GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
February 17, 1995
VIA FEDERAL EXPRESS
Mr. F.X. Jacoby
Three Winthrop Properties, Inc.
Winthrop Financial Associates
One International Place
Boston, Massachusetts 02110
Re: Springhill Lake
Dear F.X.:
This letter is intended as a follow-up to our meeting on Monday, February
13th, and our telephone conversation on February 14th regarding Springhill
Lake.
In our discussions, I raised the following questions, among others:
1. Whether Three Winthrop, as General Partner, would permit Greenbelt
Residential to make a tender offer to purchase limited partner interests in
the Springhill Lake Investor Limited Partnership. Allowing Greenbelt to bid
for limited partner interests on the same basis as your affiliate, Aquarius,
would be beneficial to limited partners because investor limited partners
would be permitted to remain as limited partners or to sell their interests.
This process would allow an "apples to apples" comparison of offers.
On the telephone, you asked what this permission would entail. Simply put,
Three Winthrop would cooperate and take all such reasonable steps as
necessary to amend the Partnership Agreement to allow Greenbelt to acquire
and vote limited partner interests.
2. I asked that you speak with the lender to confirm that the lender would
be prepared to allow, as required under the loan documents, an assumption of
the existing loans by Greenbelt Associates or another financially capable
third party who might be interested in purchasing the project. We are frankly
surprised that, given your fiduciary duty to the limited partners, you have
not undertaken this process. We are also at a loss to understand why you have
not approached other potential purchasers to see if they would be interested
in bidding on the project. Given the number of real estate investment trusts
who are actively pursuing apartment complexes and who might be able to
acquire the Project in a manner which would be tax-free to the limited
partners, we are surprised that Winthrop has not pursued this type of
transaction. Such a transaction might be of great interest to the Investor
Limited Partners and Mr. Lerner.
In our telephone conversation on February 14, you promised to discuss loan
assumption with the lender after you received the revised Greenbelt offer.
Enclosed is the offer as set forth in our February 13th letter to the
Investor Limited Partners, together with revised pages of our Partnership
Interest Purchase Agreement.
3. We have urged Three Winthrop to consider a competitive bidding process
for management. We asked that you advise us of the precise expenses which
will be borne by the Winthrop affiliate under its proposed new management
agreements. Based on our telephone conversation, I understand that you have
sent us a mark-up of the Management Agreement which is an attachment to the
loan documents. I have not yet received that document.
4. Despite our requests, we were unaware of the cash reserves of $3.2
million. Do we now have all of the relevant information regarding the
partnership, including cash reserves and escrows?
As discussed, given the March 2, 1995 deadline for your tender offer, we
would appreciate an immediate response to these matters.
Sincerely,
Edward L. Cohen
Enclosures
cc: George E. Covucci, Esq.
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
February 13, 1995
Dear Springhill Lake Investors Limited Partner:
We warned you not to sell your units in response to the Winthrop/Aquarius
Offer. By now you know why--Winthrop is using cash reserves that already
belong to you to force you either to sell your units at a price fixed by
Winthrop or remain as a minority limited partner in a partnership in which
you will have few rights. DON'T ACCEPT WINTHROP'S "TAKE IT OR LEAVE IT" OFFER
WHEN WE ARE OFFERING YOU A BETTER ALTERNATIVE.
Now that Winthrop finally has provided the financial information that we
have been seeking for over two months, WE HAVE REVISED OUR OFFER TO MAKE
AVAILABLE TO YOU AT LEAST $36,400--more than Aquarius is offering to pay you.
EVEN MORE IMPORTANTLY, IF YOU JOIN WITH US AND VOTE TO CAUSE A SALE OF THE
PROJECT, YOU COULD RECEIVE MORE. Our offer establishes the minimum amount you
will receive if you vote with us. UNDER THE WINTHROP/AQUARIUS OFFER, YOU WILL
NOT RECEIVE MORE THAN $36,000. UNDER OUR OFFER, YOU WILL NOT RECEIVE LESS
THAN $36,400. In addition, if you vote to dissolve the Partnership and to
have the Project sold, we would demand that Winthrop, as a fiduciary,
cooperate in structuring the transfer in a manner that would allow limited
partners who wish to remain in the Partnership to do so. As the successful
purchaser, we would welcome the opportunity to have any of you remain as our
partners.
BECAUSE OUR PROPOSAL GIVES YOU AN OPPORTUNITY TO MAXIMIZE THE RETURN ON
YOUR INVESTMENT, WE URGE YOU TO SIGN AND RETURN THE GREEN CONSENT CARD NOW.
THAT STEP WILL TELL WINTHROP YOU WANT THE PROJECT SOLD NOW AT THE BEST
AVAILABLE PRICE.
Please carefully consider the following:
OUR OFFER PROVIDES YOU WITH MORE CASH
Here is how our revised offer works:
o With the cash reserves of approximately $3.2 million (we just learned
about the size of those reserves from the Winthrop/Aquarius Offer), our
original offer totaled approximately $35,100 per unit. CONTRARY TO WHAT
WINTHROP IS TELLING YOU, THOSE CASH RESERVES BELONG TO YOU AND UNDER OUR
OFFER WILL BE DISTRIBUTED IN CONNECTION WITH THE DISSOLUTION.
o We are willing to add another $843,700 (approximately $1,300 per
investor unit) to our offer--making it worth at least $36,400 per unit to
you.
UNLOCK THE MOST VALUE POSSIBLE FROM YOUR INVESTMENT
The increase in our offer is not the only reason you should vote with
us--a sale of the Project will unlock the most value possible from your
investment.
Consider these facts:
o OUR RESOLUTION PLACES NO CAP ON YOUR RETURN. We have offered what we
believe to be a fair price for the Project. Your vote gives you the
opportunity to receive even more.
o OUR RESOLUTION CALLS ON WINTHROP TO DETERMINE WHAT VALUE THE MARKET
PLACES ON THE PROJECT. If a majority of you want the Project to be sold now,
Winthrop, as the general partner, will have a duty to assist in that process
and find the highest bidder for the Project.
o THE WINTHROP/AQUARIUS OFFER LIMITS THE CASH YOU CAN RECEIVE. The
Winthrop/Aquarius offer caps the amount that you can receive at $36,000 per
unit.
WINTHROP'S CONFLICT OF INTEREST
Ever since we first told you about our offer, we have expressed serious
misgivings about the conflict of interest that Winthrop has in evaluating any
transaction in which Winthrop would lose its rich fees, despite the value to
you.
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Consider what has happened in the more than two months since we submitted
our offer:
o We asked Winthrop to consider our offer and negotiate in good faith.
WINTHROP HAS NOT.
o We asked Winthrop to seek other third party offers and test the value
of the Project in the open market. WINTHROP HAS NOT.
o We asked Winthrop to obtain the consent of the Project's lender to our
assumption of the mortgage. WINTHROP HAS NOT.
Instead, an affiliate of Winthrop has offered to purchase your interests,
without negotiating, without competitive bidding, and without any attempt to
find the real value of your investment. WINTHROP WILL NOT EVEN TELL YOU
WHETHER IT BELIEVES THAT THE PRICE BEING OFFERED IS FAIR. What we believe is
clearly unfair is for Winthrop to be allowed to take control of the
Partnership and award itself annual fees of $1,000,000 in addition to the
more than $15,000,000 in fees it has already taken.
THE WINTHROP/AQUARIUS OFFER--SERIOUS SHORT-COMINGS
Compare our proposal to some of the serious short-comings of the
Winthrop/Aquarius Offer:
o IT FAILS TO REQUIRE THREE WINTHROP TO SEEK THE BEST PRICE AVAILABLE. We
have proposed only that you vote to dissolve the Partnership and allow the
market to determine the value of the Project.
o IT SUGGESTS A FLEXIBILITY THAT DOES NOT REALLY EXIST. The
Winthrop/Aquarius Offer suggests that you may choose to sell your interest or
remain as a limited partner. The Winthrop/Aquarius Offer does not highlight
that upon obtaining control, Aquarius will be able to veto all decisions that
you are currently entitled to make. In effect, Winthrop is making a "take it
or leave it" offer.
o IT PERMITS WINTHROP AND ITS RELATED PARTIES TO INCREASE THEIR ALREADY
RICH FEES. A Winthrop affiliate will take over as managing agent for the
Project at a 3% fee, plus an unspecified "expense" reimbursement. Combined
with the "oversight" and other fees already received from the Project,
Winthrop will siphon off $1,000,000 each year in fees--approximately $1,540
per unit. This is in addition to the more than $24,000 per unit of fees that
Winthrop has already pocketed from the Project. Winthrop's statement of its
intent to appoint itself as managing agent resulted in two limited partners
of the Partnership, together with Mr. Lerner, filing a lawsuit against Three
Winthrop in Maryland state court on February 7, 1995. The lawsuit alleges
that Three Winthrop's actions in this regard constitute a breach of its
fiduciary duty to you and to Mr. Lerner.
o IT ANTICIPATES ENDING WITH A PRIVATE PARTNERSHIP. While not highlighted
in the Winthrop/Aquarius Offer, its success would result in the Partnership's
not having to be regulated by the Securities and Exchange Commission. As a
result, limited partners who elected to stay in the Partnership would have
only limited access to information and would not continue to receive even the
reports currently being received.
We believe Winthrop's message to you is clear. ACCEPT ITS MAXIMUM PER UNIT
OFFER OR FACE AN UNCERTAIN FUTURE IN A PARTNERSHIP IN WHICH YOU HAVE FEW
RIGHTS AND LITTLE INFORMATION. MEANWHILE, WINTHROP WILL CONTINUE INDEFINITELY
TO TAKE ITS RICH FEES.
LEVEL THE PLAYING FIELD
We recognize that this flurry of information from us and Winthrop might be
confusing. The cause of this confusion is that Winthrop is taking advantage
of the fact that the playing field is not level. Winthrop has all of the
information--we do not. In addition, we were forced to structure our offer as
a purchase of Partnership assets rather than of your interest because the
Partnership agreement precludes us from purchasing your interest. OUR GOAL IS
TO PROVIDE YOU WITH THE MAXIMUM RETURN AND AFFORD YOU THE FLEXIBILITY YOU
DESIRE--WINTHROP'S GOAL IS TO MAXIMIZE ITS OWN RETURN AND TO FORCE YOU OUT OF
THE PARTNERSHIP WITH A "TAKE IT OR LEAVE IT" OFFER.
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IMPORTANT
CONTRARY TO WHAT WINTHROP HAS TOLD YOU, YOU DO NOT HAVE TO WAIT UNTIL MARCH
7TH TO GIVE US YOUR VOTE. IF A MAJORITY OF YOU APPROVE OUR RESOLUTION PRIOR
TO THAT DATE, SUBJECT TO WORKING OUT MATTERS WITH THE LENDER, THE RESOLUTION
WILL BE ADOPTED. WE URGE YOU NOT TO TENDER ANY UNITS TO WINTHROP IN RESPONSE
TO THE WINTHROP/AQUARIUS OFFER. WE URGE YOU TO SIGN AND RETURN THE GREEN
CONSENT CARD NOW.
We urge you to read this letter together with our Consent Solicitation
Statement dated January 19, 1995. If you have any questions regarding this
information, or would like to discuss our revised offer or the
Winthrop/Aquarius Offer, please contact either Ted Lerner, Ed Cohen or Bob
Tanenbaum at (301) 984-1500 or, toll free, at 1-800-953-7637.
Very truly yours,
GREENBELT RESIDENTIAL LIMITED
PARTNERSHIP
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NON-IMPUTATION ENDORSEMENT. ALTA Form Non-Imputation Endorsement to the
Title Insurance Policies to be issued at closing under this Agreement
insuring that coverage under the Title Insurance Policies will not be denied
on the ground that the knowledge of Seller prior to the Closing Date is
imputed to Purchaser.
OPERATING PARTNERSHIP(S). The Maryland limited partnerships known as First
Springhill Lake Limited Partnership, Second Springhill Lake Limited
Partnership, Third Springhill Lake Limited Partnership, Fourth Springhill
Lake Limited Partnership, Fifth Springhill Lake Limited Partnership, Sixth
Springhill Lake Limited Partnership, Seventh Springhill Lake Limited
Partnership, Eighth Springhill Lake Limited Partnership, Ninth Springhill
Lake Limited Partnership and Springhill Commercial Limited Partnership, or
any one of them, as the context may require.
PARTNERSHIP AGREEMENT(S). Collectively, the limited partnership agreements
of the Operating Partnerships, as amended (or amended and restated) through
the date of this Agreement, or any one of them, as the context may require.
PARTNERSHIP AMENDMENT(S). Those amendments to the Partnership Agreements
described in Section 5.b. hereof.
PARTNERSHIP INTEREST. Collectively, the general partner interest in each
of the Operating Partnerships, representing in each a ninety percent (90%)
ownership interest therein.
PERMITS. Those permits and licenses issued with respect to the Project
described on Exhibit C attached hereto and made a part hereof.
PERMITTED ENCUMBRANCES. Those matters affecting title to the Project
described on Exhibit D attached hereto and made a part hereof.
PROJECT. Together, that certain 96-building, 2,899-unit garden apartment
complex known as Springhill Lake Apartments and a commercial facility owned
by Springhill Commercial Limited Partnership, located on approximately 154.1
acres of land in Greenbelt, Prince George's County, Maryland and owned by the
Operating Partnerships.
PURCHASE PRICE. The purchase price for the Partnership Interest payable by
Purchaser to Seller pursuant to Section 3 of this Agreement.
PURCHASER. Greenbelt Residential Limited Partnership, a Maryland limited
partnership.
TITLE INSURANCE POLICIES. Those owner's policies of title insurance issued
by Lawyers' Title Insurance Corporation, or such other reputable title
insurance company which may be retained in connection with the transactions
contemplated herein, insuring the Operating Partnerships' title to the
Project.
2. AGREEMENT TO SELL AND PURCHASE. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, the Partnership Interest on the
terms and conditions hereinafter set forth.
3. PURCHASE PRICE AND TERMS. The aggregate Purchase Price for the
Partnership Interest shall be equal to the sum of (i) Twenty Million Six
Hundred Forty-One Thousand Four Hundred Seventy-Eight Dollars ($20,641,478)
and (ii) the amount of the Loan Transfer Fee. The Purchase Price shall be
payable as follows:
a. DEPOSIT.
(1) AMOUNT. Within three (3) business days after full execution of
this Agreement, Purchaser shall deposit in escrow with the Escrow Agent
the Deposit in the amount of Five Hundred Thousand Dollars ($500,000) by
cash, certified or cashier's check or wire transfer of federal funds.
Escrow Agent shall invest the Deposit in such accounts insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation in the Washington, D.C. metropolitan area, or in
such obligations issued or insured by the United States government, as
Purchaser may select and Seller may approve, such approval not to be
unreasonably withheld, conditioned or delayed. All interest earned on the
Deposit shall be and become part of the Deposit.
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(2) RELEASE OF DEPOSIT. Escrow Agent shall release the Deposit to the
Seller upon the earlier to occur of (i) full settlement of the purchase
and sale of the Partnership Interest pursuant to this Agreement, or (ii)
receipt from Seller of written notice ("Default Notice") that Purchaser
has defaulted under this Agreement beyond expiration of any cure period
expressly permitted under this Agreement, unless Purchaser, within five
(5) days of receipt of written notice of Seller's Default Notice, objects.
Until its actual receipt by the Seller, Seller shall bear no risk for the
loss of all or any part of the Deposit.
b. CASH AT CLOSING. At closing hereunder, Purchaser shall pay in cash,
certified or cashier's check or wire transfer of federal funds to the
Seller the balance of the Purchase Price as adjusted pursuant to the terms
hereof, of which sum the Deposit shall be a part.
c. ASSUMPTION OF MORTGAGE LOAN. Upon payment of the Loan Transfer Fee,
and subject to obtaining the consent of the Lender, Purchaser shall assume
the obligations of Seller under the Mortgage Loan and shall be fully
substituted for Seller thereunder.
4. TITLE.
a. TO PARTNERSHIP INTEREST. At closing hereunder, the Partnership
Interest shall be free and clear of any and all liens, defects,
encumbrances and pledges, subject only to the terms and conditions of this
Agreement and the Partnership Agreement.
b. TO PROJECT. At closing hereunder, the Operating Partnerships' title
to the Project shall be good and marketable and insurable as such in an
amount not less than the sum of (i) the Purchase Price, as adjusted upward
to reflect the partnership interest in Seller owned by Lerner, plus (ii)
the principal amount of the Mortgage Loan, free and clear of any and all
liens, defects, encumbrances, pledges and subleases, easements, covenants,
restrictions or other matters whatsoever, whether recorded or unrecorded,
except for (i) the lien of real estate taxes, water rents and sewer
charges not yet due and payable, (ii) the Leases, and (iii) the Permitted
Encumbrances.
5. CLOSING.
a. TIME AND PLACE. Closing under this Agreement shall be held on the
date which is fifteen (15) days after the Investment Approval Date, or on
such earlier date as Purchaser may designate by at least ten (10) days
prior written notice to Seller. Closing shall be held at the offices
Arnold & Porter, 1200
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