IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
- ------------------------------------------------------------------------------
LER 8, a Maryland General Partnership, on
its behalf and on behalf of
SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP,
Plaintiff,
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP DKC 95-555
11501 Huff Court, North Bethesda,
MD, 20895-1094, Plaintiff-Intervenor
v.
THREE WINTHROP PROPERTIES, INC., et al.,
Defendants.
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MOTION
Greenbelt Residential Limited Partnership hereby
moves to intervene in the above captioned action as a
plaintiff pursuant to Rule 24 of the Federal Rules of
Civil Procedure.
The grounds for this motion are set forth in the
memorandum of law which accompanies this motion. A
proposed complaint is attached to this motion.
Respectfully submitted,
/s/ Albert D. Brault
----------------------------------
BRAULT, GRAHAM, SCOTT & BRAULT
Albert D. Brault (#01041)
101 S. Washington St.
Rockville, MD 20850
(301) 424-1060
Counsel for Greenbelt
Residential Limited Partnership
OF COUNSEL:
Stephen M. Sacks
George E. Covuoci
Peter G. Neiman
ARNOLD & PORTER
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
(202) 872-6681
- 2 -
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
- ------------------------------------------------------------------------------
LER 8, a Maryland General Partnership, on
its behalf and on behalf of
SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP,
Plaintiff,
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP,
11501 Huff Court, North Bethesda,
MD, 20895-1094, Plaintiff-Intervenor
DKC 95-555
v.
THREE WINTHROP PROPERTIES, INC., et al.,
Defendants.
- ------------------------------------------------------------------------------
COMPLAINT OF GREENBELT
RESIDENTIAL LIMITED PARTNERSHIP
Plaintiff, by the undersigned attorneys, for its
Complaint against the above-named defendants states as
follows.
INTRODUCTION
1. This case concerns a contest for control of
Springhill Lake Investors Limited Partnership
("Springhill LP") and/or certain real property in
Greenbelt, Maryland which Springhill LP owns (the
"Project"). Plaintiff Greenbelt Residential Limited
Partnership ("Greenbelt") has asked the limited partners
of Springhill LP to consent to dissolution of the
partnership, so that the property can be sold to the
highest bidder. Greenbelt hopes to be the highest
bidder. If the Project is sold, defendant Three
Winthrop Properties ("Three Winthrop"), the managing
general partner of Springhill LP, will lose significant
fee income. In an effort to prevent such a sale, Three
Winthrop has, through an affiliate, launched a tender
offer for Springhill LP. Three Winthrop has failed to
comply with the federal securities laws governing such
tender offers, and has breached its fiduciary
obligations to the limited partners of Springhill LP in
a variety of ways, thereby injuring both the Investor
Limited Partners and Greenbelt. Greenbelt asks this
Court to enjoin Three Winthrop (and its affiliates) from
continuing with its tender offer until it complies with
the federal securities laws.
A. THE PARTIES
2. Plaintiff Greenbelt Residential Limited
Partnership is a limited partnership organized under the
laws of Maryland.
3. Defendant Three Winthrop is a corporation
organized under the laws of the State of Massachusetts
with its principal place of business at One
International Place, Boston, Massachusetts.
4. Defendant Aquarius Acquisition, L.P.
("Aquarius") is a newly formed Delaware limited
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partnership, whose general partner, Partnership
Acquisition Trust I is a Delaware business trust owned
and controlled by defendant Nomura Asset Capital
Corporation ("NACC"). NACC also controls Three
Winthrop.
B. JURISDICTION
5. This Court has jurisdiction over Greenbelt's
claims pursuant to 28 U.S.C. Sections 1331 and 1367.
C. BACKGROUND INFORMATION
6. The Project, the Springhill Lake Apartments
in Greenbelt, Maryland, consists of a 96 building, 2,899
unit garden apartment complex, approximately 154 acres
of land, an eight-story shopping center, a day care
center, two swimming pools, six tennis courts and a
clubhouse.
7. The Project is owned by ten limited
partnerships organized under the laws of the State of
Maryland: 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
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Lake Limited Partnership, and Springhill Commercial
Limited Partnership (collectively the "Operating
Partnerships").
8. Springhill LP is the general partner of each
of the Operating Partnerships. Springhill LP owns a 90%
interest in each of the Operating Partnerships. Subject
to certain special allocations contained in the
partnership agreements of the Operating Partnerships,
the remaining interest in each of the Operating
Partnerships has, since 1985, been owned by Theodore
Lerner, as limited partner.
9. Three Winthrop is the managing general
partner of Springhill LP and is charged with the
responsibility for carrying out the business of
Springhill LP. As managing general partner, Three
Winthrop has received (directly or through affiliates)
payments for oversight management of the Project and
syndication of the partnership in excess of $15 million.
10. Except for certain minor ownership interests
held by Three Winthrop and by an affiliated company,
Linnaeus-Lexington Associates Limited Partnership
("Linnaeus"), Springhill LP is owned by individuals or
entities who own as limited partners approximately 649
units of interest in Springhill LP (the "Investor
Limited Partners"). The Investor Limited Partners
purchased their interests in Springhill LP through a
- 4 -
confidential offering memorandum dated January 16, 1985. Those interests
constitute securities for purposes of the Securities Exchange Act of 1934
(the "Exchange Act"), and are registered under Section 12(g) of the Exchange
Act.
11. Three Winthrop, acting as managing general partner of Springhill LP,
has certain fiduciary obligations to the Investor Limited Partners and to
Springhill LP.
D. GREENBELT'S OFFER TO PURCHASE THE PROPERTY
12. On January 19, 1995, Grenbelt began soliciting consents from the
Investor Limited Partners of Springhill LP. The purpose of the consent
solicitation was to seek approval of a resolution dissolving Springhill LP,
thereby requiring a sale of its only asset, its interest in the Project, to
the highest bidder. Greenbelt simultaneously advised the Investor Limited
Partners that if the Project is put up for sale, Greenbelt will purchase its
interest in the Project. Greenbelt complied with Rule 14a-6(a) by filing the
proxy materials with the Securities and Exchange Commission ("SEC") prior to
making the consent solicitation.
13. While Greenbelt's offer is in the interest of the Investor Limited
Partners and Springhill LP, it is
- 5 -
not in the interest of Three Winthrop. Virtually all of Three Winthrop's stake
in the Project is in the form of management and other fees paid to Three
Winthrop's affiliates, which will cease if Greenbelt purchases the Project.
There is thus a conflict of interest between Three Winthrop and the Investor
Limited Partners to whom Three Winthrop has a fiduciary responsibility to
consider the Greenbelt offer.
E. AQUARIUS' TENDER OFFER
14. Despite its conflict of interest, and despite professions of
neutrality in securities filings, Three Winthrop has not remained neutral and
allowed the Investor Limited Partners to evaluate Greenbelt's consent
solicitation and offer or provided a fair procedure by which this may be
done. Instead, Three Winthrop has, through affiliates, put together a tender
offer designed to thwart Greenbelt's offer, preserve Three Winthrop's fees,
and prevent the Investor Limited Partners from receiving the maximum return
on their investment.
15. As part of that plan, on February 1, 1995 Aquarius, which, like Three
Winthrop, is controlled by NACC, commenced a tender offer for the units of
limited partnership interest in Springhill LP. On that date, Aquarius
provided the Investor Limited Partners an
- 6 -
Offering Circular which set out the terms of the tender offer and attempted to
persuade the Investor Limited Partners to vote against Greenbelt's consent
solicitation. Aquarius did not file its Offering Circular with the SEC, as
required by Rule 14a-6(a).
16. The tender offer is being made by an affiliate of Springhill LP and,
if successful, will cause the limited partnership interests to be held by
fewer than 300 people. Accordingly, Rule 13e-3 (promulgated under Section
13(e) of the Exchange Act) imposes certain disclosure obligations on Three
Winthrop, Aquarius, and NACC.
17. Under Rule 13e-3 (and Schedule 13E-3 thereto), Three Winthrop must
state whether it believes the transaction is "fair or unfair" to unaffiliated
security holders and must discuss the factors supporting that stated belief.
In other words, Three Winthrop must explain how it could believe the tender
offer is fair when alternative transactions that could result in more value
to the Investor Limited Partners have been blocked; when the offer is not the
product of arm's length negotiation; and when no competitive bids have been
sought. Three Winthrop has refused to make these required disclosures, in
breach of both the Exchange Act and its fiduciary duty to the individual
limited partners.
- 7 -
F. THREE WINTHROP'S BREACHES
OF ITS FIDUCIARY DUTY
18. Though purporting to remain neutral, Three Winthrop has in fact
supported the Aquarius tender offer. Three Winthrop has indirectly provided
crucial funding for the offer by delaying a planned distribution to the
Investor Limited Partners until after the offer is completed, at which point
the funds will go to Aquarius/Three Winthrop, rather than to the Investor
Limited Partners. On information and belief, Three Winthrop has also provided
NACC and Aquarius with extensive information about Springhill LP which
Aquarius and NACC have used in putting together the tender offer.
19. The Aquarius/Three Winthrop offer is contrary to the interests of the
Investor Limited Partners in a variety of ways. First, by preventing the
Investor Limited Partners from dissolving Springhill LP and placing the
Project or all of the partnerships interest therein up for sale to the
highest bidder, the tender offer prevents the Investor Limited Partners from
seeking the maximum return on their investment. Second, the tender offer is
effectively a "take it or leave it" proposal to the Investor Limited
Partners. Upon obtaining control, Aquarius/Three Winthrop will, as a limited
partner, be able to control all decisions made by Springhill LP without a
fiduciary duty to the other
- 8 -
Investor Limited Partners. Third, the tender offer would result in Springhill
LP no longer being regulated by the SEC, and thus would leave those Investor
Limited Partners who do not tender without access to much of the information
currently available to them. Fourth, the tender offer would result in
Aquarius/Three Winthrop being able to set the fees going to its affiliate for
managing the project, and to allocate management costs without supervision.
20. By supporting the tender offer, Three Winthrop has breached its
fiduciary duty to the Investor Limited Partners, injuring both the Investor
Limited Partners and Greenbelt.
21. Three Winthrop has also breached its fiduciary duty by refusing to
cooperate with Greenbelt's offer. Three Winthrop has refused to negotiate in
good faith with Greenbelt; has refused to seek other offers to determine the
fair market value of the Project; and has refused to obtain the consent of
the Project's lender to the assumption of the mortgage.
FIRST CAUSE OF ACTION
VIOLATION OF RULE 13e-3
22. Plaintiff repeats and realleges the allegations of paragraphs 1 to 21.
23. Because Three Winthrop has not made the disclosures required by Rule
13e-3, the Investor Limited
- 9 -
Partners are unable to properly evaluate the unfairness of the Aquarius/Three
Winthrop tender offer as compared to Greenbelt's offer. This threatens to
irreparably harm Greenbelt. Aquarius, NACC and Three Winthrop should
therefore be enjoined from pursuing that tender offer unless and until proper
disclosures are made.
SECOND CAUSE OF ACTION
VIOLATION OF RULE 14a
24. Plaintiffs repeat and reallege the allegations of paragraphs 1 to 23.
25. The Offering Circular constitutes a proxy solicitation within the
meaning of Rule 14a-1(1). Defendants failed to submit the proxy solicitation
materials to the SEC, as required by Rule 14a-6(a), and failed to provide the
Investor Limited Partners with the materials required by Rule 14a-3(a). This
gives defendants an unfair advantage in the contest for control of Springhill
LP, irreparably injuring Greenbelt. Aquarius, NACC and Three Winthrop should
be enjoined from pursuing the tender offer unless and until they comply with
Rule 14a.
THIRD CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY
26. Plaintiffs repeat and reallege the allegations of paragraphs 1 to 25.
- 10 -
27. Three Winthrop has breached its fiduciary duty to the Investor Limited
Partners and to Springhill LP in various ways, including by making a coercive
tender offer for Springhill LP through its affiliate Aquarius, by failing to
disclose information as required by the securities laws, by refusing to
cooperate with Greenbelt, given its conflict of interest, and by failing to
establish a procedure for the fair and independent evaluation of the
different proposals.
28. Aquarius and NACC have aided and abetted the Three Winthrop's
breaches.
29. These breaches have injured Greenbelt by preventing the Investor
Limited Partners from properly evaluating Greenbelt's offer vis-a-vis the
tender offer.
WHEREFORE, plaintiff Greenbelt respectfully requests that this Court:
(1) enjoin NACC, Aquarius and Three Winthrop from continuing to pursue
their tender offer until a fair and independent procedure is established to
evaluate all proposals;
(2) order Three Winthrop, NACC and Aquarius to pay damages to plaintiff
for their breaches of fiduciary duty and violations of the federal securities
laws in an amount to be determined at trial, including reasonable attorneys'
fees; and
- 11 -
(3) award plaintiff such other relief as the Court deems just and proper.
BRAULT, GRAHAM, SCOTT & BRAULT
/s/ Albert D. Brault
-----------------------------
Albert D. Brault (#01041)
101 S. Washington St.
Rockville, MD 20850
(301) 424-1060
OF COUNSEL:
Stephen M. Sacks
George E. Covucci
Peter G. Neiman
ARNOLD & PORTER
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
(202) 872-6681
- 12 -
CERTIFICATE OF SERVICE
I hereby certify that on February 27, 1995, true
and correct copies of the foregoing Motion to Intervene,
the accompanying proposed complaint, and the memorandum
in support thereof were served by telecopier and first
class United States mail, postage prepaid, upon Seth D.
Greenstein, Esq., McDermott, Will & Emery, 1850 K
Street, N.W., Washington, D.C., 20006-2296, telecopier
number (202) 778-8087, and upon Barbara L. Moore, Esq.,
Cooley, Manion, Moore & Jonas, P.C., 21 Custom House
Street, Boston, MA, 02110, telecopier number (617) 737-
3113.
Dated: February 27, 1995
/s/ Albert D. Brault
-----------------------
Albert D. Brault
101 S. Washington St.
Rockville, MD 20850
(301) 424-1060
Attorney for Greenbelt
Residential Limited
Partnership
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
- -----------------------------------------------------------------------------
LER 8, a Maryland General Partnership, on
its behalf and on behalf of
SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP,
Plaintiff,
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP DKC 95-555
11501 Huff Court, North Bethesda,
MD, 20895-1094, Plaintiff-Intervenor
v.
THREE WINTHROP PROPERTIES, INC., et al.,
Defendants.
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MEMORANDUM OF LAW IN SUPPORT OF
GREENBELT RESIDENTIAL LIMITED
PARTNERSHIP'S MOTION TO INTERVENE
Greenbelt Residential Limited Partnership
("Greenbelt") is in a battle with defendants to acquire
the interest in certain property (the "Project") owned
by Springhill Lake Investors Limited Partnership
("Springhill L.P.")
Greenbelt has solicited proxies asking the
partners of Springhill L.P. to consent to dissolving the
partnership and putting the partnership's sole asset,
its interest in the Project, up for sale. The deadline
for returning those proxies is March 7, 1995. Greenbelt
has offered to purchase Springhill L.P.'s interest if it
is put up for sale.
In an effort to block Greenbelt's efforts to
acquire the property, defendants have commenced a tender
offer to acquire Springhill L.P. That tender offer
expires on March 2.
This action was filed by a limited partner of
Springhill L.P., seeking to enjoin defendants' tender
offer on the grounds that (1) Three Winthrop Properties,
Inc. ("Three Winthrop") (which is both an affiliate of
the company making the tender offer, defendant Aquarius
Acquisitions, L.P. and also the general partner of the
target, Springhill L.P.) was violating its fiduciary
duties to the limited partners of Springhill L.P. by
aiding the tender offer and failing to set up a neutral
procedure for evaluating the competing offers, and (2)
that Three Winthrop had violated the securities laws by
failing to make the disclosures required under Rule 13-a3.
Plaintiff's preliminary injunction motion will
determine whether or not defendants' tender offer goes
forward, and thus whether or not the limited partners of
Springhill, L.P. (the "Investor Limited Partners") will
have a full and fair chance to consider Greenbelt's
proxy solicitation. Moreover, defendants' breaches of
fiduciary duty and securities law violations are
injuring Greenbelt by making it less likely that the
Investor Limited Partners will choose Greenbelt's offer
- 2 -
over defendants'. Greenbelt therefore respectfully moves to intervene as of
right in this action as a plaintiff pursuant to
Rule 24(a) of the Federal Rules of Civil Procedure.
ARGUMENT
Under Rule 24(a), the Court should grant a timely motion to intervene
where (1) "the applicant claims an interest relating to the property or
transaction which is the subject of the action" and (2) "the applicant is so
situated that the disposition of the action may as a practical matter impair
or impede the applicant's ability to protect that interest" unless (3) "the
applicant's interest is adequately represented by existing parties." Fed. R.
Civ. P. 24(a); Gould v. Alleco, Inc., 883 F.2d 281 (4th Cir. 1989), cert.
denied, 493 U.S. 1056 (1990). The Court should view motions to intervene
liberally, in favor of granting intervention. Feller v. Brock, 802 F.2d 722,
729 (1986). Under these standards, the Court should grant Greenbelt's motion
here.
First, Greenbelt has an interest in the transactions which are the subject
of this action. This action will determine how the Investor Limited Partners
evaluate Greenbelt's consent solicitation vis-a-vis the
- 3 -
Aquarius tender offer. See Feller, 802 F.2d at 730 (interest of competitor
sufficient for intervention).
Second, if this court were to deny the injunctive relief sought by the
Investor Limited Partners, that would impair Greenbelt's ability to protect
its interest in seeing that its offer is fairly weighed against the Aquarius
tender offer. While not technically binding on Greenbelt, as a practical
matter such an order would make it impossible for Greenbelt to get relief in
the few days before the Aquarius tender offer expires.
Finally, Greenbelt's interest in the transaction is not adequately
represented by the Investor Limited Partners. Greenbelt has far more at stake
than any of the Investor Limited Partner plaintiffs, who own only relatively
small interests. Greenbelt should be allowed to intervene to pursue this
litigation more aggressively than the plaintiffs may be willing to do.
- 4 -
CONCLUSION
For the reasons set forth above, this Court should grant Greenbelt's
motion to intervene.
Respectfully submitted,
BRAULT, GRAHAM, SCOTT & BRAULT
/s/ Albert D. Brault
---------------------------------
Albert D. Brault (#01041)
101 S. Washington St.
Rockville, MD 20850
(301) 424-1060
OF COUNSEL:
Stephen M. Sacks
George E. Covucci
Peter G. Neiman
ARNOLD & PORTER
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
(202) 872-6681
- 5 -
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
LER 8, a Maryland General Partnership, on
its behalf and on behalf of
SPRINGFIELD LAKE INVESTOR LIMITED
PARTNERSHIP
Plaintiff DKC-95-555
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
11501 Buff Court, North Bethesda
MD, 20895-1094,
Plaintiff-Intervenor
v.
THREE WINTHROP PROPERTIES, INC., et al.
Defendants
ORDER
UPON CONSIDERATION of the Plaintiff's, Greenbelt Residential Limited
Partnership's, Motion to Intervene and the Complaint attached thereto, and
any opposition thereto, it is this day of , 1995,
by the United States District Court for the District of Maryland,
ORDERED that the Motion to Intervene be GRANTED and that the Intervenor
should promptly file the proposed Complaint.
_______________________________
JUDGE, CIRCUIT COURT FOR
MONTGOMERY COUNTY, MARYLAND
COPIES TO:
Albert D. Brault, Esq.
101 S. Washington Street
Rockville, MD 20850
Stephen M. Sacks, Esq.
Arnold & Porter
1200 New Hampshire Avenue, N.W.
Washington, D.C., 20036
Seth D. Greenstein, Esq.
McDermott, Will & Emery
1850 K Street, N.W.
Washington, D.C., 20006-2296
Barbara L. Moore, Esq.
Cooley, Manion, Moore & Jones, P.C.
21 Custom House Street
Boston, MA 02110