (i) FOR the election, as Class II Trustees, of persons who have
been nominated by the Board, (ii) FOR the ratification of the selection of Xxx
as independent auditors to audit and report upon the consolidated financial
statements of the Trust for the 2004 fiscal year, (iii) FOR the amendment to the
Trust's Declaration of Trust to eliminate the staggered terms to for the
Trustees, (iv) FOR the amendment to the Trust's Declaration of Trust to modify
the provisions thereof relating to business activities of Trustees as set forth
under the heading "Proposal No. 4-Amendment to Business Activities of Trustees",
(v) FOR the amendment to the Trust's Declaration of Trust to eliminate the
provision thereof requiring the Board to obtain an appraisal prior to investing
in any real property, and (vi) in accordance with the judgment of the person or
persons voting the proxies on any other matter that may be properly brought
before the Meeting. Each such Proxy granted may be revoked at any time
thereafter by writing to the Secretary of the Trust prior to the Meeting, or by
execution and delivery of a subsequent Proxy or by attendance and voting in
person at the Meeting, except as to any matter or matters upon which, prior to
such revocation, a vote shall have been cast pursuant to the authority conferred
by such Proxy.
The principal executive offices of the Trust are located at 7 Bulfinch
Place, Suite 500, Boston, MA 02114. The approximate date on which this Proxy
Statement and the accompanying Proxy will be first sent or given to
Beneficiaries is March __, 2004.
Beneficiaries of record of the common interests of beneficial interest,
par value $1.00 per share (the "Common Shares"), of the Trust at the close of
business on March 1, 2004 (the "Record Date") will be entitled to notice of, and
to vote at, the Meeting or any adjournments thereof. On the Record Date, there
were issued and outstanding 31,058,913 shares of Common Shares. There was no
other class of voting securities outstanding at the Record Date. Each holder of
Common Shares is entitled to one vote for each share held by such holder. The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of Common Shares is necessary to constitute a quorum at the Meeting.
Votes cast by proxy or in person at the Meeting will be counted by the person
appointed by the Trust to act as inspector of election for the Meeting. The two
nominees for election as Class II Trustees at the Meeting who receive the
greatest number of votes properly cast for the election of Trustees shall be
elected Trustees. The affirmative vote of a majority of the votes in attendance
at the Meeting (at which a quorum is present), present in person or represented
by proxy, that are properly cast is necessary to approve the actions described
in Proposal No. 2 of the accompanying Notice of Annual Meeting. The affirmative
vote of at least 70% of the number of shares of Common Shares outstanding on the
Record Date that are properly cast is necessary to approve the action described
in Proposal No. 3 below. The affirmative vote of a majority of the number of
shares of Common Shares outstanding on the Record Date that are properly cast is
necessary to approve the actions described in Proposals No. 4 and 5 below.
Abstentions and broker "non-votes" are included in the determination of the
number of shares present at the Meeting for quorum purposes but broker
"non-votes" are not counted in the tabulations of the votes cast on proposals
presented to Beneficiaries. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
PROPOSAL NO. 1 - ELECTION OF TRUSTEES
Pursuant to the Trust's Declaration of Trust, the Board is divided into
three classes, as equal in number as possible, with respect to the term for
which they hold office and that the number of trustees constituting the Board of
Trustees shall from time to time be fixed and determined by a vote of a majority
of the Common Shares. The Board of Trustees is now comprised of six members,
with two members in each class, who, unless the proposal set forth below under
Proposal No. 3 is adopted, shall serve until the end of each respective
three-year term, or until their successors are duly elected and qualified. The
Board of Trustees has nominated (i) Bruce R. Berkowitz and Arthur N. Queler for
re-election to Class II. Unless the proposal set forth under Proposal No. 3 to
eliminate the staggered terms for the Trustees is approved, in which case all of
the Trustees' terms will expire at the next annual meeting of Beneficiaries,
each Class II Trustee's term will expire at the 2007 annual meeting of
Beneficiaries; each Class III Trustee's term expires at the 2005 annual meeting
of Beneficiaries; and each Class I Trustee's term expires at the 2006 annual
meeting of Beneficiaries.
If Proposal No. 1 is approved, Messrs. Berkowitz and Queler will be
elected as Class II Trustees for a term of three years, expiring at the 2007
annual meeting of Beneficiaries, and until their respective successors are
elected and shall qualify to serve. However, if the proposal set forth below
under Proposal No. 3 is approved, Messrs. Berkowitz and Queler's term will
expire at the at the next annual meeting of Beneficiaries. Further, as more
fully described under Proposal No. 4 below, if the proposal set forth in
Proposal No. 4 below is approved, Mr. Queler has notified the Board that he
plans to resign from the Board and it is expected that Michael L. Ashner, the
Chief Executive Officer of the Trust, will be elected to the Board to fill the
vacancy created by Mr. Queler's resignation. Also, if the proposal set forth
under Proposal No. 4 is not adopted, Mr. Berkowitz has notified the Trust that
due to holdings of certain investment entities that he manages, he may be
required to resign from the Board )as he may be in violation of the existing
provision of the Declaration of Trust).
The members of the Board on the date of this proxy statement, and the
committees of the Board on which they serve, are identified below.
Nominating and Corporate
Name Audit Committee Compensation Committee Governance Committee
- ---- --------------- ---------------------- --------------------
Bruce R. Berkowitz* X X
Arthur Blasberg, Jr.* X X X
Talton Embry* X X X
Howard Goldberg* X X X
Neil Koenig
Arthur N. Queler
* Independent Trustees as determined by the Nominating and Corporate Governance
Committee in accordance with Sections 303.01(B)(2)(a) and (3) of the New York
Stock Exchange listing standards.
Set forth below is the business experience of, and certain other
information regarding, the Trustees.
Name and month and year first became
a Trustee of the Trust Age Principal Occupation during the past Five Years
---------------------- --- -----------------------------------------------
CLASS I-TERM EXPIRING AT THE 2006 ANNUAL MEETING OF BENEFICIARIES
Arthur Blasberg, Jr. 76 Mr. Blasberg's activities for the past five years include
December 2003 appointment by the Superior Court in Massachusetts to serve
as a receiver of various businesses (including real estate
investment companies), as a special master and as the trustee
of a trust holding undeveloped land and a trust whose main
asset was a limited partnership interest in a cogeneration
plant. Mr. Blasberg serves as a director of several private
companies and previously served as the receiver and
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liquidating trustee of The March Trust, Inc., a real estate
investment firm which acted as the general partner and/or
limited partner in over 250 limited partnerships. Mr.
Blasberg is an attorney admitted to practice in the
Commonwealth of Massachusetts and previously served for five
years in the general counsel's office of the Securities and
Exchange Commission. Mr. Blasberg is a director and serves on
the audit committee of each of Shelbourne Properties I, Inc.,
Shelbourne Properties II, Inc. and Shelbourne Properties III,
Inc., three public real estate investment trusts.
Talton Embry 57 Mr. Embry has been the Chairman of Magten Asset September
September 2000 2000 Management Corp. ("Magten"), a private investment
management company, since 1998. Mr. Embry has been associated
with Magten in various capacities since 1978. Mr. Embry is
also a director of Imperial Parking Corporation and Orbimage,
Inc.
CLASS III-TERM EXPIRING AT THE 2005 ANNUAL MEETING OF BENEFICIARIES
Howard Goldberg 58 Mr. Goldberg has been a private investor and has provided
December 2003 consulting services to start-up companies since 1999. Mr.
Goldberg presently serves as a part-time consultant to Laser
Lock Technologies, Inc., a company in the security and
advertising business, performing duties consistent with that
of a chief operating officer. Mr. Goldberg also sits on the
Advisory Board of WinWin, a company specializing in foreign
charitable lotteries. From 1994 through 1998, Mr. Goldberg
served as President and Chief Executive Officer of Player's
International, a public company in the gaming business, prior
to its being sold to Harrah's Entertainment Inc. In addition,
from 1995 to 2000, Mr. Goldberg served on the board of
directors of Imall Inc., a public company that provided
on-line shopping and which was ultimately sold to
Excite-at-Home. Mr. Goldberg has a law degree from New York
University and was previously the managing partner of a large
New Jersey law firm. Mr. Goldberg is a director and serves on
the audit committee of each of Shelbourne Properties I, Inc.,
Shelbourne Properties II, Inc. and Shelbourne Properties III,
Inc., three public real estate investment trusts.
Neil Koenig(1) 53 Mr. Koenig has over 25 years of finance experience in the
June 2003 real estate industry. Mr. Koenig is a partner at Imowitz
Koenig & Co., LLP, a certified public accounting and
consulting firm, which was formed in 1980. Mr. Koenig has
acted in various capacities for numerous real estate finance
ventures, both in an internal and external capacity and
currently oversees an accounting and consulting practice for
real estate clients with a portfolio value in excess of $5
billion. In addition, Mr. Koenig acted as Interim Chief
Executive Officer from June 2003 through December 2003 and
Interim Chief Financial Officer of the Trust during 2003. Mr.
Koenig also acts as the part-time Chief Financial Officer and
is a member of the Board of Directors of Orthometrix, Inc., a
public company which manufacturers and distributes medical
and fitness related equipment.
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CLASS II-TERM EXPIRING AT THE 2007 ANNUAL MEETING OF BENEFICIARIES
Bruce R. Berkowitz. 45 Mr. Berkowitz has been Managing Member of Fairholme Capital
December 2000 Management L.L.C., a registered investment adviser, since
June 1997 and President and Director of Fairholme Funds,
Inc., a registered investment company under the Investment
Company Act of 1940, since December 1999. Since December,
2001, Mr. Berkowitz has also been a Director and Deputy
Chairman of Olympus Re Holdings, Ltd. and Olympus Reinsurance
Company, Ltd., both of Bermuda. Mr. Berkowitz is a director
of Safety Insurance Group, Inc., a publicly- held property
and casualty insurer. He served as Managing Director of Smith
Barney, Inc., a subsidiary of The Travelers Inc., a
diversified financial services holding company, from 1995 to
May 1997.
Arthur N. Queler(1) Mr. Queler has been a private investor since 1996. From 1991
December 2003 to 1996, Mr. Queler was the Chief Financial Officer and
principal in National Property Investors, Inc., a real estate
company, with interests in over 100 real properties
consisting of multi-family apartments, office buildings,
shopping centers and hotels.
(1) If the proposal set forth under Proposal No. 4 is adopted, Messrs.
Koenig and Queler have indicated that they will resign from the Board
and, it is expected, that Michael L. Ashner, the Chief Executive
Officer of the Trust, and Peter Braverman, the Executive Vice President
of the Trust, will be elected to fill such vacancies. See "Executive
Officers" below for biographical information on Messrs. Ashner and
Braverman.
It is the policy of the Board to have all members of the Board in
attendance at the Annual Meeting of Beneficial Holders, or if unavailable to
attend in person, to make arrangement, if possible, to participate by telephone
or video conference.
BACKGROUND
As you are aware, the Trust's proposed merger with Gotham Partners was
terminated on June 25, 2003. Thereafter, on November 26, 2003, the Trust entered
into a Stock Purchase Agreement with FUR Investors, LLC, ("FUR Investors") an
entity controlled by Michael L. Ashner, pursuant to which the Trust agreed to
sell to FUR Investors a minimum of 5,000,000 and a maximum of 5,185,724 newly
issued common shares for at a price of $2.60 per share. As part of the
transaction, FUR Investors was required to, and did, commence a tender offer to
purchase up to 5,000,000 common shares, at a price of $2.30 per share. Upon
consummation of the tender offer, on December 31, 2003, FUR Investors acquired
5,000,000 common shares pursuant to the tender offer at a price of $2.30 per
share and purchased an additional 5,000,000 newly issued common shares pursuant
to the terms of the Stock Purchase Agreement for a price of $2.60 per share. As
a result of these purchases, FUR Investors acquired a total of 10,000,000 of the
outstanding common shares representing 32.2% of the total outstanding common
shares.
In connection with the transactions contemplated by the Stock Purchase
Agreement, (i) Michael L. Ashner was appointed as the Chief Executive Officer of
the Trust, (ii) the Trust entered into an Advisory Agreement with FUR
Advisors, LLC ("FUR Advisors"), an affiliate of FUR Investors, pursuant to which
FUR Advisors is to provide asset management and other services to the Trust,
(iii) Mr. Ashner entered into an Exclusivity Agreement pursuant to which Mr.
Ashner agreed that so long as he is the Chief Executive Officer of the Trust,
substantially all real estate related transactions of which he becomes aware and
which are not related to assets presently held by one of his affiliates must
first be offered to the Trust, and (iv) FUR Investors entered into a covenants
agreement as described below. In addition, Daniel J. Altobello and Jeffrey
Citrin resigned as members of the Board of Trustees, and three new trustees were
appointed to the Board of Trustees.
Pursuant to the terms of the covenants agreement, FUR Investors agreed
that until the later of the time when (i) Michael L. Ashner is no longer serving
as either Chairman or Chief Executive Officer of the Trust and (ii)
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Mr. Ashner, FUR Investors or other affiliates of Mr. Ashner (the "Ashner
affiliates") are no longer beneficial owners of at least 10% of the outstanding
Common Shares:
o FUR Investors will not propose, and will vote all of its Common Shares
against, any action which would impair the Trust's status as a real
estate investment trust unless a majority of independent trustees then
in office determine that it would be in the Trust's best interest to do
so;
o FUR Investors will not take any affirmative action which would cause
the Common Shares to cease to be subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, except as approved
by a majority of the independent trustees;
o FUR Investors will not take any action which would cause the Common
Shares to cease to be listed for trading on a major stock exchange,
except as approved by a majority of the independent trustees;
o So long as the Trust has 300 or more holders of Common Shares, FUR
Investors will not take any affirmative action which would cause the
Trust to fail to comply with the corporate governance provisions
applicable to a listed company including, in all cases, Section 303A of
the New York Stock Exchange Listing Standards (whether or not such rule
would otherwise apply to the Trust) except as otherwise approved by a
majority of independent trustees.
o FUR Investors will not take any action to amend the provisions of
Section 11.13 of the Trust's Declaration of Trust, which requires all
transactions between the Trust and the Trust's officers, trustees or
advisor (or their affiliates) to be approved by a majority of the
board, including a majority of the independent trustees;
o FUR Investors, Mr. Ashner and all Ashner affiliates will vote all their
Common Shares in proportion to the votes cast by other holders of
Common Shares at any meeting of holders of Common Shares with respect
to any proposal by such persons or any trustee of the Trust affiliated
with such persons relating to a transaction in which FUR Investors, Mr.
Ashner or any Ashner affiliate have an economic interest. This
restriction will not apply, however, to (i) certain amendments to the
Declaration of Trust, (ii) the election to the Board of up to two
nominees designated by FUR Investors, (iii) any election of qualified
independent directors and (iv) any transaction approved and recommended
by a majority of the independent trustees, if a majority of the
independent trustees has determined that FUR Investors, Mr. Ashner and
any Ashner affiliate may vote their common shares in such manner as FUR
Investors, Mr. Ashner and any Ashner affiliate determines.
BOARD MEETINGS AND COMMITTEES
During 2003, the Board met or acted through written consent 27 times.
Each Trustee attended all of the meetings except that current Trustees Messrs.
Embry and Berkowitz, and former Trustees, Messrs. Altobello and Citrin, each
missed one meeting.
The Trust's by-laws give the Board the authority to delegate its powers
to a committee appointed by the Board. All committees are required to conduct
meetings and take action in accordance with the directions of the Board and the
provisions of the Trust's by-laws. The Board has appointed three standing
committees: an audit committee, a compensation committee and a nominating and
corporate governance committee. Certain of the committees' principal functions
are described below.
Audit Committee
The Audit Committee:
o reviews annual and quarterly consolidated financial statements
with the Trust's management and independent auditors;
o recommends the appointment and reviews the performance,
independence, and fees of the Trust's independent auditors and
the professional services they provide;
o oversees the Trust's system of internal accounting controls and
the internal audit function; and
5
o discharges other responsibilities, including those described in
the "Audit Committee Report" on page 11.
The Board has determined that Mr. Blasberg is an "audit committee
financial expert" as defined in Item 401(h)(2) of Regulation S-K. Although
Messrs. Blasberg and Goldberg serve as members of the Audit Committee for each
of Shelbourne Properties I, Inc, Shelbourne Properties II, Inc. and Shelbourne
Properties III, Inc., the Board has determined that their serving on such
committees will not have a negative impact on their ability to serve on the
Board's Audit Committee as each of the Shelbourne entities are presently being
liquidated.
The Board has adopted a written charter for the Trust's Audit
Committee, which is attached hereto as an Appendix A to this Proxy Statement.
The prior Audit Committee held 6 meetings during the 2003 fiscal year. On March
__, 2004, the Audit Committee met with the independent auditors of the Trust to
discuss the Trust's 2003 financial statements.
FOR FURTHER INFORMATION WITH RESPECT TO THE AUDIT COMMITTEE, SEE "AUDIT
COMMITTEE REPORT" WHICH BEGINS ON PAGE 11 OF THIS PROXY STATEMENT.
Compensation Committee
The Compensation Committee:
o recommends to the Board the compensation policies and
arrangements for the Trust's officers and advisors and
affiliates;
o ensures appropriate oversight of the Trust's executive
compensation programs and human resources policies; and
o will, as appropriate, report to Beneficiaries on the Trust's
executive compensation policies and programs.
On January 8, 2004, Messrs. Berkowitz, Blasberg, Embry and Goldberg,
independent Trustees of the Trust, were nominated as members of the Corporate
Governance Committee. The Compensation Committee held no meetings during the
2003 fiscal year.
FOR FURTHER INFORMATION WITH RESPECT TO THE COMPENSATION COMMITTEE, SEE
"COMPENSATION COMMITTEE REPORT" WHICH BEINGS ON PAGE 12 OF THIS PROXY STATEMENT.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee:
o reviews the qualifications of current and potential Trustees
including determining whether they are "independent" under the
listing standards of the New York Stock Exchange;
o reviews each Trustee's continued service on the Board;
o reviews outside activities of Board members and resolves any
issue of possible conflict of interest;
o considers nominees for trustees of the Trust submitted
in writing to the Chairman of the Nominating
Committee (along with other information submitted in accordance
with the Trust's By-laws and Declaration of Trust), which are
submitted by executive officers of the Trust, current Trustees,
search firms engaged by the Nominating Committee, by others in its
discretion and, nominees for trustee proposed by a Beneficiary in
accordance with the terms of the Trust's By-laws and Declaration
of Trust;
o considers proposals submitted by Beneficiaries for inclusion in
the Trust's Annual General Meeting proxy statement if they are
submitted in writing to the Chairman of the Nominating Committee
at the principal address of the Trust in accordance with the
provisions of the Trust's By-laws and Declaration of Trust and so
long as the submitting Beneficiary meets the qualifications and
complies with the procedures provided in the proxy rules of the
Securities and Exchange Commission. All such
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proposals shall be accompanied by information with respect to the
submitting shareholder sufficient for the committee to determine
whether such qualifications are met;
o reviews any other shareholder communications intended for
management of the Trust or the Board of Trustees or an individual
Trustee and the Nominating Committee shall determine, in its
discretion, considering the identity of the submitting Beneficiary
and the materiality and appropriateness of the communication,
whether, and to whom within the Trust, to forward the
communication;
o recommends nominations for members of the Board; and
o reviews and assesses the adequacy of the Audit Committee's and
Compensation Committee's charters.
The Trust's Nominating and Corporate Governance Committee is composed
of Messrs. Berkowitz, Blasberg, Embry and Goldberg, all of which are independent
Trustees of the Trust. The Nominating and Corporate Governance Committee held no
meetings during the 2003 fiscal year.
FOR FURTHER INFORMATION WITH RESPECT TO THE NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE, SEE "NOMINATING COMMITTEE AND CORPORATE GOVERNANCE
COMMITTEE REPORT" WHICH BEINGS ON PAGE 13 OF THIS PROXY STATEMENT.
EXECUTIVE OFFICERS
For calendar year 2003, the Trust had only one officer, Neil Koenig.
Effective December 31, 2003, Mr. Michael L. Ashner was appointed as the Chief
Executive Officer and President of the Trust and Mr. Koenig resigned. In
addition, on January 8, 2004, the Board elected additional officers of the
Trust. All officers serve at the discretion of the Board. Set forth below is
certain information regarding the executive officers and certain other officers
of the Trust at March 1, 2004:
Name Age Current Position
-------------------------------- --------- --------------------------------------------------
Michael L. Ashner 51 Chief Executive Officer and President
Peter Braverman 51 Executive Vice President
Carolyn Tiffany 37 Chief Operating Officer and Secretary
Thomas Staples 46 Chief Financial Officer
Mr. Ashner has been the Chief Executive Officer and President of the
Trust since December 31, 2003. Mr. Ashner serves as the Chief Executive Officer
of Winthrop Financial Associates, A Limited Partnership and its affiliates
("WFA"), a position he has held since January 15, 1996, as well as the Chief
Executive Officer of Newkirk MLP Corp., the manager of the general partner of
The Newkirk Master Limited Partnership ("Newkirk"). Both WFA and Newkirk are
real estate companies with over $2 billion in assets owned and/or managed. Since
August 2002, Mr. Ashner has also served as the Chief Executive Officer and a
Director of Shelbourne Properties I, Inc., Shelbourne Properties II, Inc. and
Shelbourne Properties III, Inc., three separate publicly traded real estate
investment trusts listed on the American Stock Exchange and that are currently
liquidating. Since 1981, Mr. Ashner has been Chairman of Exeter Capital
Corporation, a firm that has organized and administered real estate limited
partnerships. Since August 2001, Mr. Ashner has also served as Chief Executive
Officer of AP-Fairfield GP, LLC, the general partner of Fairfield Inn By
Marriott Limited Partnership, an entity that owns and operates 46 Fairfield
Inns. Mr. Ashner also currently serves on the Boards of Directors of the
following publicly traded companies: Greate Bay Hotel and Casino Inc., a hotel
and casino operator, and NBTY Inc., a manufacturer, marketer and retailer of
nutritional supplements.
Mr. Braverman has been the Executive Vice President of the Trust since
January 8, 2004. Mr. Braverman has served as the Executive Vice President of WFA
and its affiliates since January 1996. Mr. Braverman also serves as the
Executive Vice President of Newkirk. He has also been an Executive Vice
President of AP-Fairfield GP, LLC since August 2001. Since August 2002, Mr.
Braverman has also served as the Executive Vice President and a Director of
Shelbourne Properties I, II and III.
Ms. Tiffany has been the Chief Operating Officer and Secretary of the
Trust since January 8, 2004. Since December 1997, Ms. Tiffany has served as the
Chief Operating Officer of WFA. Ms. Tiffany also serves as Vice President,
Treasurer, Secretary and Chief Financial Officer of Shelbourne Properties I, II
and III. In addition, Ms.
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Tiffany is the Chief Operating Officer of Newkirk and has also been
Chief Operating Officer of AP-Fairfield GP, LLC since August 2001.
Mr. Staples has been the Chief Financial Officer of the Trust since
January 8, 2004. Mr. Staples, has been with WFA since 1995 and has served as its
Chief Financial Officer since January 1999. Mr. Staples is also the Chief
Financial Officer of Newkirk. Since August 2002, Mr. Staples has also served as
Assistant Treasurer of Shelbourne Properties I, II and III. He also serves as
Chief Financial Officer and Treasurer of AP-Fairfield GP, LLC. Mr. Staples is a
certified public accountant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 15,
2004 (except as otherwise indicated) regarding the ownership of Common Shares by
(i) each person who is known to the Trust to be the beneficial owner of more
than 5% of the outstanding shares of Common Shares, (ii) each Trustee and
nominee for Trustee, (iii) each executive officer named in the Summary
Compensation Table contained herein, and (iv) all current executive officers and
Trustees of the Trust as a group. Except as otherwise indicated, each such
Beneficiary has sole voting and investment power with respect to the shares
beneficially owned by such Beneficiary.
NAME AND ADDRESS POSITION WITH AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER THE TRUST BENEFICIAL OWNERSHIP(1) OF CLASS
------------------- --------- ----------------------- --------
FUR Investors, LLC -- 10,000,000(2) 32.2%
FUR Holdings LLC
WEM-FUR Investors LLC
100 Jericho Quadrangle
Suite 214
Jericho, NY 11753
Michael L. Ashner President and Chief 10,000,000(3) 32.2%
100 Jericho Quadrangle Executive Officer
Suite 214
Jericho, NY 11753
Bruce R. Berkowitz Trustee 237,784(4) *
Arthur Blasberg, Jr. Trustee 55,000 *
Peter Braverman Executive Vice (5) (5)
President
Talton Embry Trustee 1,329,902(6) 4.28%
Howard Goldberg Trustee 40,900 *
Neil Koenig Trustee 11,000 *
Arthur N. Queler Trustee 0 0
Thomas Staples Chief Financial (5) (5)
Officer
Carolyn Tiffany Chief Operating (5) (5)
Officer and Secretary
8
NAME AND ADDRESS POSITION WITH AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER THE TRUST BENEFICIAL OWNERSHIP(1) OF CLASS
------------------- --------- ----------------------- --------
All Trustees and executive officers as a 11,674,586 37.59%
group
Kensington Investment Group, Inc. (7) -- 4,072,100 13.11%
4 Orinda Way
Suite 200-C
Orinda, California 94563
*Less than 1%
(1) Unless otherwise indicated, shares are beneficially owned by indicated
holder.
(2) Based upon information contained in Amendment No. 1 to Schedule 13D as
filed by FUR Investors with the Securities and Exchange Commission on
January 7, 2004.
(3) Comprised of shares owned by FUR Investors. Mr. Ashner is the managing
member of WEM-FUR Investors LLC, the managing member of FUR Holdings,
LLC, the sole member of FUR Investors. As such, Mr. Ashner may be
deemed to beneficially own all shares owned by Investors.
(4) Mr. Berkowitz directly owns 36,600 shares of Common Shares and 237,184
shares of Common Shares are held by Fairholme Ventures II, L.L.C., an
entity in which Mr. Berkowitz is the managing member. In addition, an
additional 268,375 shares are held in investment accounts of clients of
Fairholme Capital Management, L.L.C., a registered investment advisor
and affiliate of Mr. Berkowitz. Mr. Berkowitz has disavowed management
and supervision responsibility for the shares owned by clients of the
advisor and therefore does not beneficially own such shares.
(5) Mr. Braverman, Mr. Staples and Ms. Tiffany are members of WEM-FUR
Investors LLC, the managing member of FUR Holdings, LLC, the sole
member of FUR Investors. Accordingly, Mr. Braverman, Mr. Staples and
Ms. Tiffany have an indirect pecuniary interest in approximately
246,000, 120,000 and 160,000 of the shares of Common Shares owned by
FUR Investors. However, Mr. Braverman, Mr. Staples and Ms. Tiffany do
not exercise investment control over the shares held by FUR Investors.
Accordingly, Mr. Braverman, Mr. Staples and Ms. Tiffany are not deemed
to beneficially own any of such shares under Section 13 or Section 16
of the Securities Exchange Act of 1934, as amended.
(6) The number of shares reported is owned beneficially by discretionary
accounts managed by Mr. Embry. Mr. Embry disclaims any beneficial
ownership of any such securities reported herein for purposes of
Section 16 or for any other purposes.
(7) Information is derived from the 13-G filing by Kensington Investment
Group, Inc. with the Securities and Exchange Commission on January 21,
2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Trust's executive officers, Trustees and persons
who beneficially own greater than 10% of a registered class of the Trust's
equity securities to file certain reports ("Section 16 Reports") with the
Securities and Exchange Commission with respect to ownership and changes in
ownership of the Common Shares and other equity securities of the Trust. Based
solely on the Trust's review of the Section 16 Reports furnished to the Trust
and written representations from certain reporting persons, all Section 16(a)
requirements applicable to its officers, Trustees and greater than 10%
beneficial owners have been complied with.
9
EXECUTIVE COMPENSATION
The current executive officers receive no remuneration from the Trust.
From June 2003 through December 2003, Mr. Neil Koenig served as the Interim
Chief Executive Officer of the Trust and from January 1, 2003 to December 31,
2003, served as Interim Chief Financial Officer. In such capacities, Mr. Koenig
received remuneration directly from the Trust as indicated in the following
table:
Annual Compensation Long-Term Compensation
Awards Payouts
Name and Principal Year Salary ($) Bonus Other Annual Restricted Securities LTIP All Other
Position ($) Compensation Stock Underlying Payouts Compen-sation
($) Award(s) Options/ ($) ($)
($) SARs (#)
Neil Koenig(1) 2003 $60,000 -- -- -- 100,000 -- (2)
Interim CEO and
Interim CFO
(1) Mr. Koenig served as the Interim Chief Financial Officer of the Trust
for all of 2003 and was appointed Interim Chief Executive Officer in
June 2003. Mr. Koenig was compensated $5,000 per month in such
capacities.
(2) Mr. Koenig also received $15,000 in connection with his serving as a
Trustee. In addition, Real Estate Systems Implementations Group, LLC,
an entity in which Mr. Koenig is the managing member, received
remuneration for providing asset management and accounting services to
the Trust. See "Compensation Committee Interlocks and Insider
Participation" below.
Effective December 31, 2003, the Trust entered into an advisory
agreement with FUR Advisors, an entity in which the executive officers have an
equity interest. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" on page 19
of this Proxy Statement for information relating to the fees paid under the
terms of the advisory agreement.
OPTION GRANTS IN FISCAL 2003
The Trust has a 1999 Long Term Incentive Performance Plan pursuant to
which the Board may, in its discretion, grant options exercisable for Common
Shares. None of the current executive officers of the Trust were granted options
during the year ended December 31, 2003. During the year ended December 31,
2003, the prior Board granted the following options:
Potential Per Share
% of Total Realizable Value at Assumed
Number of Options Granted Annual Rates of Stock Price
Options to Employees Exercise Price Expiration Appreciation for Option Term
Name Granted in fiscal year ($/Share) Date 5% 10%
- ---- ------- -------------- --------- ---- -- ---
Neil Koenig 100,000 100% 2.23 12/16/13 $3.63 $5.78
COMPENSATION OF TRUSTEES
During the calendar year 2003, the Trust's non-employee Trustees, Bruce
Berkowitz, Talton Embry, and Daniel Altobello each received $28,500 and Jeffrey
Citrin 27,000 for their services as Trustees. In addition, Neil Koenig, the
Trust's interim Chief Executive Officer received $15,000 for serving as a
Trustee during 2003. The Trust's current non-employee Trustees, Messrs.
Berkowitz, Blasberg, Embry, Goldberg, Koenig and Queler will receive $30,000
annually for their services as Trustees. In addition, each member of the audit
committee will
10
receive $500 for each committee meeting they attend. Trustees of the Trust who
are also officers of the Trust receive no additional compensation for serving
on the Board. However, all Trustees are reimbursed for travel expenses and
other out-of-pocket expenses incurred in connection with their service on the
Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neil Koenig, the Interim Chief Executive Officer and Interim Chief
Financial Officer during calendar 2003 and a Trustee of the Trust is the
managing member of Real Estate Systems Implementations Group, LLC ("RE
Systems"). During the years ended December 31, 2003, 2002 and 2001, RE Systems
provided substantially all of the asset management, accounting and other
services to the Trust. RE Systems received fees of $500,000, $500,000, and
$600,000 from the Trust and First Union Management Inc., the Trust's
wholly-owned subsidiary, for providing these services in each of 2003, 2002 and
2001, respectively.
AUDIT COMMITTEE REPORT
[TO BE PROVIDED IN DEFINITIVE PROXY STATEMENT]
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the February 27, 2004 Compensation Committee Report on
Executive Compensation. The members of the Compensation Committee on the date of
such report were Bruce Berkowitz, Arthur Blasberg, Jr. Talton Embry and Howard
Goldberg.
The Compensation Committee acts pursuant to the Compensation Committee
Charter and is comprised of four members who were independent within the meaning
of Section 303A.02 of the Listing Standards.
EXECUTIVE COMPENSATION PRINCIPLES
During 2003, the Interim Chief Executive Officer and Interim Chief
Financial Officer received $5,000 per month for serving in such capacity. During
2003, all other persons providing services to the Trust commensurate with that
of executive officers were not compensated directly by the Trust but received
remuneration from their employment with Real Estate Systems Implementations
Group, LLC ("RE Systems"). Effective December 31, 2003, the Trust entered into
an Advisory Agreement with FUR Advisors LLC to provide substantially all asset
management, accounting and investor services for the Trust. In light of the
entering into of the Advisory Agreement with FUR Advisors LLC, it is not
anticipated that the Trust will become responsible for the payment of any
remuneration of its executive officers. If the Trust were to retain its
executive officers directly, the Compensation Committee would, in making its
compensation recommendations to the Board consider (1) the potential holding
periods of the Trust's assets, (2) the number of assets owned by the Trust, (3)
the business plan with respect to such assets, the amount of asset management
required with respect to the assets, (4) the overall investment prospects of the
Trust and short and long-term business plan of the Trust, and (5) with respect
to a specific executive officer, such officer's specific responsibilities,
experience and overall performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
For fiscal year 2003, Neil Koenig, the Trust's Interim Chief Executive
Officer, received remuneration of $5,000 per month. The current executive
officers have been, and so long as the Advisory Agreement is in effect, will
continue to be, compensated by FUR Advisors LLC, in each case, in their
capacities as officers and employees of such company, rather than as executive
officers of the Trust.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), a publicly held company, such as the Trust, will not be entitled
to a Federal income tax deduction for compensation paid to the chief
11
executive officer or any one of the other four most highly compensated officers
of the Trust to the extent that compensation paid to such officer exceeds $1
million in any fiscal year, unless such compensation is subject to certain
exceptions set forth in the Code for compensation that qualifies as performance
based. If the Trust were to compensate its executive officers directly, the
Board and the Compensation Committee would consider Section 162(m) in
structuring compensation for the Trust's executive officers; however, the Board
or the Compensation Committee may, where it deems appropriate, implement
compensation arrangements that do not satisfy the exceptions to Section 162(m).
Members of the Compensation Committee
Bruce Berkowitz
Arthur Blasberg, Jr.
Talton Embry
Howard Goldberg
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT
The following is the February 27, 2004 Nominating and Corporate
Governance Committee Report. The members of the Nominating and Corporate
Governance Committee on the date of such report were Bruce Berkowitz, Arthur
Blasberg, Jr., Talton Embry and Howard Goldberg.
The Nominating and Corporate Governance Committee acts pursuant to the
Nominating and Corporate Governance Committee Charter and is comprised of four
members who were independent within the meaning of Section 303A.02 of the
Listing Standards.
POLICY WITH RESPECT TO NOMINATIONS FOR THE BOARD.
The Nominating and Corporate Governance Committee considers candidates
for Board membership suggested by its members and other Board members, as well
as management and Beneficiaries. A Beneficiary who wishes to recommend a
prospective nominee for the Board should notify the Trust's Secretary or any
member of the Nominating and Corporate Governance Committee in writing with
whatever supporting material the Beneficiary considers appropriate. The
Nominating and Corporate Governance Committee will also consider whether to
nominate any person nominated by a Beneficiary pursuant to the provisions of the
Trust's Bylaws relating to Beneficiary nominations as described in "Beneficiary
Proposals," below.
Once the Nominating and Corporate Governance Committee has identified a
prospective nominee, the Committee makes an initial determination as to whether
to conduct a full evaluation of the candidate. This initial determination is
based on whatever information is provided to the Committee with the
recommendation of the prospective candidate, as well as the Committee's own
knowledge of the prospective candidate, which may be supplemented by inquiries
to the person making the recommendation or others. The preliminary determination
is based primarily on the need for additional Board members to fill vacancies or
expand the size of the Board and the likelihood that the prospective nominee can
satisfy the evaluation factors described below. If the Committee determines, in
consultation with the Chairman of the Board and other Board members as
appropriate, that additional consideration is warranted, it may gather
additional information about the prospective nominee's background and experience
and to report its findings to the Committee. The Committee then evaluates the
prospective nominee based on various criteria including:
o the ability of the prospective nominee to represent the
interests of the Beneficiaries of the Trust;
o the prospective nominee's standards of integrity, commitment
and independence of thought and judgment;
o the prospective nominee's ability to dedicate sufficient time,
energy and attention to the diligent performance of his or her
duties, including the prospective nominee's service on other
public company boards; and
o the extent to which the prospective nominee contributes to the
range of talent, skill and expertise appropriate for the
Board.
12
The Committee also considers such other relevant factors as it deems
appropriate, including the current composition of the Board, the balance of
management and independent trustees, the need for Audit Committee expertise and
the evaluations of other prospective nominees. In connection with this
evaluation, the Committee determines whether to interview the prospective
nominee, and if warranted, one or more members of the Committee, and others as
appropriate, interview prospective nominees in person or by telephone. After
completing this evaluation and interview, the Committee makes a recommendation
to the full Board as to the persons who should be nominated by the Board, and
the Board determines the nominees after considering the recommendation and
report of the Committee.
POLICY WITH RESPECT TO BENEFICIARY COMMUNICATIONS
The Chairman of the Nominating and Corporate Governance Committee shall
initially review all shareholder communications intended for management of the
Trust or the Board of Trustees or an individual Trustee and the Chairman, or if
the Chairman so elects, the Nominating and Corporate Governance Committee as a
whole, shall determine, in its discretion, considering the identity of the
submitting Beneficiary and the materiality and appropriateness of the
communication, whether, and to whom within the Trust, to forward the
communication.
POLICY WITH RESPECT TO INDEPENDENCE OF TRUSTEES
Pursuant to the Committee's Charter, the Board undertook its annual
review of director independence in February 2004. During this review, the Board
considered transactions and relationships between each trustee or any member of
his or her immediate family and the Trust and its subsidiaries and affiliates,
including those reported under "Certain Relationships and Related Transactions"
below. The Board also examined transactions and relationships between trustees
or their affiliates and members of the Trust's senior management or their
affiliates. The purpose of this review was to determine whether any such
relationships or transactions were inconsistent with a determination that the
trustee is independent. In connection with such review, the Committee received
assurance from Mr. Embry that he had recused himself from all decisions relating
to the Imperial Parking Limited matters as he is a director of Imperial Parking
Limited. Mr. Embry further assured the Committee that if a situation arose where
the Trust and Imperial Parking Limited were in conflict, he would immediately
resign from the board of Imperial Parking Limited.
As a result of this review, the Board affirmatively determined that
each of Messrs. Berkowitz, Blasberg, Embry and Goldberg are independent of the
Trust and its management Sections 303.01(B)(2)(a) and (3) of the New York Stock
Exchange listing standards. Mr. Koenig is not considered independent because of
his acting as the Interim Chief Executive Officer of the Trust during 2003 and
the level of compensation paid by the Trust to Real Estate Systems
Implementations Group LLC, the entity that provided asset, accounting and other
services to the Trust and in which Mr. Koenig is the managing member. See
"Certain Relationships and Related Transactions below." Mr. Queler is not
considered independent because of his past business relationships with Mr.
Ashner, the Trust's Chief Executive Office.
POLICY WITH RESPECT TO COMMITTEE CHARTER
The Nominating and Corporate Governance Committee shall review on an
annual basis, or more frequently as it deems advisable, the charters of the
Trust's Audit Committee, Compensation Committee and other committees of the
Board. The Nominating and Corporate Governance Committee shall further review
all amendments to any Committee charters prior to their adoption.
CODE OF ETHICS
The Trust has adopted a Code of Ethics, which are applicable to all
employees of the Trust as well as the Trustees, including the principal
executive officer, the principal financial officer and the principal accounting
officer. The Code of Ethics can be obtained upon request from the Trust's
Secretary and at the Trust's website (www.firstunion-reit.net).
13
Members of the Compensation Committee
Bruce Berkowitz
Arthur Blasberg, Jr.
Talton Embry
Howard Goldberg
PROPOSAL NO. 2 - SELECTION OF INDEPENDENT AUDITORS
At the recommendation of the Audit Committee, the Board has selected
Xxx to serve as independent auditors of the Trust for its fiscal year ending
December 31, 2004. The Audit Committee recommended Xxx after it solicited bids
from three big 4 accounting firms including KPMG, LLP (the Trust's Auditors for
the 2003 fiscal year). See "Audit Committee Report" above.
During the Trust's past two fiscal years, there were: (i) no
disagreements with the KPMG, LLP on any matter of accounting principle or
practice, financial statement disclosure, or auditing scope or procedure which
disagreements if not resolved to the KPMG, LLP's satisfaction, would have caused
them to make reference to the subject matter in connection with their report on
the Trust's financial statements for such year; and (ii) there were no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K promulgated
under the Securities Exchange Act of 1934, as amended.
Although Beneficiary ratification of the Board's action in this respect
is not required, the Board considers it desirable for Beneficiaries to pass upon
the selection of independent auditors and, if the Beneficiaries disapprove of
the selection, intends to consider other firms for selection as the independent
auditors for the current fiscal year.
Representatives of Xxx are expected to be present at the Meeting, will
have an opportunity to make a statement if they so desire and will be available
to respond to questions from Beneficiaries. It is [not] expected that
representatives of KMPG LLP will be present at the Meeting.
Audit Fees. The Trust paid fees charged by KPMG, LLP for the fiscal
years ended December 31, 2003 and 2002 of $124,000 and $134,000, respectively,
for the audit of its annual financial statements and the review of the Trust's
Form 10-Q for the such fiscal years for proper financial presentation and
disclosures.
Audit-Related Fees. The Trust did not pay any fees to KPMG, LLP for the
fiscal years ended December 31, 2003 and 2002 for audit related fees
Tax Fees. The Trust paid fees charged by KPMG, LLP for the fiscal years
ended December 31, 2003 and 2002 of $2,500 and $5,400, respectively, for tax
related fees.
All Other Fees. The Trust paid other fees charged by KPMG, LLP for the
fiscal years ended December 31, 2003 and 2002 of $0 and $215,00, respectively.
The fees paid to KPMG, LLP in 2002 were for services rendered in connection with
the Gotham Partners transaction.
All of the work performed by KPMG, LLP on the audit of annual financial
statements for fiscal year 2003 was performed by persons employed by KPMG, LLP
on a full-time basis.
PROPOSAL NO. 3 - AMENDMENT TO DECLARATION OF TRUST TO ELIMINATE STAGGERED
TERMS FOR TRUSTEES
Pursuant to the Trust's Declaration of Trust, the Board is divided into
three classes. As a result, Beneficiaries have the right to elect each class of
Trustees once every three years. If the Board were not divided into three
classes, all Trustees would be subject to Beneficiary election at each Annual
Meeting of Beneficiaries. Because a staggered board provides for only one-third
of the Trustees to be elected each year, it can have a negative impact on the
ability of a third party to gain control of the Trust.
14
As a condition to the former Board granting a waiver to FUR Advisors
to acquire up to 33% of the outstanding Common Shares, FUR Advisors agreed to
request that the Board of Trustees adopt an amendment to eliminate the staggered
Board. In this regard, the Board has approved, subject to obtaining the consent
of at least 70% of the Common Shares, an amendment to the Trust's Declaration of
Trust to eliminate the staggered Board. In addition, the Board has adopted a
further amendment to Section 8.1 of the Declaration of Trust to provide that the
number of Trustees may be set by a vote of a majority of the then Trustees as
well as a majority of the outstanding shares of Common Shares, as is presently
provided.
Accordingly, your consent is sought to amend Section 8.1 of the
Declaration of Trust to read in its entirety as follows:
"Section 8.1 Number of Trustees.
The number of Trustees shall be not less than three nor more
than fifteen, as from time to time determined either by a
majority of the Trustees then in office or at an annual or
special meetings of the Beneficiaries by affirmative vote of
the holders of a majority of the shares represented and
entitled to vote at such meetings. Trustees shall be all of
one class. A Trustee may be any individual (who is a citizen
of the United States and not a minor) or an entity. Whenever
there shall be a vacancy, until such a vacancy is filled, the
continuing or surviving Trustee or Trustees then in office
shall have all the powers granted to the Trustees and
discharge all the duties imposed upon the Trustees by this
Declaration. A majority of the Trustees shall not be
affiliated with an adviser of the Trust or any organization
affiliated with an adviser of the Trust. The term "majority
of the Trustees" whenever used herein shall include one
Trustee if only one Trustee is at the time in office
regardless of the fixed number of trusteeships."
In order to adopt the foregoing amendment to the Declaration of Trust
("Proposal No. 3") holders of at least 70% of the outstanding Common Shares need
to vote FOR this proposal on the enclosed Proxy Card. The Board of Trustees
recommends that Beneficiaries vote FOR this proposal. The Board of Trustees,
executive officers of the Trust and their affiliates, which collectively hold
approximately 37.59% of the outstanding Common Shares have indicated that they
intend to vote for Proposal No. 3.
If Proposal No. 3 is not approved by the requisite vote of
Beneficiaries, the terms of the Trustees will continue to be staggered and
Beneficiaries will vote annually for the applicable class of Trustees for such
year.
15
PROPOSAL NO. 4 - AMENDMENT TO DECLARATION OF TRUST TO MODIFY RESTRICTIONS
ON BUSINESS ACTIVITIES OF TRUSTEES
Pursuant to Section 8.10 of the Trust's Declaration of Trust, a person
is not qualified to serve on the Board if such person:
owns, directly or indirectly, more than one percent 1% of the
securities of, or acts as an officer, trustee, director, employee
of or consultant for, or is otherwise affiliated with or
controlled by, any real estate investment trust, or any other real
estate company (a) that competes with the Trust for investments,
(b) that is a major supplier of services to the Trust, or (c) in
which the Trust has a significant financial interest, or any
person who is an agent of, or is otherwise affiliated with or
controlled by any such person.
The effect of this provision is to prohibit officers, directors or
equity holders of entities that provide asset management services to the Trust
from serving on the Board event though such persons may be most knowledgeable
with respect to the Trust's assets. In this regard, Messrs. Ashner and
Braverman, the Chief Executive Officer and Executive Vice President,
respectively, of the Trust, are prohibited from serving on the Board because
they are officers and equity holders of FUR Advisors, the entity that provides
asset management services to the Trust. Further, the current provision restricts
persons associated with investment advisors or companies that may own more than
1% of another real estate investment trust even though such persons do not make
the investment decisions for people they advise or have any control with respect
to investments by such real estate investment trusts or real estate companies
themselves.
In order to enable the permit Board to have members who are "inside
directors" as well as to permit persons who are affiliated with investment
management companies that may hold non-controlling interests in competitive
companies or service providers to sit on the Board, the Board has approved,
subject to obtaining the consent of a majority in interest of the Common Shares,
an amendment to the Trust's Declaration of Trust to modify the foregoing
restriction. Regardless of whether or not this Proposal is approved, the Trust
remains subject to the rules of the New York Stock Exchange which requires the
Board to consist of a majority of "independent directors (trustees)" as defined
by the New York Stock Exchange. Further, under the terms of the Exclusivity
Agreement that Michael Ashner entered into with the Trust, so long as Mr. Ashner
is the Chief Executive Officer of the Trust, substantially all real estate
related transactions of which he becomes aware and which are not related to
assets presently held by one of his affiliates must first be offered to the
Trust. As a result, the potential for a conflict of interest with respect to
potential investments by the Trust has been effectively eliminated.
Accordingly, your consent is sought to amend Section 8.10 of the
Declaration of Trust to read in its entirety as follows:
"SECTION 8.10. TRUSTEE'S OTHER BUSINESS ACTIVITIES.
Each Trustee may from time to time for his own account engage
in, or directly or indirectly be interested in, business
activities of the types conducted or to be conducted by the
Trust; provided however, that any person who owns, directly or
indirectly, more than one percent 1% of the securities of, or
acts as an officer, trustee, director, employee of or
consultant for, or is otherwise affiliated with or controlled
by, any real estate investment trust, or any other real estate
company (a) that competes with the Trust for investments, (b)
that is a major supplier of services to the Trust, or (c) in
which the Trust has a significant financial interest, or any
person who is an agent of, or is otherwise affiliated with or
controlled by any such person, shall not be qualified to serve
as a Trustee; provided, further, however, that the foregoing
restriction shall not apply to (i) employees, officers,
directors, equity holders or affiliates of any third party
that is under contract to provide advisory services to the
Trust pursuant to an agreement in form and substance
substantially the same as that certain Advisory Agreement
dated December 31, 2003, between the Trust and FUR Advisors,
LLC or (ii) to Trustees who (x) hold less than a 10% interest
in such other real estate investments trust, (y) are not, nor
is its affiliate, a member of the board of directors or
involved in the management of such other
16
real estate investment trust, and (z) do not, nor does its
affiliate, exercise any rights with respect to investment
decisions of such other real estate investment trust. ."
If Proposal No. 4 is approved by the requisite vote of Beneficiaries,
it will permit the current executive officers of the Trust to sit on the Board,
if so elected, as well as permit investment entities or accounts that are
managed by Messrs. Berkowitz or Embry to hold non-controlling interests in
entities that may be competitive with the Trust. If this Proposal is adopted,
Messrs. Koenig and Queler have indicated that they will immediately resign from
the Board and it is expected the Messrs. Ashner and Braverman will be elected to
the Board. See "Executive Officers" above for biographical information relating
to Messrs. Ashner and Braverman.
In order to adopt the foregoing amendment to the Declaration of Trust
("Proposal No. 4") a majority of the outstanding Common Shares needs to vote FOR
this proposal on the enclosed Proxy Card. The Board of Trustees recommends that
Beneficiaries vote FOR this proposal. The Board of Trustees, executive officers
of the Trust and their affiliates, which collectively hold approximately 37.59%
of the outstanding Common Shares, have indicated that they intend to vote for
Proposal No. 4.
PROPOSAL NO. 5 - AMENDMENT TO DECLARATION OF TRUST TO ELIMINATE
APPRAISAL REQUIRMENT
Section 11.16 of the Trust's Declaration of Trust provides that "the
consideration paid for real property acquired by the Trust after its initial
investment in the Union Commerce Building shall be based upon the value of the
property to the Trust as determined by the Trustees on the basis of a real
estate appraisal prepared by a qualified, disinterested, independent appraiser."
The Board has determined that although obtaining an appraisal in certain
circumstances may be advisable, the requirement to do so causes the Trust to
incur an unnecessary cost and can have the effect of putting the Trust at a
competitive disadvantage in bidding for real property as any purchase agreement
will be conditioned upon the receipt of an appraisal. This condition, as well as
the time it may take to obtain the appraisal, will, most likely, be looked at as
a negative factor by sellers in determining whether to accept the Trust's offer
or a third party's offer as the seller can not be sure that the Trust can close.
In this regard, the Board has approved, subject to obtaining the
consent of a majority in interest of the Common Shares, an amendment to the
Trust's Declaration of Trust to delete in its entirety Section 11.16 of the
Trust's Declaration of Trust
In order to adopt the foregoing amendment to the Declaration of Trust
("Proposal No. 5") a majority of the outstanding Common Shares needs to vote FOR
this proposal on the enclosed Proxy Card. The Board of Trustees recommends that
Beneficiaries vote FOR this proposal. The Board of Trustees, executive officers
of the Trust and their affiliates, which collectively hold approximately 37.59%
of the outstanding Common Shares have indicated that they intend to vote for
Proposal No. 5.
17
PERFORMANCE GRAPH
The following graph compares the cumulative return among the Common
Shares, a peer group index, the NAREIT index and the Standard & Poor's 500 Stock
Index, for the periods shown. The peer group consists of REITs with a diversity
and other property focus and have a current market value as of February __, 2004
of less than $750M. The Trust believes that this is a more accurate peer group
than the NAREIT index which was previously used as a comparative group by the
Trust. The quarterly changes for the periods shown in the graph are based on the
assumption that $100 had been invested in the Common Shares and each index on
January 1, 1998.
[TO BE PROVIDED IN DEFINITIVE PROXY STATEMENT]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
[TO BE PROVIDED IN DEFINITIVE PROXY STATEMENT]
18
BENEFICIARY PROPOSALS
Any Beneficiary proposals intended to be presented at the 2005 Annual
Meeting of Beneficiaries must be received by the Trust for inclusion in the
Trust's proxy statement and form of proxy relating to that meeting on or before
November 17, 2004. In addition, under the Trust's By-laws, Beneficiaries must
comply with specified procedures to nominate persons for election as Trustees or
introduce an item of business at an annual meeting. Trustee nominations or an
item of business to be introduced at an annual meeting must be submitted in
writing and received by the Trust not less than 120 days in advance of an annual
meeting. To be in proper written form, a shareholder's notice must contain the
specific information required by the Trust's By-laws. A copy of the Trust's
By-laws, which specifies the advance notice procedures, can be obtained from the
Trust by request to the Secretary of the Trust. Any Beneficiary who wishes to
submit a Beneficiary proposal, should send it to the Secretary, First Union Real
Estate Equity and Mortgage Investments, 7 Bulfinch Place, Suite 500, Boston,
Massachusetts 02114.
ANNUAL REPORT
Copies of our Annual Report for the fiscal year ended December 31, 2003
are being mailed to Beneficiaries of record on the Record Date together with
this Proxy Statement.
MISCELLANEOUS
As of the date of this Proxy Statement, the Board does not know of any
other matter to be brought before the Meeting. However, if any other matters not
mentioned in the Proxy Statement are brought before the Meeting or any
adjournments thereof, the persons named in the enclosed Proxy or their
substitutes will have discretionary authority to vote proxies given in said form
or otherwise act, in respect of such matters, in accordance with their best
judgment.
The Trust has retained MacKenzie Partners, Inc. to aid in the
solicitation of proxies. MacKenzie Partners, Inc. will receive a fee not to
exceed $5,000, as well as reimbursement for certain out of pocket expenses
incurred by them in connection with their services, all of which will be paid by
the Trust. All of the costs and expenses in connection with the solicitation of
proxies with respect to the matters described herein will be borne by the Trust.
In addition to solicitation of proxies by use of the mails, Trustees, officers
and employees (who will receive no compensation therefor in addition to their
regular remuneration) of the Trust may solicit the return of proxies by
telephone, telegram or personal interview. The Trust will request banks,
brokerage houses and other custodians, nominees and fiduciaries to forward
copies of the proxy materials to their principals and to request instructions
for voting the proxies. The Trust may reimburse such banks, brokerage houses and
other custodians, nominees and fiduciaries for their expenses in connection
therewith.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL OWNER OF
COMMON SHARES ON THE RECORD DATE, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2003 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
REQUEST SHOULD BE MADE IN WRITING TO CAROLYN TIFFANY,
19
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, 7 BULFINCH PLACE, SUITE
500, BOSTON, MA 02114.
It is important that proxies be returned promptly. Beneficiaries are,
therefore, urged to fill in, date, sign and return the Proxy immediately. No
postage need be affixed if mailed in the enclosed envelope in the United States.
By Order of the Board of Trustees
Carolyn B. Tiffany
Secretary
March __, 2004
20
APPENDIX A
AUDIT COMMITTEE CHARTER
OF
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
[TO BE PROVIDED IN DEFINITIVE PROXY STATEMENT]
A-1
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PROXY FOR ANNUAL MEETING OF BENEFICIARIES
APRIL 15, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Michael L. Ashner and Peter Braverman
or either of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated below, all shares of stock which the
undersigned is entitled to vote, with all powers which the undersigned would
possess if personally present, at the Annual Meeting of Beneficiaries (including
all adjournments thereof) of FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS to be held on Thursday, April 15, 2004 at 2:00 P.M. at The Hilton
Long Island/Huntington, 598 Broad Hollow Road, Melville, New York 11747. THE
BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL PROPOSALS.
1. ELECTION OF TRUSTEES
FOR all nominees WITHHOLD AUTHORITY
----- ---- to vote for all nominees
Bruce R. Berkowitz
Arthur N. Queler
BENEFICIARIES MAY WITHHOLD AUTHORITY TO ELECT ANY OF THE TRUSTEES BY
WRITING THE NAME OF THAT TRUSTEE IN THE SPACE PROVIDED BELOW.
----------------------------------------------------------------
2. APPROVAL of the appointment of auditors as set forth in Proposal No. 2
of the accompanying Proxy Statement.
FOR AGAINST ABSTAIN
--- --- ---
----------------------------------------------------------------
3. APPROVAL of the modification of the Declaration of Trust to eliminate
the staggered terms of Trustees as set forth in Proposal No. 3 of the
accompanying Proxy Statement.
FOR AGAINST ABSTAIN
--- --- ---
----------------------------------------------------------------
4. APPROVAL of the modification of the Declaration of Trust to modify the
provision relating to Business Activities of Trustees as set forth in
Proposal No. 4 of the accompanying Proxy Statement.
FOR AGAINST ABSTAIN
--- --- ---
----------------------------------------------------------------
5. APPROVAL of the modification of the Declaration of Trust to eliminate
the requirement to obtain an appraisal prior to investing in any real
property as set forth in Proposal No. 5 of the accompanying Proxy
Statement.
FOR AGAINST ABSTAIN
--- --- ---
The proxy is authorized to transact such other business as may properly
come before the meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned Beneficiary. If no direction is given, this
proxy will be voted FOR items 1 and 2 in the discretion of said proxy on any
other matter which may come before the meeting or any adjournments thereof.
Dated: , 2004
---------------
-------------------------------
Print Name
-------------------------------
Signature
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, custodian, guardian or corporate
officer, please give your full title as such. If a corporation, please sign full
corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.