February 22, 1995
Mr. Edward L. Cohen
Greenbelt Residential Limited Partnership
11501 Huff Court
North Bethesda, MD 20895
Re: Springhill Lake Apartments
(the "Project")
Dear Ed:
Provided below are answers to the four questions raised in your letter
dated February 17, 1995.
1. As you know, Three Winthrop, as general partner, does not have the
power to amend the partnership agreement to permit you to make a tender
offer to purchase limited partnership interests or to permit any
other action which is currently prohibited by the partnership agreement.
Such an amendment would require the consent of at least a majority of the
limited partners. You could have sought such consent in your currently
pending consent solicitation but did not. You are still free to seek such
consent in a new consent solicitation. You should note that if a majority
of the limited partners in fact did consent in writing to effect an
amendment such as that proposed by you, Three Winthrop would seriously
consider, consistent with its fiduciary duty, whether to consent
thereto. You should also note that whether or not any such amendment were
to become effective, Three Winthrop would not agree to resign as the
general partner of the Partnership and, if removed as general partner,
would not (unless legally required to do so) consent to the substitution
of any entity affiliated with you to become the general partner.
2. It would be inconsistent with our fiduciary duties and the
partnership's existing contractual relationships to expend assets of the
partnership to cause the partnership's mortgage lender to take actions and
incur out-of-pocket expenses (which would be paid by the partnership under
the loan documents) in respect of a possible transaction which may
never occur. For this reason we have determined that it would not be in
the best interest of the partnership to approach the lender unless and
until it is determined that the Project should be sold and that your offer
is the highest and best offer in respect of the Project and that all
conditions precedent to your offer (other than lender approval) have been
satisfied or waived. If and when we make this determination, we will, of
course, take all actions within our power to cause the lender to review
your application and give you all due consideration to assume the mortgage
indebtedness in respect of the Project.
With respect to third parties who might be interested in purchasing
the Project, Three Winthrop cannot make a valid assumption request to the
lender until the identity and financial capabilities of the bidder is
known. If the Partnership were to pay the fees necessary to cause the
lender to pre-approve all bidders in respect of the Project, the cost
would be substantial and, we believe, the mortgage lender might become
unwilling to cooperate with us in the future.
3. There is no need to engage in competitive bidding to arrive at a
fair and reasonable management arrangement in respect of the Project. As
experienced property managers in the DC area, you and we are each aware of
the market value of management services in that area. The proposed
management agreement with Winthrop Management has been approved by the
lender, and Three Winthrop believes that the compensation arrangements
specified in such agreement are fair and reasonable and consistent with
the amounts charged by other unaffiliated managers of similar properties.
For your information, I am enclosing a copy of the approved form of
management agreement.
Three Winthrop will provide you with a description of the precise
expenses which will be reimbursable to Winthrop Management under the
management agreement once Winthrop Management has reviewed the payroll and
other relevant expense records of the Lerner Corporation with respect to
the Project, and determined how a possible change in management will
impact the Project's operations.
4. The reserve and escrow balances listed in Aquarius' Offer to
Purchase dated February 1, 1995 are correct as of January 1, 1995, to the
best of Three Winthrop's knowledge. You may wish to review the financial
information which Three Winthrop already sends you on a regular monthly
basis and which the Partnership files with the SEC on a regular quarterly
basis to confirm that this meets your information needs.
I would like to take this opportunity to make certain that the record is
clear on certain of the matters stated in your correspondence to the limited
partners. First, contrary to statements made by you to limited partners, at
no time prior to your letter dated February 17, 1995 did you request Three
Winthrop to market the Project to third parties and, in fact, prior to your
letter to limited partners dated February 3, 1995, you had urged the
partnership to sell the Project to you without competitive bidding. Second,
contrary to statements made by you to limited partners, you have never
attempted to obtain information on the partnership's escrows or reserves from
Three Winthrop prior to your letter dated February 17, 1995.
We have consistently fulfilled our fiduciary and other obligations to you
and the other investors in the Project. In doing so, we have endeavored at
all times to provide complete and truthful information to all interested
partners. You have not in your cummunications to investors. You have instead
attempted through groundless litigation and factual distortion to portray Three
Winthrop in a negative light. You should note that we reserve any and all of our
rights against you relating to such acts, including seeking redress for such
acts in an appropriate forum and at an appropriate time.
Very truly yours,
F.X. Jacoby