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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
(Name of Registrant as Specified in Its Charter)
MACKENZIE PATTERSON, INC.
AND C. E. PATTERSON
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
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MacKenzie Patterson Inc.
June 24, 2002
Dear Fellow Stockholder:
You may be receiving additional proxy material from American Residential
Investment Trust (the "Company") which attempts to display the MacKenzie
Patterson Group's (the" Patterson Group") proxy solicitation in an unfavorable
light. We have been forced to respond in order to clear up the
misrepresentations made by management of the Company.
While management refers to us as "two dissident shareholders," MacKenzie
Patterson Inc. and the group of eleven shareholders that we represent hold 4% of
the Company's common stock. Our philosophy and our agenda have been, and will
continue to be, to maximize the value of our investments. When we see entrenched
management running roughshod over shareholders as we have seen with this
Company--completely changing the mission, strategy and purpose of OUR, the
shareholders' and not the management's, company without prior approval and
discussion--we are compelled to say something. When that same entrenched
management presides over the precipitous decline in the company's fortunes and
stock price1 then asks us to trust them again with a totally different business
endeavor, we are compelled to act, and that is the reason for our opposition to
management's proposal to throw away the status of the Company as a Real Estate
Investment Trust and, in the process, any chance we might have of once again
receiving dividends from our investment.
While we appreciate the management's argument that they have the three largest
shareholders agreeing with them, what they fail to point out is that they caused
our Company to pay one of the shareholders (the former manager of the company)
$10,000,000 to buy back the management agreement, a condition of which was that
the former manager (which owns approximately 20% of the Company's shares) would
vote in favor of de-REIT proposals.
Management insinuates that the Patterson Group's proxy solicitation is designed
to spur liquidation of the Company. This is NOT the case; were it, the
Securities and Exchange Commission's rules would have required us to state that
this was our intention. Management states that if they were to liquidate the
Company's investment portfolio today it would provide stockholders "little, if
any, premium over today's stock price of approximately $5.00 per share." We
think that's probably right. The key point is what management goes on to admit,
which is that the value received from selling the portfolio would represent a
"significant price discount to the actual cash flows, which would be realized
over the next few years by retaining these assets." Once again we agree. THE
ESSENCE OF OUR DISAGREEMENT IS WHAT TO DO WITH THOSE ACTUAL CASH FLOWS. WE
BELIEVE THE INCOME SHOULD BE PAID OUT TO INVESTORS AND THE PRINCIPAL REINVESTED
WHILE MANAGEMENT WANTS TO HOLD ON TO ANY INCOME AND INVEST BOTH THE INCOME AND
THE PRINCIPAL IN THEIR "PET PROJECT." THE COMPANY WE INVESTED IN THREE YEARS AGO
WAS CREATED TO PAY OUT CASH FLOWS. The other issue for which management fails to
account is the value of their Pet Project. If, as management contends, the Pet
Project is originating significant mortgage volume already, then that operation
should have substantial value in any liquidation. If their Pet Project has no
value in liquidation as management apparently contends, then doesn't that
suggest that their Pet Project is a highly speculative project that is outside
of the scope of risks for which we shareholders originally bargained?
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1 From an opening price of $15 per share on October 29, 1997 to $4.76 on June
21, 2002, with a low of $1.60 on December 19, 2001.
At the bottom of the Company's additional materials, they discuss the Patterson
Group's proposal to request the Board of Directors to redeem the "Poison Pill"
in the Amended and Restated bylaws. Management spends a lot of time explaining
why they think a poison pill is a good idea, but what they don't do is refute
our basic contentions found in our proxy statement. Our basic contentions are
that poison pills lead to entrenched management and boards of directors and have
not proved to be beneficial to shareholders. We urge you to revisit our proxy
and read the truth about "Poison Pills." We have always believed that entrenched
management is not good for any company. In an attempt to show that entrenchment
does not matter, management of the company points out that John Robbins "as
chairman and chief executive officer and Mr. Fuller as president and chief
operating officer, have had one 5% cost of living increase to their base
salaries in four years". What they fail to point out is that in the past five
years, while presiding over what can only be called a collapse in the Company's
stock price, John Robbins was paid $2,166,979 in compensation and Mr. Fuller was
paid $1,663,901 in compensation. We certainly appreciate them holding their
request to a five percent cost of living raise.
One of the more disturbing issues raised by the Company's additional materials
is management's contention that "since we began to implement our strategic
initiative nearly seven months ago, ...[the] shares price has risen
significantly...." They conclude that the stock market is thus ratifying the
wisdom of their move. The reality is that according to their own 1999 Annual
Report on form 10-K, filed March 30, 2000, management initiated its mortgage
origination business in the beginning of 2000, originating its first loans in
the second quarter of 2000. The stock began the year 2000 trading at $7.00, over
$2 above the $4.76 per share price on June 21, 2002! We ask, "if after the
announcement of a change in direction of the Company the stock price went from
$7 to a low of $1.60 on December 19, 2001, isn't that validation that the move
was NOT viewed favorably by the stock market?" We think the answer is obvious!
In the final analysis we ask that you read our proxy statement and consider it
carefully. Look through the hype from the Company's management. We believe that
our arguments are good and sound and deserve your support with a vote in our
favor. We think that a more careful analysis of the situation is warranted,
including a return to paying out dividends to the investors when available; then
we can take another look at the mortgage origination business when it is no
longer in its infancy and has a proven track record. If the company de-REITs now
THERE IS NO TURNING BACK.2 We trusted management once to do the right thing. Now
is the time to make them prove themselves first and then come back and ask for
our money again.
Sincerely,
C.E. Patterson
MacKenzie Patterson Inc.
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2 At least for five years,
that is, which we believe is effectively the same as an irrevocable decision.
ADDITIONAL INFORMATION
Stockholders of the Company are urged to read the proxy statement when it
becomes available because it will contain important information about the
Company, MPI, our recommendations to vote against the DeREIT Proposals and in
favor of our proposals, and related matters. When they become available,
Stockholders will be able to obtain free copies of the proxy statement and other
documents filed by MPI with the SEC in connection with our recommendations to
vote against the DeREIT Proposals and in favor of our proposals at the SEC's web
site at www.sec.gov, or by contacting us at 1640 School Street, Suite 100,
Moraga, California 94556 (Telephone: (800) 854-8357).
We and our directors, executive officers, and other employees may be deemed to
be participants in the solicitation of proxies of the Company's stockholders to
vote in the manner requested by this letter. We are the manager of certain
investment funds, which collectively beneficially own the following shares of
common stock of Company. Our investment funds and we have no substantial
interest in this solicitation other than as owners of the Company's common
stock.
Name Shares (all Common Stock) Percentage
Accelerated High Yield Income Fund I 12,400 *
Accelerated High Yield Pension Investors 8,400 *
LP Secondary Market 42,200 *
MP Income Fund 12, LLC 42,500 *
MP Income Fund 18, LLC 6,000 *
MP Value 5, LLC 32,100 *
MacKenzie Patterson Special Fund 29,100 *
Real Estate Securities Fund 1983 47,000 *
Moraga Fund 1, LP 25,000 *
Moraga DeWaay Fund, LLC 24,000 *
Patterson Real Estate Services 17,500 *
Previously Owned Mortgage Partnership Income Fund 3 30,000 *
C. E. Patterson 316,200 (1) 4.0
Glen W. Fuller (2) 0 0
All participants as a group 316,200 4.0
*Represents less than 1% of the outstanding shares of the Company's common
stock. Calculated on the basis of 7,880,909 shares of common stock outstanding,
as disclosed by the Company in its Proxy Statement on Schedule 14A, filed June
7, 2002.
(1) Mr. Patterson may be deemed to beneficially own the shares of the funds
listed above by virtue of his ownership therein and/or his power to direct
the voting power of the securities held by such funds. Mr. Patterson does
not directly own any shares of the Company's common stock.
(2) Mr. Fuller is an officer and director of MPI, the general partner of the
funds, and may be deemed to be a participant if he solicits proxies on
behalf of MPI.