GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
March 17, 1995
BY FACSIMILE
Three Winthrop Properties, Inc.
One International Place
Boston, Massachusetts 02110
Attention: Mr. F.X. Jacoby
Re: Springhill Lake Investors Limited Partnership
Dear F.X.:
We are writing to inform you that we had received consents representing
more than a majority in interest of the outstanding Units.
We felt it critical to inform you of this material information now in
light of the 5:00 p.m. closing planned for the tender offer from your affiliate,
Aquarius Acquisition, L.P. It was our feeling that, in light of your fiduciary
duty to all of the limited partners, you would want to consider carefully how
Aquarius proceeds with its offer.
As you told me in Boston on January 10, 1995, if the majority of the
Investors want the Project sold, it will be sold. They have spoken and I expect
you to live up to your word, and for Winthrop to discharge its fiduciary duty to
the investors.
We would like to meet with you as soon as possible to facilitate a
prompt sale of the Project. We would request your assistance, if necessary, in
obtaining the assurance we have requested from the Lender. We enclose copies of
our correspondence to the Lender.
Greenbelt looks forward to discussing with you our current offer to the
Partnership, including considering an approach which would allow those partners
who wish to remain as limited partners to do so.
I look forward to hearing from you upon your receipt of this letter.
Sincerely,
/s/ Edward L. Cohen
Edward L. Cohen
THEODORE N. LERNER
11501 HUFF COURT
NORTH BETHESDA, MARYLAND 20895-1094
TELEPHONE: (301) 984-1500
FACSIMILE: (301) 770-0144
MARCH 17, 1995
BY FACSIMILE
AEW NO. 207 Trust
c/o Aldrich, Eastman & Waltch, L.P.
225 Franklin Street
Boston, MA 02110
Attention: Elizabeth A. Briones, Vice President
Re: Springhill Lake Investors Limited Partnership
Dear Elizabeth:
As you will recall, we spoke on December 12, 1994, to discuss the
efforts by Greenbelt Residential Limited Partnership to acquire Springhill Lake.
The Lender to Springhill Lake is AEW No. 207 Trust.
Because Greenbelt's initial efforts to acquire Springhill Lake were
thwarted by Springhill's general partner. Three Winthrop, Greenbelt was required
to undertake a time consuming and expensive proxy solicitation in an effort to
direct Winthrop to sell Springhill Lake. Greenbelt has done this and a majority
of investors have given their proxies to vote in favor of a dissolution of the
Partnership, thereby directing Three Winthrop to sell the Project, either to
Greenbelt or a higher bidder. Greenbelt's current offer values Springhill Lake
at a price which is at least $25 million more than your loan.
Under your loan documents, it may be raised that delivery of these
proxies to Three Winthrop would result in a technical default under the loan.
What is clear is that the dissolution does not harm your position because, as we
understand, the loan is current and in good standing, and the process of winding
up the Partnership and selling Springhill Lake to the highest bidder would not
change this. Because of the potential risk to investors, Greenbelt will not
formally deliver these proxies to Three Winthrop until it receives your
assurance that the delivery of these proxies would not be treated by you as a
default under the loan.
Greenbelt needs that assurance now and expects to receive it
immediately. With your confirmation in hand, the will of the majority of the
investors will be carried out and Greenbelt Residential or someone else will
purchase Springhill Lake. During the process, the Partnership will likely
approach you and ask that you consent to the assumption of the loan by Greenbelt
Residential or some other bidder. Your consent today will, of course, not
prejudice your rights under the loan documents to consider such an assumption on
its merits. Although I am hopeful that Greenbelt will be the buyer, that the
loan will be assumed, and that you and I will benefit from the transaction,
those matters are properly left for discussion another day.
Today I have made a simple request - confirm in writing that this
process will not be deemed a default - which I would expect you will honor
immediately. To do otherwise, would in my judgment, mean that you have taken
sides in a bidding war between Winthrop and Greenbelt Residential. Any such
action would cause significant harm to Greenbelt, me and the investors who favor
a sale.
I ask that you call me today to resolve this matter. I enclose a longer
letter from my lawyers which sets out Greenbelt's position in greater detail. If
necessary, your lawyers should feel free to call my lawyers today as well.
Very truly yours,
/s/ Theodore N. Lerner
Theodore N. Lerner
[ARNOLD & PORTER LETTERHEAD]
March 17, 1995
BY FACSIMILE
AEW NO. 207 Trust
c/o Aldrich, Eastman & Waltch, L.P.
225 Franklin Street
Boston, MA 02110
Attention: J. Grant Monahon, Esquire
Re: Springhill Lake Investors Limited Partnership
Dear Mr. Monahon:
We are writing on behalf of our client, Greenbelt Residential Limited
Partnership ("Greenbelt Residential"). The purpose of this letter is to request
the formal written assurance of AEW No. 207 Trust ("Lender") that it will not
declare an event of default under the loan agreement ("Loan Agreement") between
the Lender and Springhill Lake Investors Limited Partnership (the "Investor
Partnership") in the event Greenbelt Residential, which has now received
consents to the dissolution of the Investor Partnership from a majority in
interest of the investor limited partners ("ILPs") of the Investor Partnership,
delivers such consents to Three Winthrop, Inc., the general partner of the
Investor Partnership, thereby effectuating a "dissolution" of the Investor
Partnership.
On December 2, 1994, Mr. Lerner, an affiliate of our client, notified
you regarding the offer that Greenbelt Residential had submitted to purchase all
of the partnership interests in the Investor Partnership, the general partner of
the Operating Partnerships which own and operate Springhill Lake Apartments in
Greenbelt, Maryland (the "Property"). At that time, he advised you that as part
of the offer Greenbelt Residential would assume the loans on the Property which
you hold in the approximate outstanding principal amount of $62 million.
Further, he advised you that Greenbelt Residential was seeking the consent of
the ILPs of the Investor Partnership to dissolve the Investor Partnership. This
dissolution would begin the process of winding up the Investor Partnership's
affairs. In that letter, Mr. Lerner stated that under these circumstances he
anticipated you would agree that a vote by ILPs in favor of a winding up would
not be deemed a technical event of default under the Loan Agreement.
Elizabeth A. Briones, a Vice President of Aldrich, Eastman & Waltch,
responded to that letter on December 12, 1994 stating that, while your company
would be happy to consider a loan assumption, any such request would have to be
made by the Borrower (i.e., the Investor Partnership) as provided in Section
4.3.3 of the Loan Agreement. She also indicated that you were not prepared at
that time to consider whether a vote of the ILPs to dissolve the Investment
Partnership would be deemed an event of default.
At this time, Greenbelt Residential has received sufficient proxies such
that it is now time that you must permit the will of the majority of the
partners to sell the Project be carried out. Pursuant to the dissolution vote,
the general partner of the Investor Partnership would seek to dispose of the
Property and Greenbelt Residential has, as stated above, made an offer to
purchase at a price which values the Project approximately $25,000,000 more than
your mortgage. In connection with the winding up of the Investor Partnership, we
would expect that you would receive a formal request from the Borrower to permit
the loan to be assumed by Greenbelt Residential or a third party who outbids
Greenbelt Residential for the Property. However, today, our request is limited
to the assurance that the delivery of the proxies will not be deemed by you to
be a default.
You should be aware that in connection with the proxy solicitation above
described, a number of court actions have been filed among and between the
parties. We presume that you would consider it in your interest to remain
neutral in respect of those various actions and the bidding war between
Greenbelt and Winthrop. It is certainly our client's hope not to join you as a
party. Thus, we do find it necessary at this time to obtain your immediate
written assurance that the mere delivery by Greenbelt Residential to Winthrop of
the proxies, which would provide sufficient votes in favor of the dissolution of
the Investment Partnership, would not be deemed by you in and of itself as a
default of the Loan Agreement. Without the necessary partnership vote, the
process to sell the Investor Partnership's asset cannot commence. Surely,
putting the property up for sale, particularly given the strong offer on the
table from Greenbelt Residential, cannot be considered a default and certainly
does not in any way jeopardize your secured position. We would anticipate that
you would not impede the will of the majority of the ILPs who wish to sell this
asset. Further, any delay by you now in considering this request - which was
first presented to you on December 2, 1994 - would likely materially and
adversely affect the ILPs and our client.
As we understand it, the loan is current and in all respects in good
standing. The process of winding up the Partnership will not disturb that
status. During that winding up period, you, as lender, would have the
opportunity to determine whether the loan documents require you to consent to a
loan assumption or if you would otherwise consent to a loan assumption based on
the merits of the case then presented to you. By not declaring a default as a
result of the delivery of the proxies, you will not have prejudiced your
position to consider the loan assumption matter on its merits. To declare a
default based on delivery of the proxies, however, would prevent the ILPs from
proceeding with their efforts to market the property to a seller who will pay
the highest possible price. Failure to provide this simple assurance might well
be construed by a court as an action interfering with the rights of the equity
owners. As you surely appreciate, as a lender you have a duty to the Investor
Partnership and to the majority in interest of the ILPs consenting to a
dissolution to consider a request of this nature reasonably and in good faith.
Once you have reviewed this letter, please indicate your consent in the
space provided below and return one fully executed copy of this letter to me. To
reiterate, by your signature you will merely be indicating that you will not
declare a default upon the mere delivery of the proxies of a majority in
interest of the ILPs. We acknowledge that by signing you will not be waiving
your right to consent to an assumption of the mortgage in accordance with the
terms of the Loan Agreement.
We look forward to hearing from you at your earliest convenience. If you
have any questions, please contact either me at (202) 728-2276 or George Covucci
at (202) 872-3702.
Sincerely,
ARNOLD & PORTER
/s/ Stephen W. Porter
By ---------------------
Stephen W. Porter
SEEN AND AGREED TO:
AEW No. 207 Trust
By: -----------------------------
cc: Elizabeth A. Briones, Vice President (vis facsimile)
George E. Covucci, Esquire