SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934
Filed by the Registrant [X]x
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
| x | Preliminary Proxy Statement | o | |
| o | (as permitted by Rule 14a-6(e)(2)) | ||
| o | |||
| o | or Rule 14a-12 |
WINTHROP REALTY TRUST
(Name of Registrant as Specified in itsIn Its Charter)
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant):
Payment of Filing Fee (Check the appropriate box):
| o | No fee required. |
| x | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
Title of each class of securities to which transaction applies: Common Shares of Beneficial Interest, par value $1.00 per share |
Aggregate number of securities to which transaction applies: 36,417,584 |
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): The filing fee has been calculated in accordance with Rule 0-11 under the Exchange Act and is equal to 0.01288 percent of the product of 36,417,584 Common Shares and the estimated per share liquidation proceeds of $13.79. |
| Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: $64,683.16 |
| o | Fee paid previously with preliminary materials: $____________ |
| o |
(1) Amount Previously Paid: |
(2) Form, Schedule or Registration Statement No.: |
(3) Filing Party: |
(4) Date Filed: |
 | WINTHROP REALTY TRUST 7 Bulfinch Place Suite 500 Boston, Massachusetts 02114 (617) 570-4614 |
_____________, 2014
Dear Shareholders:
You are invited to attend a special meeting of the holders of common shares of beneficial interests of Winthrop Realty Trust (the “Trust”) to be held at the 11th Floor Conference Center in the offices of Katten Muchin Rosenman, 575 Madison Avenue, New York, New York 10022, on ______________, 2014, at _____________, local time.
At the special meeting, we will ask you to approve a plan of liquidation for the Trust. The principal purpose of the plan of liquidation is to maximize shareholder value by selling our assets, paying the liquidation preference on our Series D Preferred Shares, paying our debts (including, to the extent required, our senior notes and amounts payable to FUR Advisors LLC, our external advisor) and, after establishing sufficient reserves, distributing the net proceeds of our liquidation to our holders of our common shares of beneficial interest (“common shares”).
Prior to determining to propose this plan of liquidation, our board of trustees considered a number of alternatives including a sale of the Trust as a whole, acquiring another real estate company, and continuing to operate in the current manner or pursuant to a different business plan. In this regard, we retained the services of Barclays Capital Inc. to seek potential target companies for us to acquire as well as potential companies to acquire us.
After carefully reviewing the offers from potential acquirers and considering the alternatives reasonably available to us at this time, as well as the terms and conditions of the plan of liquidation and the transactions contemplated by that plan, our board of trustees unanimously determined that a liquidation at this time will be more likely to provide you with a greater return on your investment within a reasonable period of time than you would receive through other alternatives reasonably available to us at this time, and unanimously approved the sale of all of our assets and our dissolution in accordance with the plan of liquidation, conditioned upon your approval. Accordingly, our board of trustees unanimously recommends that you vote FOR approval of the plan of liquidation. You should carefully read the plan of liquidation, a copy of which is attached as Exhibit A to the accompanying proxy statement
In reaching this decision, our board of trustees considered many factors including the stagnant price of our common shares that was prevalent prior to the announcement of our board’s determination to adopt a plan of liquidation , the discrepancy between our common share trading price and our estimate of net asset value, the limited trading volume in our common shares that was prevalent prior to the announcement of our board’s determination to adopt a plan of liquidation, the inability to raise debt or equity capital on favorable or non-dilutive terms, the inability of the Trust and its investment banker to source any suitable target acquisitions, and the price level of the offer received in connection with a potential sale. Although it is impossible to determine the ultimate proceeds that will be obtained for our assets and the resulting aggregate amount of the dividends payable on the common shares, our estimate of the current net asset value of our assets at March 31, 2014 (as determined in accordance with the methodology described in our March 31, 2014 supplemental financial information), which is the most recent determination of net asset value, ranges from $13.79 to $15.79 per common share. Our board of trustees presently believes that based on current market conditions the amount ultimately distributable on account of each common share in connection with a liquidation would exceed $13.79, the low range of our most recently reported net asset value, after taking into account our costs, expenses and other obligations. No assurance, however, can be given as to the actual amount of liquidation proceeds that will be available for distribution, the timing of such distributions or that the aggregate distributions made will exceed the lower range of our estimated net asset value.
If our shareholders approve the plan of liquidation, pursuant to the documents governing our 9.25% Series D Cumulative Redeemable Preferred Shares, we will not be permitted to make any dividend payments or other distributions on account of our common shares until such time as our Series D Preferred Shares receive their liquidation preference. Accordingly, upon adoption of the plan of liquidation our current quarterly dividend of $0.1625 per common share will be suspended. The liquidation preference currently payable on our Series D Preferred Shares is $120,500,000 plus a 9.25% annual return thereon. In addition, it is our intention to retire (or establish a sufficient reserve to retire) our 7.75% Senior Notes due 2022 which currently have an outstanding principal balance of $__________ (after giving effect to Senior Notes recently acquired by the Trust) and which bear interest at 7.75% per annum prior to resuming dividends or other distribution on our common shares.
At the special meeting, you will also be asked to transact such other business as may properly come before the meeting or any adjournment or postponement thereof. It is not anticipated that any other matter will be brought before the special meeting. If other matters are properly presented, however, proxies will be voted in accordance with the discretion of the proxy holders.
Your vote is important. Whether or not you plan to attend the special meeting, you are requested to promptly sign, date and mail the enclosed proxy card in the postage-paid envelope provided. Returning a signed proxy card will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting, but your presence, without further action, at the special meeting will not constitute revocation of a previously delivered proxy.
On behalf of your board of trustees and management, thank you for your continued support.
Sincerely,
Michael L. Ashner
Chairman and Chief Executive Officer
| WINTHROP REALTY TRUST 7 Bulfinch Place Suite 500 Boston, Massachusetts 02114 (617) 570-4614 |
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD __________, 2014
Dear Shareholders
You are cordially invited to attend the 2013 Annuala Special Meeting of Shareholders of Winthrop Realty Trust (the “Trust”) to be held Tuesday, May 21, 2013,[Day, Month, Date,] 2014, at 11:00 A.M.,__________, local time, at the offices of Katten Muchin Rosenman LLP, 575 Madison Avenue, 11th Floor, New York, New York 10022, to consider and act upon the following::
| 1. | To |
| · | dispose of all of our assets (including, without limitation, any assets held by our operating partnership and our subsidiaries) in exchange for cash, notes, redemption of equity, or such other assets as may be conveniently liquidated or distributed, which we expect to accomplish within 24 months after approval of the plan of liquidation; |
| · | liquidate and dissolve the operating partnership and our subsidiaries, and distribute the net proceeds of such liquidation in accordance with the provisions of our governing documents and the laws of all applicable jurisdictions; |
| · | pay or provide for our liabilities and expenses, which may include the purchase of insurance or the establishment of a reserve fund to provide for payment of contingent or unknown liabilities; |
| · | payment of the liquidation preference on our 9.25% Series D Cumulative Redeemable Preferred Shares; |
| · | retire (or establish a sufficient reserve to retire) our 7.75% Senior Notes due 2022; |
| · | distribute the proceeds of the liquidation to you (and to the extent that amounts are payable to FUR Advisors LLC pursuant to the advisory agreement, FUR Advisors LLC) to the extent not otherwise required to pay our liabilities and expenses; |
| · | if we cannot sell our assets and pay our liabilities within 24 months after your approval of the plan of liquidation, or if our board of trustees otherwise determines that it is advisable to do so, we intend to transfer our remaining assets and liabilities to a liquidating trust and distribute the beneficial interests in the liquidating trust to you; and |
| · | wind-up our operations and dissolve our company, all in accordance with the plan of liquidation attached hereto as Exhibit A, and take all other necessary or advisable actions to wind-up our affairs. |
| 2. |
The Proxy Statement accompanying this notice describes each of these items of business in more detail. Our board of trustees recommends a vote “FOR” eachcurrently knows of proposals 1, 2 and 3.no other business to be presented by or on behalf of the Trust.
Only holders of common shares of beneficial interestsshareholders of record at the close of business on March 28, 2013 shall__________, 2014 will be entitled to receive notice of, and to vote at, the Annual Meeting, and atspecial meeting or any adjournment or adjournments thereof.postponement of the meeting. Eligible shareholders can vote their shares by completing, signing, dating and returning the enclosed proxy card as promptly as possible in the enclosed pre-addressed, postage-paid envelope. Proxies received after the special meeting will not be counted.
By order of the Board of Trustees  Michael L. Ashner Chairman and Chief Executive Officer |
Boston, Massachusetts
_____________, 2014
TABLE OF CONTENTS
Page
| 1 | ||
| 5 | ||
| 13 | ||
| Risks that May Delay or Reduce Our Liquidating Distributions | 13 | |
| Other Risks Relating to the Proposals | 15 | |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | 17 | |
| THE SPECIAL MEETING | 18 | |
| Date, Time and Place | 18 | |
| Purposes | 18 | |
| Record Date for Voting; Number of Votes | 18 | |
| Quorum | 19 | |
| Voting Methods and Proxies | 19 | |
| Required Vote | 19 | |
| Revocation of Proxies | 19 | |
| Information Regarding Tabulation of the | ||
| 20 | ||
| | Solicitation of | |
| Background | 20 | |
| Net Asset Value Analysis | 21 | |
| Chronology of Events | 21 | |
| REASONS FOR APPROVING THE LIQUIDATION AND RECOMMENDATION OF THE BOARD | 24 | |
| THE PROPOSAL - PLAN OF LIQUIDATION | 26 | |
| The Proposal | 26 | |
| Key Provisions of the | ||
| 27 | ||
| Estimate of Amount and Timing of Distributions to be Paid to Shareholders | 28 | |
| Cancellation of Shares | ||
| Economic Interests in the Proposed Liquidation Other than Common | ||
| 29 | ||
| 30 | ||
| 31 | ||
| Liquidating Distributions to Non-U.S. Shareholders | 31 | |
| Liquidating Trust | 32 | |
| State and Local Income Tax | 33 | |
| Transfer Taxes | 33 | |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 33 | |
| SELECTED HISTORICAL FINANCIAL DATA | 35 | |
| WHERE YOU CAN FIND MORE INFORMATION | 36 | |
| INCORPORATION OF CERTAIN INFORMATION BY REFERENCE | 36 | |
| SHAREHOLDER PROPOSALS | 37 | |
| OTHER MATTERS | 37 | |
| WHO CAN HELP ANSWER YOUR QUESTIONS | 37 | |
| EXHIBITS | 38 | |
| Exhibit A - Plan of Liquidation | A-1 | |
| Exhibit B - March 31, 2014 Estimated Net Asset Value | B-1 | |
Unless otherwise indicated or the context otherwise requires, in this proxy statement, the following defined terms have the following meanings: (1) “us”, “we”, “our” and the “Trust” refers to Winthrop Realty Trust and our direct and indirect subsidiaries including WRT Realty, L.P., our operating partnership; (2) “Common Shares” refers to our Common Shares of Beneficial Interest, (3) “Senior Notes” refers to our 7.75% Senior Notes due 2022, (4) “Series D Preferred Shares” refers to our 9.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, (5) “board” refers to our board of trustees, (6) “shareholders” refers to holders of our common shares, (7) “special meeting” refers to the Special Meeting of Shareholders to which this proxy statement relates,(8) “FUR Advisors” refers to FUR Advisors LLC, our external advisor, (9) “the “plan of liquidation” refers to the plan of liquidation and dissolution attached hereto as Exhibit A; and (10) the “plan of liquidation proposal” refers to the proposal for both the approval of the sale of all of our assets in accordance with the plan of liquidation and the approval of our dissolution in accordance with the plan of liquidation.
This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. For additional information concerning the plan of liquidation, you should read this entire proxy statement, including the exhibits, and the other documents referenced in this proxy statement. A copy of the plan of liquidation is included as Exhibit A to this proxy statement. The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information appearing elsewhere in this proxy statement.
Our Company
We are a real estate investment trust, commonly referred to as a REIT, formed under the laws of the State of Ohio. Our operations are managed by FUR Advisors pursuant to an advisory agreement. Our common shares are traded on the New York Stock Exchange, or NYSE, under the symbol “FUR.” We conduct our business through the operating partnership. We are the sole general partner of, and own, directly and indirectly, all of the limited partnership interests in, the operating partnership.
We are engaged in the business of owning and managing real property and real estate related assets. Our business objective has been to maximize long-term shareholder value through a total return value approach to real estate investing. As a result of our emphasis on total return we have not selected or managed our investments for short-term dividend growth, but rather towards achieving overall superior total return. Our approach has focused on opportunistic investments and has provided us with both the ability to capitalize on evolving market conditions and the flexibility to pursue diverse opportunities.
As a diversified REIT, we currently operate in three strategic business segments: (i) the ownership of investment properties, including properties in joint ventures consolidated or accounted for on an equity method basis, which we refer to as operating properties; (ii) the origination and acquisition of senior loans, mezzanine loans and debt collateralized directly or indirectly by commercial and multi-family real property, which we refer to as loan assets; and (iii) the ownership of equity and debt securities in other REITs, which we refer to as REIT securities.
As of March 31, 2014 we had interests in (i) 50 operating properties, (ii) 18 loan assets, and (iii) the collateral managers and equity holders of two collateralized debt obligation vehicles.
Our Company Information
Our executive offices are located at 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114-9507 and Two Jericho Plaza, Jericho, New York 11753. Our telephone numbers are (617) 570-4614 and (516) 822-0022 and our website is located at http:/www.winthropreit.com. None of the information on our website that is not otherwise expressly set forth in or incorporated by reference in this proxy statement is a part of this proxy statement.
Only shareholders of record on ___________, 2014, the record date for determining eligibility to vote at the special meeting, will be entitled to vote. Each shareholder at that time will be entitled to one vote per share. On the record date, there were _________ common shares entitled to vote at the special meeting. See “THE SPECIAL MEETING” below.
The Plan of Liquidation
At the special meeting, you will be asked to consider and atvote upon a proposal to approve the plan of liquidation, attached to this proxy statement as Exhibit A. The plan of liquidation provides that we will sell all of our assets (including, without limitation, the assets of the operating partnership and our subsidiaries) for cash, notes, redemption of equity, or such other assets as may be conveniently liquidated or distributed. We will distribute the proceeds of all sales of our assets (after satisfying any adjournmentasset specific debt and costs associated with such sale) in accordance with the provisions of our governing documents and those of our operating partnership and subsidiaries and the laws of all applicable jurisdictions including paying all amounts due to FUR Advisors, if any, pursuant to the terms of the advisory agreement. In addition, prior to paying any dividends or adjournments thereof,making other distributions on account of our common shares from such net proceeds, we are required to satisfy the liquidation preference on our Series D Preferred Shares and it is also our intention to retire (or establish a sufficient reserve to retire) our Senior Notes. Any remaining proceeds will then be distributed to our shareholders. Our board presently believes that based on current market conditions the amount ultimately distributable on account of each common share in connection with a liquidation would exceed $13.79, the low range of our most recently reported net asset value, after taking into account our costs, expenses and other obligations. See “THE PROPOSAL-PLAN OF LIQUIDATION-Estimate of Amount and Timing of Distributions to be Paid to Shareholders” below.
We intend to sell all of our assets during the 24 month period following approval by our shareholders of the plan of liquidation. At that point, we expect to terminate our registration under the Securities Exchange Act of 1934, as amended, which we refer to as the “Annual Meeting”.
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Background of the Plan of Liquidation; Reasons for the Liquidation
The decision of the board to seek your approval for the plan of liquidation followed a lengthy and detailed process during which the board reviewed several different options for ways in which we refercould maximize the value of your investment in the Trust over a reasonable period of time including:
| · | continuing under the current or a revised business plan; |
| · | acquiring through merger or otherwise the assets of another company; |
| · | seeking to dispose of our assets through a merger or a portfolio sale; |
| · | liquidating all of our assets. |
In analyzing the foregoing, our board determined that to asadopt the SEC, we are making this Proxy Statement,plan of liquidation and submit it to you for approval was in the enclosed proxy card,shareholders’ best interest for a number of reasons including:
| · | the limited current liquidity for our shareholders due to the limited trading volume in our common shares; |
| · | the relative continued disparity between our common share price and our estimated net asset value; |
| · | the inability to raise additional capital for investments on a non-dilutive basis to net asset value; |
| · | the current low interest rate environment for commercial real estate loans which is driving higher real estate values; |
| · | the diminished flow of accretive opportunistic investments that satisfy our investment strategy and minimum return parameters; |
| · | the limitation, absent a plan of liquidation, on the number of assets that we can sell in any calendar year due to applicable federal tax law restrictions in order not to be subject to a 100% tax on gains from sales; |
| · | the expectation that all liquidating distributions will be paid in cash thereby eliminating the uncertainty associated with the receipt of non-cash consideration; |
| · | the costs associated with maintaining a public entity; |
| · | the federal income tax benefits to shareholders that may be derived from the adoption of a plan of liquidation. |
In addition to the foregoing, our board considered potential negative effects on our shareholders which could result from implementing the plan of liquidation, including:
| · | there is no assurance that the Trust would be successful in disposing of its assets for values equal to or exceeding those estimated in our net asset value calculation or that these dispositions would occur as early as expected; |
| · | the anticipated expenses and potential for unforeseen expenses that will or may be incurred in connection with the sale of our assets and the continued operation of the Trust; |
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| · | the potential for a change in market conditions which could provide substantial opportunity for opportunistic investments that satisfy our investment strategy and minimum return parameters; |
| · | shareholders may, depending on the tax basis in their shares, recognize taxable gain in connection with the completion of the liquidation; |
| · | 24 months after the plan of liquidation is adopted, we may transfer assets to a liquidating trust, which may cause our shareholders to recognize taxable gain at the time of such transfer, and may have adverse tax consequences on tax-exempt and foreign shareholders; |
| · | if the plan is approved and implemented, shareholders will no longer participate in any future earnings or growth of the Trust’s assets or benefit from any increases in their value once such asset is sold; |
See “BACKGROUND OF THE TRUST’S DECISION TO LIQUIDATE” “REASONS FOR APPROVING THE LIQUIDATION AND RECOMMENDATIONS OF THE BOARD” and “CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN OF LIQUIDATION” below.
Recommendations of Our Board
Our board has unanimously determined that the sale of all of our assets and our Annual Reportdissolution in accordance with the plan of liquidation are fair to you and unanimously recommend that you vote FOR approval of the plan of liquidation proposal. See “BACKGROUND OF THE TRUST’S DECISION TO LIQUIDATE” and “REASONS FOR APPROVING THE LIQUIDATION AND RECOMMENDATIONS OF THE BOARD” below.
Interests in the Liquidation That Differ from Your Interests
In considering our board’s recommendations that you vote in favor of the plan of liquidation proposal, you should be aware that some of our trustees and officers and FUR Advisors have interests in the liquidation that are different from your interests as a shareholder. See “THE PROPOSAL-PLAN OF LIQUIDATION-Economic Interests in the Proposed Liquidation Other Than Common Shareholders” below.
Risk Factors
In addition to general risks associated with holding an interest in the Trust which includesare set forth in Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2012,2013, there a number of risks associated with the plan of liquidation including the risk that our assets will not be sold at prices equal to or exceeding our most recently reported net asset value, that expenses incurred in connection with the sale of our assets will be greater than expected or that there will be additional unforeseen costs incurred by us, all of which would result in the amount of proceeds derived from the liquidation of our assets that are ultimately distributed on account of the common shares to be less than $13.79, the low range of our most recently reported net asset value. See “RISK FACTORS” below.
Tax Consequences of the Plan of Liquidation
We believe the adoption of the plan of liquidation may provide favorable federal tax benefits to our shareholders. We urge you to carefully review “CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN OF LIQUIDATION” below with your tax advisor.
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QUESTIONS AND ANSWERS
What is the purpose of the special meeting?
At the special meeting we will ask you to approve the plan of liquidation and authorize our board to carry it out.
Has the board made a recommendation with respect to the proposed liquidation?
In connection with approving the plan of liquidation on April 28, 2014, our board unanimously determined that the plan is in the overall best interests of shareholders and recommended that you vote "FOR" its approval.
Why was the plan of liquidation adopted?
As noted below, our board explored other options prior to determining to adopt the plan of liquidation. Our board determined that to adopt the plan of liquidation and submit it to you for approval was in the shareholders’ best interest for a number of reasons including:
| · | The relative stagnant price of the common shares over the past three years that was prevalent prior to the announcement of our board’s determination to adopt a plan of liquidation; |
| · | The continued failure of the common share price to approximate the low end of our reported net asset value; |
| · | The limited trading volume in the common shares that was prevalent prior to the announcement of our board’s determination to adopt a plan of liquidation and the certainty of liquidity that a liquidation offers at a value that is expected to be not less than the low end of our reported net asset value of our assets; |
| · | The nature of our business strategy which is to invest in opportunistic real estate investments and the lack of such investments in the current market environment which would be accretive to our shareholders particularly in light of our cost of capital; |
| · | The limitation, absent a plan of liquidation, on the number of assets that we can sell in any calendar year due to applicable federal tax law restrictions in order not to be subject to a 100% tax on the gain from sales; |
| · | Our inability to raise capital through the sale of common shares in a manner that is not dilutive to existing shareholders; |
| · | The inability to obtain an offer for the entire company that our board believed was commensurate with the projected proceeds that could be obtained from a liquidation of our assets; |
| · | The overall return to shareholders during the past five years which is both below the Trust’s peer group (i.e., REITs with a diversity and other property focus and have a current market value as of January 27, 2014 of less than $750 million) and the MSCI US REIT index; |
| · | The board’s estimate that based on current market conditions the amount ultimately distributable on account of each common share in connection with a liquidation would exceed $13.79, the low range of our most recently reported net asset value, after taking into account our costs, expenses and other obligations. We cannot assure you that the Trust will be successful in disposing of its assets for values equaling or exceeding $13.79. If values of the Trust's assets decline or if the costs and expenses related to such asset sales exceed those estimated for purposes of determining net asset value, then the liquidation may not yield distributions which equal or exceed $13.79. No assurances can be made as to the actual amount and timing of distributions which will be made over a substantial period of time. See “RISK FACTORS” below; |
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| · | The expectation that all liquidating distributions will be paid in cash thereby eliminating the uncertainty associated with the receipt of non-cash consideration; |
| · | The costs of continuing to operate a public company; |
| · | The federal income tax benefits to our shareholders that may be derived from the adoption of a plan of liquidation. |
The board also considered potentially negative factors in their deliberations concerning the liquidation, including the following:
| · | There could be no assurance that the Trust would be successful in disposing of its assets for values equal to or exceeding the low range of our estimated net asset value or that the dispositions would occur in the time frame expected; |
| · | The anticipated expenses and potential for unforeseen expenses that will or may be incurred in connection with the sale of our assets and the continued operation of the Trust; |
| · | The inability to take advantage of future changes in market conditions which could provide for presently unforeseen opportunistic investments that satisfy our investment strategy and minimum return parameters; |
| · | Depending on their tax basis in their shares, shareholders may recognize taxable gain in connection with the completion of the liquidation; |
| · | We may determine to transfer unsold assets to a liquidating trust, which may cause our shareholders to recognize taxable gain at the time of such transfer and may have adverse tax consequences on tax-exempt and foreign shareholders; |
| · | If the plan is approved and implemented, shareholders will no longer participate in any future earnings or growth of the Trust’s assets or benefit from any increases in their value once the Trust’s assets are sold; |
| · | As opposed to a business combination with a relatively short time frame during which a third party would acquire the Trust, the liquidation process would involve a longer distribution process and will require the Trust to incur potentially larger administrative and other costs; |
| · | Certain conflicts of interest could exist for the Trust’s management in connection with the liquidation. See “THE PROPOSAL – PLAN OF LIQUIDATION- Economic Interests in the Proposed Liquidation Other Than Common Shareholders” below; |
| · | The likelihood that the price of the common shares will decrease as we make distributions to shareholders; |
| · | The potential loss of key personnel who provide services to the Trust and FUR Advisors which could impact adversely on our day-to-day operations as well as the ability to consummate sales of our assets. |
Were other alternatives considered?
Yes, we explored the options of continuing under the current business plan; modifying our current business plan; acquiring another real estate company or a portfolio of assets; raising additional debt financing; seeking to dispose of our assets through a merger or a portfolio sale; or issuing additional equity. In this regard, in late 2013 we engaged Barclays Capital Inc., which we refer to as Barclays, to seek a potential strategic transaction. In connection with Barclays engagement five companies expressed an interest in acquiring us and conducted substantial due diligence on us and our assets. Upon completion of the Annual Report, availabledue diligence, only one written offer was received which provided for consideration in the form of cash and common stock of the offeror, with a then aggregate value at the lower end of our estimated net asset value and which did not provide any downside protection in the event that the offeror’s common share price declined. After significant deliberation by our board, the offer was not accepted.
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What is the plan of liquidation?
The plan of liquidation authorizes us to undertake an orderly liquidation. In an orderly liquidation, we would sell all of our assets, pay all of our known liabilities, provide for the payment of our unknown or contingent liabilities, distribute our remaining cash to our Shareholders electronically viashareholders, wind-up our operations and dissolve. Upon dissolution, we will cease to exist.
What are the Internet. Accordingly, Shareholderskey provisions of the plan of liquidation?
The plan of liquidation provides, in pertinent part, that, among other things:
| · | We will be authorized to sell all of our assets, liquidate and dissolve, and distribute the net proceeds of such liquidation in accordance with the provisions of our governing documents and the laws of all applicable jurisdictions. |
| · | We will be authorized to take all necessary or advisable actions to wind-up our business, pay our debts, and distribute the remaining proceeds to our shareholders. |
| · | We will be authorized to provide for the payment of any unascertained or contingent liabilities. We may do so by purchasing insurance, by establishing a reserve fund or in other ways. |
| · | We intend to liquidate our assets within 24 months after the date the plan of liquidation is approved by our shareholders. If, however, we cannot sell our assets and pay our debts within 24 months, or if our board determines that it is otherwise advisable to do so, we are authorized, and intend, to transfer and assign our remaining assets to a liquidating trust. Upon such transfer and assignment, our shareholders will receive interests in the liquidating trust. The liquidating trust will pay or provide for all of our liabilities and distribute any remaining net proceeds from the sale of its assets to the holders of interests in the liquidating trust. The amounts that you would receive from the liquidating trust are included in our estimates described below of the total amount of cash that you will receive in the liquidation. |
| · | Once we make our final distribution, all of our outstanding common shares will be cancelled and we will cease to exist. |
| · | Our board or, if a liquidating trust is established, the trustees of the liquidating trust, may modify or amend the plan of liquidation without further action by our shareholders to the extent permitted under applicable law. |
| · | The plan of liquidation provides that the board and such officers of the Trust as the board may direct are authorized to interpret the provisions of the plan of liquidation and to take such further actions as they deem necessary or desirable to wind up the affairs of the Trust expeditiously and complete the liquidation including, without limitation, entering into or modifying such agreements (including those with FUR Advisors and its affiliates) and retaining such third parties as the board deems advisable. |
Are there any agreements to sell assets?
As of the date of this proxy statement, we have not entered into any binding agreements to sell any of our assets.
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What is a liquidating trust?
A liquidating trust is a trust organized for the primary purpose of liquidating and distributing the assets transferred to it. If we form a liquidating trust, we will transfer to our shareholders beneficial interests in the liquidating trust. These interests will generally not be transferable by the holders.
What will I receive in the liquidation?
It is impossible to determine the actual amount or timing of dividends on the common shares. However, as owners of the Trust, shareholders of record on the applicable record dates will receive all net proceeds from the sale of the Trust’s assets then being distributed after satisfying the liquidation preference on the Series D Preferred Shares, to the extent required, the Senior Notes, all of the Trust’s other applicable existing debt, as well as amounts due, if any, to FUR Advisors. At March 31, 2014, we estimated the net asset value of our assets, after satisfying such debt and other obligations, to be $13.79 to $15.79 per common share. Our board presently believes that based on current market conditions the amount ultimately distributable on account of each common share in connection with a liquidation will exceed the low range of our most recently reported net asset value after taking into account our costs, expenses and other obligations. The amount of proceeds received from the disposition of individual assets, however, is dependent upon a Noticenumber of Internet Availabilityconditions, many of Proxy Materials,which are beyond our power to control, including market conditions at the time of each sale, and no assurance can be given as to the actual amount of liquidation proceeds that will be available for distribution. See “RISK FACTORS” and “BACKGROUND OF THE TRUST'S DECISION TO LIQUIDATE-Net Asset Value Analysis” below.
Will I continue to receive regular quarterly dividends?
No. Pursuant to the terms of the certificate of designations as to which we referissued our Series D Preferred Shares, upon adoption of the plan of liquidation we are required to assatisfy the Notice, which was orliquidation preference on our Series D Preferred Shares before any dividends can be paid on our common shares. In addition, we expect that all liquidation proceeds will be sentapplied first to Shareholdersreserves sufficient to satisfy our financial covenants under various loan documents, then to satisfy our obligations including the Series D Preferred Shares and administrative costs. In addition, it is our intention to retire (or establish a sufficient reserve to retire) our Senior Notes which have an outstanding principal balance of $__________ at the date of this proxy statement (after giving effect to Senior Notes recently acquired by the Trust) and which bear interest at 7.75% per annum prior to resuming dividends on our common shares. Accordingly, our ability to pay dividends on or about April 11, 2013 containing instructions on how to access this Proxy Statementcommon shares will be limited until the Series D Preferred Shares are redeemed and the Annual Report viaSenior Notes are retired or provision is made for their retirement. The ability to pay dividends on our common shares may be further limited to the Internetextent we use our cash to repurchase common shares based on market prices.
How often will dividends be paid on common shares?
The actual amount and howtiming of, and record dates for, dividends on our common shares will be determined by the board and will depend upon the timing and proceeds of the sale of our assets, and the amounts deemed necessary by the board to vote online. If you receivedpay or provide for the NoticeTrust’s liabilities and obligations. It is our present expectation that once we have satisfied any priority payments and have cash available for dividend payments, dividends will be paid no less frequently than semi-annually.
Who will oversee the liquidation?
The sale of the Trust’s assets will be administered by mail, youthe board and FUR Advisors in accordance with the plan of liquidation and the advisory agreement and subject to the Trust’s governing documents.
Will the Trust make any new investments?
In accordance with applicable tax law, upon implementation of the plan of liquidation, we will not receive a printed copy of the proxy materials in the mail unless you request a copy in the manner described in the Notice. All Shareholdersbe permitted to make any new investments. We will, however, be able to satisfy any existing contractual obligations including any capital call requirements and acquisitions or dispositions pursuant to buy-sell provisions under existing venture documentation, pay for required tenant improvements and capital expenditures at our real estate properties, to repurchase our existing common shares, Series D Preferred Shares and Senior Notes if we so choose and make protective acquisitions or advances with respect to our existing assets. In addition, we will be able to accessinvest our cash reserves in short-term U.S. Treasuries or other short-term obligations. Accordingly, to the extent that new investment opportunities arise not related to the foregoing, the Trust will not be permitted to make an investment in such opportunity.
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What is the anticipated date of the liquidation?
We are working to complete the liquidation in an orderly manner as soon as possible. In order to permit us to deduct liquidating distributions to shareholders for federal income tax purposes, we must dispose of all of our assets within 24 months of shareholder adoption of the plan. Accordingly, we intend to place all our remaining assets (if any) at such time in a liquidating trust through which we would continue disposing of our assets. The liquidating trust would be required to dispose of any remaining assets within the subsequent three year period.
What are the tax consequences of the liquidation?
If the plan of liquidation is approved, distributions to you under the plan of liquidation, including your pro rata share of the fair market value of any assets that are transferred to a liquidating trust, should not be taxable to you for federal income tax purposes until the distributions exceed the tax basis of your shares of common stock, and then should be taxable to you as capital gain (assuming you hold your shares as a capital asset). A summary of these tax consequences begins at page 29 of this proxy materials onstatement. You should consult your own tax advisor for a web site referredfull understanding of the particular tax consequences of the liquidation to you.
Will we continue to maintain our status as a REIT?
We expect to remain qualified as a REIT until such time, if at all, as we transfer any remaining assets and liabilities to a liquidating trust. Nevertheless, due to the changes in the Notice and this Proxy Statement and will be able to request to receive a printed set of the proxy materials by mail or electronically, in either case, free of charge. If you would like to receive a printed or electronic copynature of our proxy materials, you should followassets and the instructions for requesting such materials included insources of our income that may result during this period, we can neither assure that we will remain qualified as a REIT nor that we will not become subject to federal income tax during the Notice. We elected to participate in the notice and access process in order toliquidation process. Any taxes imposed on us could materially reduce the costs associated with printing and mailing documentscash available for distribution to you and reduce the impact of the Annual Meeting on the environment.
Who is entitled to vote at the Annual Meeting?meeting?
What vote is required to approve the plan of liquidation?
The affirmative vote of at least a majority of the outstanding common shares is required to approve our plan of liquidation. Abstention, the failure to vote or a broker non-vote has the same effect as a vote against the plan of liquidation.
Our management owns or controls approximately 9.4% of our outstanding common shares. Our management has agreed to vote these shares FOR the plan of liquidation. Accordingly, the affirmative vote of approximately an additional 40.7% of our outstanding common shares will be sufficient to approve the plan of liquidation.
If any other matter is properly submitted to the Common Shares,shareholders at the Record Date there were outstanding 4,820,000 sharesspecial meeting, it will be adopted by the affirmative vote of our 9.25% Series D Cumulative Redeemable Preferred Sharesthe holders of Beneficial Interest, which we refer to as “Series D Preferred Shares”.a majority of votes cast at the meeting.
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Yes, prior to shareholder approval of the plan of liquidation, our board reserves the right to cease its pursuit of the plan of liquidation for any reason, including, without limitation, to pursue any other strategic alternatives that are, or may become, available to us.
What if an offer is received for the Trust?
No. Neither our governing documents nor Ohio law (the state in which we are organized) provide appraisal rights to our shareholders in connection with the Record Dateplan of liquidation.
What will happen if the plan of liquidation is entitlednot approved by shareholders?
If the plan of liquidation is not approved by shareholders at the special meeting, the board may explore other alternatives including continuing to one vote on each item submitted for consideration.operate as a publicly-owned entity and making investments and dispositions and conduct its operations in the ordinary course of business. Under the terms of our governing documents our board is permitted to sell any or all of our assets at any time it deems advisable. Accordingly, it is possible that, subject to applicable tax laws, we may sell all or substantially all of our assets.
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How do I vote my Common Shares that are held of record by me?
| By Mail: | Vote, sign, date your proxy card or voter instruction card and mail it in the postage-paid envelope. |
| In Person: | Vote at the |
| By Telephone: | If provided, call the telephone number listed on the proxy card or voter instruction card you received and follow the instructions provided. You will be prompted for certain information that can be found on your proxy card. |
| Via Internet: | If provided, log on to the website listed on the proxy card or voter instruction card you received and follow the on-screen instructions. You will be prompted for certain information that can be found on your proxy card. |
What if I hold my Common Sharescommon shares through my broker?
If you hold your Common Sharescommon shares in “street name” through a broker or other nominee, you may instruct your broker to vote your Common Sharescommon shares by following the instructions that the broker provides to you. Most brokers offer voting by mail, telephone and on the Internet. Please note that your broker or nominee may not be permitted to exercise voting discretion with respect to some of the mattersmatter to be acted upon. Under the rules that govern brokers who are voting with respect to Common Shares held in street name, brokers have the discretion to vote such Common Shares on routine matters, but not on non-routine matters. A broker “non-vote” occurs when a nominee holding Common Shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.
Can I change my vote after I return my proxy?
You may revoke your proxy at any time before its exercise by (1) executing and submitting a later dated proxy card, (2) subsequently authorizing a proxy through the Internet or by telephone, (3) timely sending a written revocation of proxy to our Secretary at our principal executive office, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114, or (4) attending the Annual Meetingspecial meeting and voting in person.
Attendance at our Annual Meetingthe special meeting will not constitute a revocation of a proxy unless you affirmatively indicate at our Annual Meetingthe special meeting that you intend to vote your Common Sharescommon shares in person by completing and delivering a written ballot.
Can I Attend the Special Meeting in Person?
If you would like to attend the special meeting in person, you will need to bring your admission ticket which is the upper half of the proxy card, an account statement or other evidence acceptable to us of ownership of your common shares as of the close of business on the record date. If you hold common shares in “street name” (i.e., through a bank, broker or other nominee) and wish to vote at the special meeting, you will need to contact your nominee and obtain a proxy from your nominee and bring it to the special meeting.
What constitutes a Quorum?
The holders of a majority of the outstanding common shares as of the close of business on the record date, present in person or by proxy, will constitute a quorum for the transaction of business at the special meeting. Abstentions and broker “non-votes” are included in the determination of the number of common shares present at the special meeting for quorum purposes.
What happens if I authorize my proxy without voting on all proposals?
A proxy, in the accompanying form, which is properly executed, duly returned to us and not revoked, will be voted in accordance with the instructions contained therein and, in the absence of specific instructions, will be voted as recommended FOR the adoption of the plan of liquidation and in accordance with the judgment of the person or persons voting the proxies on any other matter that may be properly brought before the special meeting.
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Will anyone contact me regarding this vote?
We have hired Mackenzie Partners, Inc. to solicit proxies. In addition to solicitation by mail, by telephone and by e-mail or the Internet, arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to their principals and we may reimburse them for their expenses in so doing. If you hold Common Sharescommon shares in “street name” (i.e., through a bank, broker or other nominee), you will receive instructions from your nominee which you must follow in order to have your proxy authorized or you may contact your nominee directly to request these instructions.
Who can answer my questions?
105 Madison Avenue
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Name | Age | Principal Occupation and Positions Held | Served as Trustee Since | |
| Michael L. Ashner | 60 | Mr. Ashner has been our Chief Executive Officer since December 31, 2003 and Chairman since April 2004. Mr. Ashner also served as the Executive Chairman and a trustee of Lexington Realty Trust (“Lexington”), a New York Stock Exchange listed real estate investment trust, from December 31, 2006 when Newkirk Realty Trust, Inc. (“Newkirk”) was merged into Lexington to March 20, 2008. Mr. Ashner previously served as a director and the Chairman and Chief Executive Officer of Newkirk until it was merged into Lexington. Mr. Ashner also currently serves as the Chief Executive Officer of First Winthrop Corporation, a real estate investment and management company, a position he has held since 1996. Mr. Ashner previously served as a director and Chief Executive Officer of Shelbourne Properties I, Inc., Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc. (collectively, the “Shelbourne Entities”), three real estate investment trusts, from August 2002 until their liquidation in April 2004. During the past five years Mr. Ashner has served as a director of NBTY, Inc. a public company that had a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15 of such Act. Mr. Ashner’s experience in opportunistic real estate investing, as well as his performance as our chief executive officer and chairman of the Board and his experience as a board member for other large and/or public companies, led the Board to conclude that he should again be nominated as a Trustee. | 2004 | |
| Arthur Blasberg, Jr. | 85 | Mr. Blasberg's activities for the past five years include serving as a receiver appointed by the Superior Court in Massachusetts and as a trustee of various businesses, including real estate investment firms and industrial companies. Mr. Blasberg was a director and chairman of the audit committee of each of the Shelbourne Entities from August 2002 to their liquidation in April 2004 and was Chairman of the Trust’s audit committee from January 2004 to the third quarter of 2011. Mr. Blasberg also has served as a director of several private companies. He is an attorney admitted to practice in the Supreme Court of the United States, various federal courts and state courts and served for five years in the general counsel's office of the SEC. Mr. Blasberg’s extensive management experience in various companies including real estate companies, his experience as an audit committee chairperson of several public companies during the past ten years, his performance as our audit committee chairperson, and his understanding of the Trust’s business, led the Board to conclude that the age limitation By-law be waived in order for Mr. Blasberg to again be nominated as a Trustee. | 2003 |
| Howard Goldberg | 67 | Mr. Goldberg has been a private investor in both real estate and start-up companies and has provided consulting services to start-up companies since 1999. From 1994 through 1998, Mr. Goldberg served as President, CEO, and board member of Player’s International, a publicly-traded company in the gaming business prior to its sale to Harrah's Entertainment Inc. From 2003 through 2005, Mr. Goldberg served as a part-time consultant to Laser Lock Technologies, Inc., LLTI.OB, a publicly-traded development stage company, engaged in the development and marketing of technologies for the prevention of product and document counterfeiting and electronic article surveillance. From 1995 through 2000, Mr. Goldberg served on the board of directors and audit committee of Imall Inc., a publicly-traded company that provided on-line shopping prior to its sale to Excite-at-Home. Mr. Goldberg served as a member of the board of directors and the audit committees of the Shelbourne Entities from August 2002 until their liquidation in April 2004. Mr. Goldberg has a law degree from New York University and was previously the managing partner of a New Jersey law firm where he specialized in gaming regulatory law and real estate from 1970 through 1994. Mr. Goldberg’s legal background as well as his experience in senior management of other companies and as a director of other public companies led the Board to conclude that he should again be nominated as a Trustee. | 2003 | |
| Thomas F. McWilliams | 70 | Mr. McWilliams is currently a managing partner and member of the investment committee of Court Square Capital Partners, a private equity company that manages approximately $6 billion in capital, a position he has held since 2006 when Court Square Capital Partners was formed. From 1983 to 2006, Mr. McWilliams held a similar position with Citigroup Venture Capital, the private equity arm of Citigroup. Mr. McWilliams’ over 15 years of experience in the supervision of the management of numerous companies either as an investor or as a director together with his capital markets knowledge, led the Board to conclude that he should again be nominated as a Trustee. | 2008 | |
| Scott Rudolph | 55 | Mr. Rudolph is currently the President of Piping Rock Health Products (“Piping Rock”), a vitamin and health supplement company which Mr. Rudolph formed in May 2011. Prior to forming Piping Rock, Mr. Rudolph was the Chief Executive Officer and Chairman of NBTY, Inc., a New York Stock Exchange listed company and the world’s largest manufacturer and marketer of nutritional supplements, which was sold to a private equity firm in 2010. Mr. Rudolph served as the President of Dowling College located on Long Island, New York from May 2010 to May 2011 and is currently a member of the Board of Trustees of Washington University in St. Louis, Missouri. Due to his time limitations, Mr. Rudolph elected not to stand for re-election to the Board. | 2012 |
| Lee Seidler | 78 | Dr. Seidler is currently a private investor. Dr. Seidler serves frequently as an expert witness in accounting and finance cases for various plaintiffs and defendants as well as the SEC. He testified in 2002 before the Senate Committee on Banking, Housing and Urban Affairs on regulation of the accounting profession and consulted with staff drafting Sarbanes-Oxley which produced the Public Company Accounting Oversight Board (PCAOB). He was a member of the PCAOB’s Standing Advisory Group. Mr. Seidler served as a General Partner and Senior Managing Director of Bear, Stearns & Co. from 1981 to 1989. Dr. Seidler was elected to Institutional Investor’s All Star first team of financial analysts for 14 consecutive years (until his retirement) for his analysis of the impacts of accounting and financial reporting and taxes on the decisions of investors. He was also director of the firm’s 55 person internal audit staff for two years and represented Bear, Stearns in Washington D.C. on legislative issues. Dr. Seidler has been a member of the boards of directors of numerous public and private companies and has served as chair of the audit committees of these companies. Dr. Seidler was a professor of accounting and the Price Waterhouse professor of auditing at New York University Stern School of Business Administration for 22 years. Dr. Seidler’s recognition as a pre-eminent authority on public accounting and his business experience led the Board to conclude that he should again be nominated as a Trustee. | 2010 | |
| Carolyn Tiffany | 46 | Ms. Tiffany has been our President since January 1, 2010 and served as our Chief Operating Officer and Secretary from January 8, 2004 to January 31, 2007. From February 2007 through March 2008 Ms. Tiffany served as a principal and the Chief Operating Officer for High Street Equity Advisors, a private equity real estate firm. From April 2008 to December 31, 2008, Ms. Tiffany was a private investor. In addition, Ms. Tiffany served as the Chief Operating Officer and Secretary of Newkirk and its predecessor entities from 1996 to December 31, 2006. Ms. Tiffany’s real estate experience and her performance as our President led the Board to conclude that she should again be nominated as a Trustee. | 2010 | |
| Steven Zalkind | 71 | Since 1975, Mr. Zalkind has been a principal of Resource Investments Limited, LLC (“Resource”), a real estate investment firm, acting as either an officer of the General Partner or Managing Member in the acquisition of over 26,000 multi-family apartment units and 2,000,000 square feet of commercial shopping centers and office buildings. Mr. Zalkind currently serves as the Chairman and Chief Executive Officer of Resource. Mr. Zalkind was a director of each of the Shelbourne Entities from August 2002 to their liquidation in April 2004 and a director of Newkirk from November 2005 until its merger with Lexington in December 2006. Mr. Zalkind’s experience in multi-family and commercial real estate investing since 1975 led the Board to conclude that he should again be nominated as a Trustee. | 2008 |
| Type of Fee | Fiscal 2012 | Fiscal 2011 | ||||||
| Audit Fees | $ | 1,404,000 | $ | 1,095,000 | ||||
| Audit Related Fees | 142,000 | 290,000 | ||||||
| Tax Fees | 73,000 | 50,000 | ||||||
| All Other Fees | - | - | ||||||
| Total | $ | 1,619,000 | $ | 1,435,600 | ||||
| Name and Position | Dollar Value ($)(1) | Number of Shares | ||||||
| Michael L. Ashner, Chairman and CEO(2) | $ | 2,492,820 | 198,000 | |||||
| Carolyn Tiffany, President(3) | $ | 1,284,180 | 102,000 | |||||
| John Garilli, Chief Financial Officer | $ | 944,250 | 75,000 | |||||
| John Alba, Chief Investment Officer | $ | 944,250 | 75,000 | |||||
| Executive Group | $ | 5,665,500 | 450,000 | |||||
| Non-Executive Director Group | - | - | ||||||
| Non-Executive Officer Employee Group | $ | 1,888,500 | 150,000 | |||||
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RISK FACTORS
In addition to general risks and the recipient under Section 83(b)other information contained in this proxy statement, in evaluating the proposals to be voted on at our special meeting you should carefully consider the “Risk Factors” discussed below in this proxy statement and in our Annual Report on Form 10-K for the year ended December 31, 2013. Each of the Code,risks described could result in a participant will not recognize any taxable income upon the award of restricted shares that are not transferable and are subject to a substantial risk of forfeiture. Unless paiddecrease in the formproceeds ultimately distributed to you in connection with the plan of additional restricted shares (which would then be subject toliquidation and the same restrictions and tax treatmenttiming of distributions. Much of the business information as well as the restricted sharesfinancial and operational data contained in our risk factors are updated in our periodic reports, certain of which are also incorporated by reference into this proxy statement. Although we have tried to discuss key factors, please be aware that other risks may prove to be important in the future. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they relate), dividends paidmay affect our financial performance.
Risks that May Delay or Reduce Our Liquidating Distributions
Our board presently believes that based on current market conditions the amount ultimately distributable on account of each common share in connection with respect to restricted shares prior toa liquidation would exceed $13.79, the lapselow range of restrictions applicable to those sharesour most recently reported net asset value, after taking into account our costs, expenses and other obligations. We currently anticipate that such distributions will be taxable as compensation income topaid within 24 months after shareholder approval of the participant. Generally, the participant will recognize taxable ordinary income at the first time those shares become transferable or are no longer subject to a substantial riskplan of forfeiture, in an amount equal to the fair market value of those shares when the restrictions lapse, less any amount paid with respect to the award of restricted shares. The recipient’s tax basis will be equal to the sum ofliquidation. Our expectations about the amount of ordinary income recognized uponliquidating distributions that we will make and when we will make them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the lapseactual amount of restrictionsliquidating distributions we pay to you may be more or less than we estimate in this proxy statement. In addition, the liquidating distributions may be paid later than we predict and any amount paid for such restricted shares. The recipient’s holding period will commence onmay take as long as 60 months after shareholder approval of the date on whichplan of liquidation. In addition to the restrictions lapse.risks that we generally face in our business, factors that could cause actual payments to be later or lower than we expect include, among others, the risks set forth below:
If we are unable to find buyers for our assets at our expected sales prices, our liquidating distributions may be delayed or reduced.
As indicated above, a participant may elect under Section 83(b) of the Code to recognize taxable ordinary income upon the award date of restricted shares (rather than being taxed as described above) based on the fair market value of the shares of Common Stock subject to the award on the date of this proxy statement, we have not entered into any binding agreements to sell any of our assets. In calculating our estimated range of liquidating distributions, we assumed that we will be able to find buyers for all of our assets at amounts equal to or in excess of the award.low end or our estimated range of net asset values for each asset. We, however, may have overestimated the sales prices that we will be able to obtain for these assets or underestimated the costs associated with such sales. For example, in order to find buyers in a timely manner, we may be required to lower our asking price below the low end of our current estimate of an asset’s net asset value. If we are not able to find buyers for these assets in a participant makes that election,timely manner or if we have overestimated the sales prices we will receive, our liquidating payments to our shareholders would be delayed or reduced. Furthermore, the projected liquidating distribution is based upon our estimated range of net asset value for each asset based on current market conditions and asset operations, but real estate market values are constantly changing and fluctuate with changes in interest rates, supply and demand dynamics, occupancy percentages, lease rates, the availability of suitable buyers, the perceived quality and dependability of income flows from tenancies and a number of other factors, both local and national. The net liquidation proceeds from each asset may also be affected by the terms of prepayment or assumption costs associated with debt encumbering each asset. In addition, minority ownership matters, transactional fees and expenses, environmental contamination at our properties or unknown liabilities, if any, dividends paid with respectmay adversely impact the net liquidation proceeds from those assets.
If any of the parties to those restricted shares (unless paidour future sale agreements default thereunder, or if these sales do not otherwise close, our liquidating distributions may be delayed or reduced.
If you approve the plan of liquidation, we will seek to sell all of our assets. The consummation of the potential sales for which we will enter into sale agreements in the form of additional restricted shares, which would either require a separate election under Section 83(b) of the Code orfuture will be subject to the treatment described in the paragraph above) will not be treated as compensation income, but rather as dividend income, and the participant will not recognize additional taxable income when the restrictions applicable to his or her restricted share award lapse.
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In calculating our estimated liquidating distributions, we assumed that we would maintain the occupancy rates of currently-leased space, that we would be able to rent certain currently available space and that we would not experience any significant tenant defaults during the liquidation process that were not subsequently cured. Negative trends in one or more of these factors during the liquidation process may adversely affect the resale value of the Board. Set forth belowproperties, which would reduce our liquidating distributions. To the extent that we receive less rental income than we expect during the liquidation process, our liquidating distributions will be reduced. We may also decide in the event of a tenant default to restructure the lease, which could require us to substantially reduce the rent payable to us under the lease, or make other modifications that are unfavorable to us.
If our transaction costs, liquidation costs or unpaid liabilities are greater than we expect, our liquidating distributions may be delayed or reduced.
Before making the liquidating distributions on our common shares, we will need to pay or arrange for the payment of all of our transaction costs in the liquidation, all other costs and all valid claims of our creditors including satisfying the liquidation preference on our Series D Preferred Shares and, retiring (or establishing a sufficient reserve to retire) the Senior Notes. Our board may also decide to acquire one or more insurance policies covering unknown or contingent claims against us or them, for which we would pay a premium which has not yet been determined. Our board may also decide to establish a reserve fund to pay these contingent claims. The amounts of transaction costs in the liquidation are not yet final, so we have used estimates of these costs in calculating the amounts of our projected liquidating distributions. To the extent that we have underestimated these costs in calculating our projections or we incur unforeseen additional costs, our actual net asset value may be lower than our estimated range. In addition, if the claims of our creditors are greater than we have anticipated or we decide to acquire one or more insurance policies covering unknown or contingent claims against us, our liquidating distributions may be delayed or reduced. Further, if a reserve fund is established, payment of liquidating distributions to our shareholders may be delayed or reduced.
If we fail to remain qualified as a REIT, our shareholders would be adversely affected.
Although we expect to remain qualified as a REIT until such time, if at all, as we transfer any remaining assets and liabilities to a liquidating trust, given the changes in the nature of our assets and sources of our income that will result during this period, and the need to retain certain information regardingassets to meet our executive officersliabilities, we cannot assure you that we may continue to qualify as a REIT through the completion of our liquidation. If we fail to remain qualified as a REIT, we would be taxed as a corporation for federal income tax purposes and could not deduct distributions to our shareholders in computing our taxable income. As a result, we would be liable for federal income taxes at March 28, 2013 (biographical informationcorporate tax rates on our taxable income from operations and asset sales for the taxable year in which our qualification as a REIT terminates and any subsequent years, which could materially reduce the cash available for distribution to our shareholders.
Distributing interests in a liquidating trust may cause you to recognize gain.
If we have not sold all of our assets within 24 months of the approval of the plan, the plan of liquidation requires that any remaining assets and liabilities be transferred to a liquidating trust. In that event, you will be treated for federal income tax purposes as if you received a distribution of your pro rata share of the fair market value of any assets that are transferred to a liquidating trust, and will be subject to federal income tax to the extent that such “deemed” distribution exceeds the remaining tax basis of your shares of common stock as reduced by all prior distributions made to you during the liquidation period. As a result, you may recognize taxable gain with respect to Mr. Ashnerassets transferred to a liquidating trust prior to the subsequent sale of such assets and Ms. Tiffany is set forth above on pages 5 and 7):
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If you approve the plan of liquidation, you may experience a delay before receiving your share of the eight current Trusteesnet proceeds of such liquidation. In a liquidation, we may sell our assets either subject to or upon the assumption of any then outstanding mortgage debt or, alternatively, may provide financing to purchasers. We do not have any limitations or restrictions on taking such purchase money obligations. To the extent we receive promissory notes or other property in lieu of cash from sales, such proceeds, other than any interest payable on those proceeds, will not be included in net sale proceeds until and fiveto the extent the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. We may receive initial down payments in the year of sale in an amount less than the selling price and subsequent payments may be spread over a number of years. In such event, you may experience a delay in the distribution of the seven nominees for electionnet proceeds of a sale until such time as Trusteethe installment payments are independent and all membersreceived.
Other Risks Relating to the Proposals
Our entity value may be adversely affected by adoption of the Audit Committee, Compensation Committee, Conflicts Committee, and Nominating and Governance Committee are independent Trustees. In addition, our current policy regarding the receipt and disseminationplan of Shareholder communications allows our Shareholders to communicate directly with any or all of our Trustees. Further, in addition to formal Board meetings, management holds monthly informal informational calls with the Board at which updates on company matters are provided.liquidation.
Once our shareholders approve the plan of liquidation, we will be committed to winding-up our operations. This may adversely affect the value that a potential acquirer might place on us or our ability to sell the foregoing, the Board believes that its existing leadership structure provides for an appropriate balance that best serves us andTrust as a whole. It may also preclude other possible courses of action not yet identified by our Shareholders. The Boardboard.
We will periodically review its leadership structurenot be able to ensure that it remains the optimal structure for us and our shareholders.make new investments.
The Board acknowledges its responsibilityadoption of the plan of liquidation may cause our common shares to no longer be listed on the NYSE.
Although we believe that the adoption of the plan of liquidation will not cause our common shares to fail to meet the listing requirement of the NYSE, it is possible that as we reduce our overall assets through the distribution of sales proceeds whether to satisfy debt, expenses, our Series D Preferred Shares, Senior Notes or to make liquidation distributions to our shareholders, we may fail to satisfy the requirement to cause our common shares to remain listed on the NYSE. If this were to occur, the ability to transfer your common shares would be substantially limited which may reduce the market price for reviewingyour common shares.
Certain institutional shareholders may be required to sell their common shares or our common shares may fail to meet the process for assessingrequirements to be on certain indexes as a result of the major risks facing us andplan of liquidation.
Upon the options for their mitigation. Trustees are entitled to rely on management andadoption of the adviceplan of liquidation, the governing documents of certain of our outside advisorsinstitutional investors may prohibit them from holding our common shares. Similarly, any index to which our common shares are a member such as the Russell 2000 may have restrictions that would require our common shares to no longer be part of such index. If either or both of these were to be the case, such institutional investors and auditors, but must at all times have a reasonable basis forother investors who invest in stocks included on such reliance. This responsibility is addressed in a numberindex would be required to divest of ways. First, our Audit Committeethe common shares they hold which would create downward pressure on a quarterly basis reviews and discusses with management, our internal auditor and our independent registered public accounting firm our major risk exposures and the policies management has implemented to monitor such exposures, including our financial risk exposures and risk management policies. Second, we have adopted a Corporate Compliance and Business Ethics Compliance Program which established an Ethics and Compliance Committee, consistingtrading price of our President, Chief Financial Officer, Internal Auditor, Human Resources Director, and general counsel, or such personscommon shares. If this were to occur, shareholders who effectively serve in such capacities or performsell common shares prior to the roles attendant thereto. The Ethics and Compliance Committee conducts an annual compliance risk assessment to include consideration of compliance risk-related information otherwise identified through operationcompletion of the Corporate Compliance and Business Ethics Compliance Program (such as information from internal audit reports; reports of possible violations; and issues raised in connection with training sessions). The Ethics and Compliance Committee also incorporates information aboutliquidation may receive less than the changing nature of our business (such as the development of new services, the acquisition of new business, the entry into a new venture, the imposition of new requirements, or the entry into new geographical markets) into the risk assessments. The results of these reviews are reported directly to Audit Committee and the Board. Third, our Board further oversees risk through provisions of our Declaration of Trust, By-laws and general corporate governance policies which provide that (i) each of our Board Committees consist solely of Trustees who qualify as “independent” under the requirements of the New York Stock Exchange, (ii) a majority of our Trustees qualify as independent, (iii) Board approval is required for any acquisition or disposition in excess of $10,000,000 and (iv) approval of our Conflicts Committee is required for approval of any transactions involving a conflict of interest, or potential thereof.
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Our board may amend the plan of liquidation even if you approve it.
Even if you vote to approve the plan of liquidation, our board may amend the plan of liquidation without further shareholder approval, to the extent permitted by Ohio law.
Approval of the Compensation Committeeplan of liquidation may lead to shareholder litigation which could result in costs and distract our management.
Historically, extraordinary corporate actions by a company, such as our proposed plan of liquidation, sometimes lead to securities class action lawsuits being filed against that company. We may become involved in this type of litigation as a result of our proposal of, or the adoption of, the plan of liquidation. As of the date of this proxy statement no such lawsuits relative to the plan of liquidation were pending or, to our knowledge threatened. If such a lawsuit is filed against us, the litigation may be expensive and, may divert management’s attention from implementing the plan of liquidation and otherwise operating our business. If we do not prevail in such a lawsuit, we may be liable for damages which would reduce (and may significantly reduce) our cash available for distribution.
We may incur a 100% tax on any prohibited transactions.
Assuming that we remain qualified as a REIT, we will incur a 100% tax on our net income and gain derived from our sale of any property that we are treated as holding primarily for sale to customers in the ordinary course of business. We believe, but cannot assure, that all of our properties are held for investment and that none of the asset sales that we intend to make pursuant to the plan of liquidation should be subject to this tax.
Approval of the plan of liquidation will cause our accounting basis to change, which could require us to write-down one or more of our assets.
Once the shareholders approve the proposed plan of liquidation, we must change our basis of accounting from the going-concern basis to that of the liquidation basis of accounting. In order for our financial statements to be in 2012accordance with generally accepted accounting principles under the liquidation basis of accounting, all of our assets must be stated at their estimated net realizable value, and all of our liabilities must be recorded at the estimated amounts at which the liabilities are expected to be settled. Based on the most recent available information, if the plan of liquidation is adopted, we may make liquidating distributions that exceed the carrying amount of our net assets. We, however, cannot assure you what the ultimate amounts of such liquidating distributions will be. Therefore, there is a risk that the liquidation basis of accounting may entail write-downs of certain of our assets to values substantially less than their respective carrying amounts, and may require that certain of our liabilities be increased or certain other than Mr. Rudolph.liabilities be recorded to reflect the anticipated effects of an orderly liquidation.
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Writing down our assets could make it more difficult to negotiate amendments to our credit agreements or result in defaults under any restructured credit agreements that we may enter. In addition, write-downs in our assets could reduce the price that a third party would be willing to pay to acquire your shares or our assets.
We may be unable to sell certain of our assets held in ventures.
We currently hold a number of our assets in ventures with third parties. Pursuant to the terms of certain of these agreements, the consent of our venture partner is required to the sale of the underlying asset or our interest in some of these ventures. If we are unable to obtain our venture partner’s consent we may have difficulty in timely selling such asset or may need to acquire our venture partner’s interest through the exercise of our dispute resolution provisions which, in all such cases, may cause us to incur additional expenses and result in a delay in the sale of such assets which could reduce our liquidating distributions.
We may have underestimated the amount of prepayment fees or defeasance charges on our mortgages.
In calculating our estimated net asset value range, we have assumed that the purchasers of our properties will assume certain mortgages on the underlying property, which contain penalties in the event of the prepayment of those mortgages. The Nominatingsale of our properties pursuant to the plan of liquidation will trigger these penalties unless the purchasers assume (and/or are allowed to assume) the corresponding mortgage. We may be unsuccessful in negotiating the assumption of any underlying mortgages in the sale of any of our properties, which could negatively affect the amount of cash available for distribution pursuant to the plan of liquidation.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Any statements included in this proxy statement, including any statements in the documents that are incorporated by reference herein or therein that are not strictly historical are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements contained or incorporated by reference herein should not be relied upon as predictions of future events. Certain forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans, intentions or anticipated or projected events, results or conditions. Such forward-looking statements are dependent on assumptions, data or methods that may be incorrect or imprecise and Corporate Governance Committee:they may be incapable of being realized. Such forward-looking statements include statements with respect to:
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| · | our policies regarding investments, acquisitions, dispositions, financings and other matters; |
| · | our qualification as a real estate investment trust under the |
| · | the |
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| · | the availability of debt and equity financing; |
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| · | the anticipated performance of our assets and of acquired properties and businesses, including, without limitation, statements regarding anticipated revenues, cash flows, funds from operations, earnings before interest, depreciation and amortization, property net operating income, operating or profit margins and sensitivity to economic downturns or anticipated growth or improvements in any of the foregoing; and |
| · | our ability, and that of our assets and acquired properties and businesses, to grow. |
You are no differencescautioned that, while forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance and they involve known and unknown risks and uncertainties. Actual results may differ materially from those in the mannerforward-looking statements as a result of various factors. The information contained or incorporated by reference in whichthis proxy statement, including, without limitation, the Nominatinginformation set forth in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013, that are incorporated by reference in this proxy statement, identifies important factors that could cause such differences. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may reflect any future events or circumstances, except as required by applicable laws, rules or regulations.
THE SPECIAL MEETING
Date, Time and Corporate Governance Committee evaluate a candidate whoPlace
The special meeting will be held in the 11th Floor Conference Center in the offices of Katten Muchin Rosenman, 575 Madison Avenue, New York, New York 10022 on ________, 2014 at _________ local time, and any adjournment or postponement of the meeting. This proxy statement and the accompanying Notice of Special Meeting of Shareholders and proxy card are first being mailed to shareholders on or about ____________, 2014.
Purposes
At the special meeting, you will be asked to consider and vote upon the plan of liquidation. The board is recommendednot currently aware of any business to be acted upon at the special meeting other than as described in this proxy statement. If other matters are properly brought before the special meeting, however, the persons appointed as proxies will have authority to vote on those matters according to their discretion.
Record Date for nomination for membershipVoting; Number of Votes
Only shareholders of record at the close of business on __________, 2014 are entitled to receive notice of and to vote at the Board by a Shareholder. The Nominatingspecial meeting. On such date there were issued and Corporate Governance Committee has not received any recommended nominations from Shareholders in connection with the Annual Meeting.outstanding ________ common shares.
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Common shares present but abstaining and the Chief Executive Officer. Members of the Board also have an opportunity to interview qualified candidates. As described above, the Nominating and Corporate Governance Committeebroker non-votes will also consider candidates recommended by Shareholders. The Nominating and Corporate Governance Committee then determines, based on the background information and the information obtainedbe included in the interviews, whether to recommend to the Board that the Trust nominate a candidate for approval by the Shareholders to fill a Board position. With respect to an incumbent Trustee whom the Nominating and Corporate Governance Committee is considering as a potential nominee for re-election, the Nominating and Corporate Governance Committee reviews and considers the incumbent Trustee’s service to the Trust during his or her term, including the number of meetings attended, levelshares present at the special meeting for purposes of participation,establishing a quorum. A broker non-vote occurs on a matter when a broker holding stock in street name returns an executed proxy but does not vote on the matter because the broker lacks discretionary authority from the beneficial owner to vote on that matter. The missing votes are deemed to be "broker non-votes."
Voting Methods and overall contributionProxies
You can vote on the matters to come before the special meeting as follows:
| By Mail: | Vote, sign, date your proxy card or voter instruction card and mail it in the postage-paid envelope. |
| In Person: | Vote at the special meeting. If you hold your shares through a broker, you must supply a legal proxy assigning you with direct voting power. |
| By Telephone: | If provided, call the telephone number listed on the proxy card or voter instruction card you received and follow the instructions provided. You will be prompted for certain information that can be found on your proxy card. |
| Via Internet: | If provided, log on to the website listed on the proxy card or voter instruction card you received and follow the on-screen instructions. You will be prompted for certain information that can be found on your proxy card. |
Required Vote
Once a quorum is present or represented by proxy at the special meeting, approval of the plan of liquidation requires the affirmative vote of at least a majority of the outstanding common shares. At the close of business on _____________, the record date, there were _________ common shares outstanding.
Our senior management owns or controls 3,419,946 common shares representing approximately 9.4% of the votes eligible to be cast at the special meeting and have agreed to vote all such common shares FOR the plan of liquidation. Accordingly, the affirmative vote of approximately an additional 40.7% of the votes eligible to be cast at the special meeting, or common shares, will be sufficient to approve the plan of liquidation.
Revocation of Proxies
A shareholder may revoke a proxy given with respect to the Trust in addition to such person’s biographical information and qualifications. The Nominating and Governance Committee gives consideration to a wide range of diversity factors as a matter of practice when evaluating candidates tospecial meeting at any time before it is voted at the Board and incumbent Trustees, but the Committee does not have a formal policy regarding Board diversity.special meeting by:
| · | executing and submitting a later dated proxy card; |
| · | subsequently authorizing a proxy through the Internet or by telephone; |
| · | timely sending a written revocation of proxy to our Secretary at our principal executive office, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114; |
| · | attending the special meeting and voting in person, but the presence (without further action) of a shareholder at the special meeting will not constitute revocation of a previously delivered proxy. |
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Name | Fees Earned or Paid in Cash | Stock Awards | Option Awards | All Other Compensation | Total | |||||||||||||||
| Arthur Blasberg, Jr. | $ | 62,750 | - | - | - | $ | 62,750 | |||||||||||||
| Howard Goldberg | $ | 87,750 | - | - | - | $ | 87,750 | |||||||||||||
| Thomas F. McWilliams | $ | 50,500 | - | - | - | $ | 50,500 | |||||||||||||
| Scott Rudolph | $ | 32,500 | - | - | - | $ | 32,500 | |||||||||||||
| Lee Seidler | $ | 82,750 | - | - | - | $ | 82,750 | |||||||||||||
| Steven Zalkind | $ | 50,500 | - | - | - | $ | 50,500 | |||||||||||||
Solicitation of Proxies and Expenses
We will bear the Audit Committee receives an additional $30,000 annually. For serving as Lead Independent Trustee, Mr. Goldberg receivesentire cost of solicitation of proxies from our shareholders. We have retained MacKenzie Partners, Inc. to assist in soliciting proxies and will pay approximately $25,000 annually. Trustees who are also our officers receive no compensation for serving on the Board. However, all Trustees are reimbursed for travel expenses and otherplus reasonable out-of-pocket expenses incurred in connection with their service on the Board and its committees. In addition, in recognition of the additional time required and efforts of the Compensation Committee in connection with the January 2013 modificationssolicitation. Copies of solicitation materials will be furnished to the advisory agreement,brokerage houses, fiduciaries and custodians holding in January 2013 the Board votedtheir names common shares beneficially owned by others to pay a one-time fee of $25,000forward to Mr. Zalkind and $2,000 per Compensation Committee meeting attended by the other membersthose beneficial owners. We will reimburse persons representing beneficial owners of the Compensation Committee upcommon shares for their expenses in forwarding solicitation materials to a maximumthose beneficial owners. Original solicitation of $10,000.proxies by mail may be supplemented by telephone or personal solicitation by our trustees, officers or other representatives of the Trust. No additional compensation will be paid to our trustees, officers or other representatives for these services.
The decision of the board to seek your approval for the plan of liquidation followed a lengthy and detailed process in which the board, together with the assistance of Barclays, reviewed several different options for ways in which we could maximize the value of your investment in us over a reasonable period of time including:
| · | continuing under the current or a revised business plan; |
| · | acquiring through merger or otherwise the assets of another company; |
| · | seeking to dispose of our assets through a merger or a portfolio sale; |
| · | liquidating all of our assets. |
Background
We are a diversified REIT. As such, in making investments we have adoptedtraditionally not focused on any specific type of real estate asset (i.e., office, retail, apartment, etc.), or any particular geographic area within the United States (i.e., northeast, primary markets, central business districts, etc.), or the asset’s priority in the capital stack (i.e., mortgage debt, mezzanine debt, CUSIP securities, preferred or common equity, fee ownership, etc.). As an opportunistic investor, we have sought to maximize long-term shareholder value through a Codetotal return value approach to real estate investing. As a result of Ethics, which is applicablethis emphasis on total return, we have sought to all Trustees and our executive officers, including the principal executive officer, the principal financial officer and the principal accounting officer,achieve consistent growth in underlying asset value as well as FUR Advisorsa stable, predictable dividend for our shareholders. We have not selected or managed our investments for short-term dividend growth, but rather towards achieving overall superior total risk adjusted return. Our approach has focused on opportunistic investments and its employees. The Code of Ethics can be obtained upon request from our Secretary and at our website www.winthropreit.com in the Governance section under the link “Charters”.
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As a REIT we are reliant on raising funds in the Audit Committee recommendedmarket through sales of debt and equity securities as we are required to distribute not less than 90% of our taxable income each year, thereby restricting our ability to retain earnings. When we have sought to issue common shares in the past, most recently September 2013, the newly-issued shares have been sold at a discount not only to the Trust’s Board of Trustees thatthen trading price for our common shares but, more significantly, to our net asset value resulting in the Trust’s audited consolidated financial statementsnecessity to achieve higher returns on investments in order for the fiscal year ended December 31, 2012proceeds derived from such offering to be includedaccretive to shareholders.
In addition to the foregoing, in the Trust’s Annualfourth quarter of 2013 we saw a substantial increase in market demand for real estate equity and debt asset investments thereby increasing purchase prices for assets with a corresponding decrease in expected returns for such assets. This increase in demand is driven by a number of factors including continued low interest rates, an ever increasing supply of equity and debt capital, and a market perception of a growing economy, all of which have combined to depress investment returns relative to risk. Consequently, it has become difficult to accretively deploy our capital relative to its cost. As a result, the number of opportunistic investments that satisfy our investment strategy and minimum return parameters has diminished substantially. Furthermore, we are limited to the number of assets that we can sell in any calendar year due to applicable federal tax law restrictions in order to maintain our status as a REIT.
Net Asset Value Analysis
As previously noted, beginning with the quarterly period ended June 30, 2012, we have been providing a net asset value range in our supplemental financial information available on our website (www.winthropreit.com) and furnished with a Current Report on Form 10-K as8K which is filed with the SEC and available at the SEC’s EDGAR website. See “WHERE YOU CAN FIND MORE INFORMATION” below. The net asset value range provided in our supplemental financial information for the period March 2013.31, 2014 was $13.79 and $15.79 per common share. A copy of our net asset values at March 31, 2014 is attached hereto as Exhibit B.
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As a result of Barclays’ efforts, it became evident that the most likely strategic alternative for the Trust was to seek to be acquired and, at our direction, Barclays began informal discussions with selected potential acquirers regarding an acquisition of the Trust. During November and December 2013 Barclays contacted at our direction 12 potential acquirers and received indications of interest from five of them, each of which entered into a confidentiality agreement and were given access to an electronic data site containing detailed information about the Trust and its assets including all relevant legal documentation with respect to the Trust and its assets.
From March 2005late December 2013 through February 7, 2014 each company that signed a confidentiality agreement had access to May 2007, no share option or share grant plans were in effect pursuantthe data site. In addition, four of the five potential acquirers visited certain of our more significant assets and had in-person and telephonic meetings with our asset management team to which we could issue options. In May 2007,discuss our Shareholders approved the Winthrop Realty Trust 2007 Long Term Incentive Plan pursuant to which share options or share grants can be granted. In January 2013 the Board approved the issuance of 66,667assets. Michael Ashner, our Chairman and 33,333 Common Shares to Michael L. AshnerChief Executive Officer, and Carolyn Tiffany, respectively, which shares are subjectour President, also had in-person and telephonic meetings with each of the potential acquirers and, together with other members of management and our legal counsel, made themselves available to certain restrictions and forfeiture as set forth in the grant award. In addition, in January 2013 the Board approved the issuance of an additional 500,000 Common Shares which will also be subjectsuch potential acquirers to restrictions and forfeiture and will only be issued if the Plan Amendment is approved or a subsequent plan is approved. When issued, the 500,000 Common Shares will be allocated as set forth above under “PROPOSAL NO. 3 – AMENDMENT TO 2007 LONG TERM INCENTIVE PLAN-Plan Awards-Number of Shares.”address their questions.
The Compensation Committee is comprised entirely of independent Trustees. The Compensation Committee has reviewedboard met again on January 13, 2014 at which time Mr. Ashner and Ms. Tiffany updated the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
On January 17, 2014, a letter which outlined the process for providing a bid for the Trust was made available on the data site. The only parameters for the bid were that it be provided by February 7, 2014, state the per common share price, the type of consideration (i.e., cash, securities), how the Series D Preferred Shares and Senior Notes would be addressed, and any other conditions to the transaction.
On January 24, 2014, the board again met at which time Mr. Ashner and Ms. Tiffany updated the members of the Board or our executive officers who served during our 2012 fiscal year that require disclosure under Item 407(e)(4) of Regulation S-K promulgated underboard on the Securities Exchange Act of 1934, as amended. All current membersstatus of the Compensation Committee are considered independent under our Corporate Governance Guidelines.potential acquirers review of the Trust. In addition, at the meeting the board approved a form of merger agreement that was then made available on the data site to the potential acquirers and on which they were to comment in connection with a bid. Further, the board discussed the terms of an engagement letter with Barclays which was approved by written consent on January 29, 2014.
On February 1, 2014 the board again met and was provided with a further update as to the potential acquirers. Mr. Ashner reported that one of the interested parties had advised Barclays that it would not be making an offer.
At the February 7, 2014 bid date, the Trust received one written offer, which we refer to as the Offer. The Offer provided for aggregate consideration of $14.25 per common share which was to be paid in the form of cash and securities. The securities component was fixed at a specified number of shares of the offeror’s common stock which was to be valued based on the volume weighted average price of the offeror’s common stock for the prior 30 day trading period at the time of the announcement of a transaction, which we refer to as the VWAP. The cash component would then equal the aggregate consideration of $14.25 per common share less the value of the offeror’s common stock. Based on the then current VWAP, the price would have been paid 62% in the offeror’s common stock and the balance ($5.42) in cash. To the extent that the VWAP increased between the offer date and the announcement of the transaction, the cash portion would decrease and to the extent the VWAP decreased between the offer date and the announcement of the transaction, the cash portion would increase. In addition, the Offer provided the offeror with the ability to convert to an all cash price if it chose. Accordingly, if the offeror’s per share stock price increased so that it was in excess of the VWAP at the time the transaction was announced, then the offeror could pay all cash thereby limiting any upside to the shareholders. Conversely, if the offeror’s per share stock price decreased below the VWAP, the ultimate consideration paid to shareholders would be less than $14.25 in total consideration. At the time of the Offer, the VWAP was below the then current trading price of the acquirer’s common stock which would have likely resulted in a higher VWAP at the announcement of the transaction and, therefore, a smaller cash component.
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On February 8, 2014 the board met to discuss the Offer. At the meeting the amount and nature of the consideration were discussed. The board determined that there was significant risk in the ultimate proceeds that would be achieved by the shareholders as the offeror was then trading at a price close to its 52 week high. As such, there was an increased potential for the downside risk associated with the stock component as the transaction would likely not close for at least three months following the transaction’s announcement. Based on the board’s discussions, Mr. Ashner was instructed to continue negotiations with the offeror in an effort to limit the downside risk by obtaining either an all cash offer or a downside protection on the stock price.
On February 10, 2014 the board met on two occasions. At the first meeting Mr. Ashner reported that the offeror verbally indicated that it would reduce the stock portion of the consideration (thereby increasing the cash portion) but would not provide any downside protection to the shareholders in the event that the offeror’s stock price dropped below the VWAP at the time the transaction was announced. Our board then analyzed the Offer price and the downside price risk associated with the Offer as compared to the amount shareholders might receive in a liquidation. Our board agreed that downside price risk protection was essential and instructed Mr. Ashner to advise Barclays of this fact. Later that day, at the second meeting, Mr. Ashner reported that Barclays verbally informed him that the offeror would not provide any downside protection on the stock component but would consider an all cash offer of $13.65 per common share, a 4% discount to the original offer price.
From February 10 to February 15, 2014 Barclays continued discussions with the offeror and on February 16, 2014 the board met with counsel and representatives of Barclays to assess the Trust’s options. At the meeting representatives of Barclays detailed the process to date and reviewed with our board management's liquidation analysis (see chart below) which was generally derived from the base and favorable net asset values at December 31, 2013 with management’s adjustments to certain assets for potential increases in value during the liquidation period.
| Discount Rate | Value per Share | |
| Low | High | |
| 6.0% | $15.12 | $20.06 |
| 8.0% | $13.98 | $18.53 |
| 10.0% | $12.98 | $17.17 |
| 12.0% | $12.08 | $15.96 |
| 14.0% | $11.27 | $14.88 |
| 16.0% | $10.55 | $13.91 |
The liquidation analysis assumed that asset sales would be timed to limit the amount of any prepayment premiums and the need to obtain venture partner or lender consents. It further assumed transaction expenses of one percent and that net proceeds would be applied first to pay the liquidation preference on the Series D Preferred Shares and redeem the Senior Notes before being distributed to shareholders and that the liquidation proceeds would be distributed at December 31, 2018. Further, the liquidation analysis assumes a $9,300,000 termination fee payable to FUR Advisors in 2018 in accordance with the terms of the existing advisory agreement. In addition, at the February 16, 2014 board meeting the sale of the Trust’s Crossroads I and II properties at a price in excess of the December 31, 2013 net asset value for these properties was approved. In the board’s business judgment it determined that shareholders could ultimately receive a better return either through a liquidation or by continuing to operate the Trust as a going concern.
The board met on March 4, 2014 at which time they again discussed whether to continue to operate the Trust in accordance with the existing business plan or under a revised business plan. The board also discussed the implications of adopting a plan of liquidation. The Trust’s management reported that the Trust’s assets that were being marketed for sale (the Jacksonville, Florida and Amherst, New York properties) were receiving bids or strong indications of interest at prices in excess of the low net asset value range. At the meeting, our trustees agreed that if investment opportunities did not increase or the common share price did not trend upwards, they would likely seek to explore a liquidation alternative. Management also informed the board that due to limitations relating to REIT rules which limit the number of dispositions in any taxable year, the Trust’s ability to sell additional assets in 2014 was significantly limited.
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At a March 31, 2014 board meeting, management reported that the number of assets that could be sold for the balance of 2014, absent adopting a plan of liquidation, was limited to one in addition to those currently under contract or being marketed for sale in light of applicable REIT rules. The board members were advised that prices for real estate assets continue to be favorable. Management also reported that investment opportunities of the nature that the Trust seeks (i.e., opportunistic) continues to be limited and at prices with substantial downside risk. Further, the board was advised that the announcement of a plan of liquidation would not prevent any potential offers for the Trust to be considered by the board.
On April 7, 2014 the board again met and discussed the tax implications of a liquidation as well as other potential ownership structures for the Trust. In addition, the board discussed the terms of Mr. Ashner’s exclusivity agreement and whether any modification was warranted or advisable in connection with a liquidation. The board determined to discuss any modifications to the exclusivity agreement at such time when, if at all, a formal request for a modification is made by Mr. Ashner.
On April 28, 2014 our board again discussed considerations associated with adopting a plan of liquidation. Counsel discussed with the board the process for adopting a plan of liquidation, the provisions contained in the plan of liquidation as well as those set forth in liquidating trust agreements utilized in prior liquidations. Mr. Ashner discussed with the board potential options to assist FUR Advisors to incentivize certain of its personnel who provide services to the Trust to remain in its employ as well as granting discretion to Mr. Ashner with respect to modifications to the restricted shares previously granted or possible replacement grants. The board unanimously determined based, in part, on the all of the information obtained during the preceding five month period to adopt the plan of liquidation and submit it to the shareholders for approval. The board acknowledged that to the extent an offer would be received for the Trust as a whole, the board would analyze the offer in accordance with its obligations. In this regard, subsequent to the announcement of the board’s adoption of the plan of liquidation, we entered into a confidentiality agreement with a creditworthy third-party that expressed a potential interest in acquiring the Trust as a whole.
REASONS FOR APPROVING THE LIQUIDATION AND RECOMMENDATION OF THE BOARD
Upon culmination of the foregoing process, adoption of a plan of liquidation was approved by a unanimous vote of the board on April 28, 2014 and the board recommends that shareholders vote FOR the plan of liquidation. In connection with approving the plan, determining that it is fair to, and in the best interest of shareholders, and recommending that shareholders approve the plan, our board consulted with the Trust’s financial and legal advisors and considered the following factors:
| · | The relative stagnant price of the common shares over the past three years that was prevalent prior to the announcement of our board’s determination to adopt a plan of liquidation; |
| · | The continued failure of the common share price to approximate the low end of our reported net asset value; |
| · | The limited trading volume in the common shares that was prevalent prior to the announcement of our board’s determination to adopt a plan of liquidation and the certainty of liquidity that a liquidation offers at a value that is expected to be not less than the low end of our reported net asset value range; |
| · | The nature of our business strategy which is to invest in opportunistic real estate investments and the lack of such investments in the current market environment which would be accretive to our shareholders particularly in light of our cost of capital; |
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| · | The limitation, absent a plan of liquidation, on the number of assets that we can sell in any calendar year due to applicable federal tax law restrictions in order not to be subject to a 100% tax on the gain from sales; |
| · | Our inability to raise capital through the sale of common shares in a manner that is not dilutive to existing shareholders; |
| · | The inability to obtain an offer for the entire company that our board believed was commensurate with the projected proceeds that could be obtained from a liquidation of our assets; |
| · | The overall return to shareholders during the past five years which is both below the Trust’s peer group (i.e., REITs with a diversity and other property focus and have a current market value as of January 27, 2014 of less than $750 million) and the MSCI US REIT index; |
| · | The board’s estimate that based on current market conditions the amount ultimately distributable on account of each common share in connection with a liquidation would exceed $13.79, the low range of our most recently reported net asset value, after taking into account our costs, expenses and other obligations. We cannot assure you that the Trust will be successful in disposing of its assets for values equaling or exceeding $13.79. If values of the Trust's assets decline or if the costs and expenses related to such asset sales exceed those estimated for purposes of determining net asset value, then the liquidation may not yield distributions which equal or exceed $13.79. No assurances can be made as to the actual amount and timing of distributions which will be made over a substantial period of time. See “RISK FACTORS” above; |
| · | The expectation that all liquidating distributions will be paid in cash thereby eliminating the uncertainty associated with the receipt of non-cash consideration; |
| · | The costs of continuing to operate a public company; |
| · | The federal income tax benefits to our shareholders that may be derived from the adoption of a plan of liquidation. |
In addition to the risk factors noted above under “RISK FACTORS”, the board also considered potentially negative factors in their deliberations concerning the liquidation, including the following:
| · | There could be no assurance that the Trust would be successful in disposing of its assets for values equal to or exceeding the low range of our estimate of net asset value or that the dispositions would occur in the time frame expected; |
| · | The anticipated expenses and potential for unforeseen expenses that will or may be incurred in connection with the sale of our assets and the continued operation of the Trust; |
| · | The inability to take advantage of future changes in market conditions which could provide for presently unforeseen opportunistic investments that satisfy our investment strategy and minimum return parameters; |
| · | Depending on their tax basis in their shares, shareholders may recognize taxable gain in connection with the completion of the liquidation; |
| · | We may determine to transfer unsold assets to a liquidating trust, which may cause our shareholders to recognize taxable gain at the time of such transfer and may have adverse tax consequences on tax-exempt and foreign shareholders; |
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| · | If the plan is approved and implemented, shareholders will no longer participate in any future earnings or growth of the Trust’s assets or benefit from any increases in their value once the Trust’s assets are sold; |
| · | As opposed to a business combination with a relatively short time frame during which a third party would acquire the Trust, the liquidation process would involve a longer distribution process and will require the Trust to incur potentially larger administrative and other costs; |
| · | Certain conflicts of interest could exist for the Trust’s management in connection with the liquidation. See “THE PROPOSAL – PLAN OF LIQUIDATION- Economic Interests in the Proposed Liquidation Other Than Common Shareholders” below; |
| · | The likelihood that the price of the common shares will decrease as we make distributions to shareholders; |
| · | The potential loss of key personnel who provide services to the Trust and FUR Advisors which could impact adversely on our day-to-day operations as well as the ability to consummate sales of our assets. |
THE PROPOSAL — PLAN OF LIQUIDATION
The Proposal
We are requesting that you approve the proposed plan of liquidation which will allow us to commence a formal liquidation of our assets in a manner which, as noted above, our board believes is in the best interest of our shareholders. By voting in favor of the plan of liquidation, you will also approve and ratify the actions described in this proxy statement which the Trust and the board have undertaken in connection with the proposed plan.
Key Provisions of the Plan of Liquidation
The following is a brief description of the key provisions of the plan of liquidation.
| · | Pursuant to applicable REIT rules, in order to be able to deduct liquidating distributions as dividends, we must complete the disposition of our assets within two years after the date the plan of liquidation is adopted by the shareholders. We intend to satisfy this requirement by distributing our unsold assets into a liquidating trust at the end of the two-year period following the adoption by shareholders of the plan of liquidation. The liquidating trust would be required to dispose of any such remaining assets within the subsequent three year period. See “Liquidating Trust” below. |
| · | As soon as reasonably practicable after the approval of the plan of liquidation, FUR Advisors will seek to dispose of all our assets, without further approval of shareholders, on such terms and in a manner FUR Advisors deems to be in our best interest. As to sales equal to or in excess of $10,000,000, FUR Advisors will continue to seek the consent of the board as required by the Trust’s by-laws. |
| · | Cash reserves of the Trust in excess of $500,000 will be invested only in short-term U.S. Treasuries or other short-term obligations. |
| · | We will use reasonable efforts to maintain the listing of the common shares on the NYSE and if the shares are delisted, we will use all reasonable efforts to have the shares listed on another national stock exchange or on the NASDAQ stock market. |
| · | We will not be permitted to make any new investments in real estate or real estate related assets. We will, however, be able to satisfy any existing contractual obligations including any capital call requirements and acquisitions or dispositions pursuant to buy-sell provisions under existing venture documentation, pay for required tenant improvements and capital expenditures at our real estate properties and to repurchase our existing common shares, Series D Preferred Shares and Senior Notes, if we so choose. The only contractual obligation to our existing ventures that we are presently subject to is our agreement to fund up to an additional $31,133,000 to our 701 Seventh Avenue venture. |
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| · | Proceeds received from the liquidation of our assets will likely be applied in the following order of priority. |
| o | First, to satisfy our operating expenses including fees payable to FUR Advisors and the cost of any directors and officers insurance policy; |
| o | Second, to be retained as reserves to the extent necessary to satisfy financial covenants to which we are subject. Currently, in order for us not to breach any of our financial covenants under any debt financing to which we are subject we are required to maintain a net worth of not less than $120,000,000 and have liquid assets of not less than $8,500,000; |
| o | Third, to be retained as reserves to satisfy any contractual obligations to which we are subject; |
| o | Fourth, to be retained as reserves for estimated tenant improvement, leasing commissions, capital expenditures and other potential cash needs; |
| o | Fifth, to satisfy the liquidation preference our Series D Preferred Shares; |
| o | Sixth, to satisfy, or establish sufficient reserves to satisfy, our Senior Notes; |
| o | Seventh, for dividend payments to our shareholders and/or repurchase of common shares. |
| · | Until the earlier of the date of final liquidation and six years after we file a certificate of dissolution, we will not amend in any manner any provision relating to the liabilities or indemnification of our trustees, offices, fiduciaries and agents that adversely affects the rights of such persons presently. In addition, we may maintain insurance to cover the same or provide other arrangements with respect thereto. |
| · | The plan of liquidation provides that the board, and such officers of the Trust as the board may direct, are authorized to interpret the provisions of the plan of liquidation and to take such further actions as they deem necessary or desirable to wind up the affairs of the Trust expeditiously and complete the liquidation including, without limitation, entering into or modifying such agreements (including those with FUR Advisors and its affiliates) and retaining such third parties as the board deems advisable. |
| · | Appoint such persons as trustees of the liquidating trust as the board so determines which may or may not include members of management and/or independent trustees. |
Liquidating Trust
If we have not disposed of all our assets within 24 months of the adoption by shareholders of the plan of liquidation, we intend to establish a liquidating trust to which we will distribute in kind our unsold assets. This is necessary in order for us (assuming we remain qualified as a REIT) to be eligible to deduct amounts distributed pursuant to the plan of liquidation as dividends and thereby not be subject to federal income tax on such amounts.
If we establish the liquidating trust, we will distribute to our then shareholders beneficial interests in the liquidating trust in proportion to the number of common shares owned by such shareholders. This distribution generally would be a taxable event to such shareholders, and may subject such shareholders, if tax-exempt or non-U.S. shareholders, to United States federal income tax with respect to the activities of the liquidating trust. The sole purpose of the liquidating trust will be to liquidate any remaining assets and, after paying any remaining liabilities, distribute the proceeds of the sale of assets formerly owned by us to the holders of the interests in the liquidating trust. The liquidating trust, if established, would be managed by one or more trustees designated by our board at such time (which may or may not include members of management and/or independent trustees) and would continue the process of selling our assets including through the continued retention of FUR Advisors or, if deemed advisable, another third party advisor. The liquidating trust will be obligated to pay any of our expenses and liabilities that remain unsatisfied.
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Interests in the liquidating trust will not be freely transferable except by will, intestate succession or operation of law. Therefore, the recipients of the interests in the liquidating trust will not realize any value from these interests unless and until the trustees of the liquidating trust distributes cash or other assets to them, which will be solely in the discretion of the liquidating trusts’s trustees. Unlike the Trust which is required to comply with all of the filing requirements of the Securities and Exchange Commission for publicly traded entities, based on current guidance provide by the Securities and Exchange Commission we anticipate that the liquidating trust will be required to file only annual and current reports with the Securities and Exchange Commission.
Any plan to transfer assets to a liquidating trust is only a contingency plan. Therefore, except as noted above our board has not determined the detailed terms or structure for a liquidating trust. The characteristics of any liquidating trust will be determined by our board at a future date depending on factors such as the number and value of assets to be held by the liquidating trust and the number of holders of interests in the liquidating trust. Notwithstanding the foregoing, the terms of the liquidating trust will require that all assets must be disposed of within three years from the date such assets are deposited in the liquidating trust.
Estimate of Amount and Timing of Distributions to be Paid to the Shareholders
After the sale or other liquidation of our assets, and after providing for the payment of our obligations and liabilities and satisfying all preference payments to holders of our Series D Preferred Shares and, to the extent required, the Senior Notes, we will distribute to shareholders the remaining cash proceeds we receive from the sale or other liquidation of our assets in cancellation of all of our outstanding common shares. Subject to the terms of any of our indebtedness, all net property sale proceeds, if any, will be distributed no less frequently than semi-annually and paid to shareholders of record at the close of business on the record dates to be determined by the board, pro rata based on the number of shares owned by each.
Our board presently believes that based on current market conditions the amount ultimately distributable on account of each common share in connection with a liquidation would exceed $13.79, the low range of our most recently reported net asset value, after taking into account our costs, expenses and other obligations. It is impossible to determine with certainty the total liquidation proceeds that may ultimately be available for distribution to shareholders. See "RISK FACTORS” above which detail the risks associated with the realization of the estimated amount of liquidation proceeds distributable to shareholders including the following:
| · | the board’s estimate of liquidation proceeds includes estimates of the costs and expenses of the liquidation. If actual costs and expenses exceed such estimated amount, actual proceeds could be less than estimated; |
| · | if liabilities, unknown or contingent at the time of the mailing of this proxy statement, later arise which must be satisfied or reserved for as part of the plan of liquidation, the aggregate proceeds could be less than estimated; |
| · | delays in consummating the plan of liquidation could result in additional expenses and result in actual proceeds that are less than estimated; and |
| · | the estimates were not audited or reviewed by independent auditors. |
The actual amount and timing of, and record dates for, shareholder distributions will be determined by the board and will depend upon the timing and proceeds of the sale of the Trust’s assets, and the amounts deemed necessary by the board to pay or provide for the Trust’s liabilities and obligations.
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Cancellation of Shares
Upon the final distribution on our common shares (including a transfer of our assets to a liquidating trust), you will be required to surrender your share certificates, if any. If we have established a liquidating trust, your interest in the liquidating trust will be in proportion to the number of common shares owned by you at the time of such final distribution.
Economic Interests in the Proposed Liquidation Other Than Common Shareholders
Pursuant to the existing advisory agreement, FUR Advisors is entitled to its base management fee. In addition, the existing advisory agreement provides that FUR Advisors will become entitled to receive a termination fee equal to the lesser of (i) the base management fee paid to FUR Advisors for the twelve months prior to adoption of the plan of liquidation (approximately $_________ at ___________, 2014, the date of the special meeting) or (ii) 20% of all dividends paid on account of the common shares after such time as we have paid, after the date of this proxy statement, approximately $_____ of dividends per common share (which amount increases by a per annum rate equal to the greater of (x) 4% or (y) the 5 year U.S. Treasury Yield plus 2.5% per annum, such amount, the “growth factor”). Furthermore, after we have paid, after the date of this proxy statement, dividends of approximately $______ per common share (which amount increases by the growth factor), FUR Advisors will be entitled to an incentive fee equal to 20% of all amounts that otherwise would be paid on the common shares. It is presently impossible to determine whether either of such fees will be paid, the amount or timing of such payments as the amount and timing of such fees are dependent on the amount and timing of dividends and other distributions paid on the common shares.
Pursuant to the terms of the existing advisory agreement, all liquidating dividend payments paid in excess of the growth factor are deemed a return of capital. As a result, as the liquidation preference is paid on our Series D Preferred Shares and liquidating dividends on our common shares are paid, the base advisory fee will be reduced in accordance with the terms of the existing advisory agreement. Finally, to the extent not then forfeited or subsequently modified, upon the earlier of the sale of all or substantially all of our assets or the transfer of all our assets and liabilities to a liquidating trust, the restricted shares issued to members of our management team and other personnel who provide services to FUR Advisors will no longer be subject to forfeiture.
NYSE Listing
If the plan of liquidation proposal is adopted by our shareholders, we expect that our common shares will continue to be listed on the NYSE under the symbol “FUR”. We anticipate, however, that the market price of our common shares will decline as we make liquidating distributions to shareholders. In this regard, there is a possibility that we will not be able to maintain continued compliance with the NYSE’s listing requirements or that the NYSE will take action to delist our securities.
Within 24 months of the adoption by shareholders of the plan of liquidation, we intend to distribute our remaining assets to a liquidating trust. If our common shares are delisted from the NYSE prior to such time, we may elect to transfer our remaining assets to a liquidating trust following any such delisting.
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
OF THE PLAN OF LIQUIDATION
The following is a general discussion of certain material U.S. federal income tax consequences of the liquidation to a holder of common shares who holds the shares as a capital asset (within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code”). We did not obtain an opinion of legal counsel with respect to the plan of liquidation, and the discussion below is not binding on the Internal Revenue Service (IRS) or the courts. The discussion assumes that we have qualified as a REIT for federal income tax purposes at all times commencing with our taxable year ended December 31, 2004 and will remain qualified as a REIT until such time, if at all, as we transfer any remaining assets and liabilities to a liquidating trust. The discussion does not address all federal income tax consequences that may be relevant to you (including the potential application of the Medicare contribution tax) in light of your particular circumstances, and also does not address any state, local or foreign tax consequences of the liquidation. Your tax treatment may vary depending upon your particular situation. The discussion below does not address the U.S federal income tax consequences of the liquidation to all categories of shareholders, including shareholders subject to special treatment under federal income tax laws, such as financial institutions, dealers in securities, tax-exempt entities (except as discussed under “--- Liquidating Distributions to U.S. Tax-Exempt Shareholders” below), non-U.S. shareholders (except as discussed under “--- Liquidating Distributions to Non-U.S. Shareholders” below), regulated investment companies, and shareholders that are classified as partnerships for U.S. federal income tax purposes.
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The discussion is based on current provisions of the Code, the Treasury regulations promulgated thereunder and judicial and administrative authorities. All these authorities are subject to change, and any change may be effective retroactively. The discussion below is not tax advice. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF THE LIQUIDATION.
Federal Income Tax Consequences to the Trust
So long as we remain qualified as a REIT, we expect to be able to deduct our liquidating distributions to our shareholders, including the fair market value of any assets that we transfer to a liquidating trust, as dividends (to the extent of our earnings and profits, calculated without reduction for capital losses) in computing our taxable income for the taxable years in which we make liquidating distributions. Accordingly, we do not expect to be subject to federal corporate income tax for the taxable years in which we liquidate. Should we lose our REIT status, we will be subject to federal corporate income tax on our taxable income and gain from operations and liquidating sales for the taxable year in which our qualification as a REIT terminates and any subsequent years, without deduction for distributions made to our shareholders.
So long as we remain qualified as a REIT, any net gain that we realize from "prohibited transactions" will be subject to a 100% tax. "Prohibited transactions" are sales of property held primarily for sale to customers in the ordinary course of a trade or business. Whether a real estate asset is property held primarily for sale to customers in the ordinary course of a trade or business is a highly factual determination. We believe that our properties are held for investment and the production of rental income, and that none of our sales of properties pursuant to the plan of liquidation should constitute a prohibited transaction. However, we cannot assure that the IRS will not successfully challenge our position for purposes of applying the 100% tax.
Liquidating Distributions to U.S. Shareholders
For purposes of the discussion below, a “U.S. shareholder” is a holder of our common shares who, for United States federal income tax purposes, is a citizen or resident of the United States, a domestic corporation (or other entity treated as a corporation for federal income tax purposes), an estate the income of which is subject to U.S. federal income tax regardless of its source, or a trust if a United States court can exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all the substantial decisions of the trust, or the trust has a valid election in effect to be treated as a U.S. person.
Liquidating distributions made by us will not be dividend income to you, notwithstanding our treatment of such distributions as dividends for purposes of computing our taxable income. Distributions in liquidation, including your pro rata share of the fair market value of any assets that we transfer to a liquidating trust, will first reduce the tax basis of your common shares and be non-taxable to you to that extent. Any further liquidating distributions will be taxable to you as capital gain. If the sum of all liquidating distributions made to you is less than your tax basis in your common shares, the difference will constitute a capital loss to you at the time you receive your final liquidating distribution, which will include our distribution of any remaining assets to a liquidating trust. (See “--- Liquidating Trust” below.) Your gain or loss and holding period will be calculated separately for each block of common shares you hold; with a block consisting of shares acquired at the same cost in a single transaction. Capital gain or loss will be long-term or short-term, depending on whether your common shares have been held for more than one year. However, if you recognize a capital loss on the liquidation and have held your common shares for six months or less, your loss will be treated as a long-term capital loss to the extent you previously received capital gain dividends from us with respect to your common shares.
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Long-term capital gains of non-corporate U.S. shareholders may qualify for reduced federal income tax rates, while capital gains of corporate U.S. shareholders generally are taxable at regular corporate federal income tax rates. U.S. shareholders who are individuals, estates or trusts may be subject to a 3.8% Medicare tax on their gain from the liquidation, and should consult their tax advisors concerning the applicability of this tax. The deductibility of capital losses is subject to certain limitations.
Backup withholding (currently at a rate of 28%) may apply to payments made to you in connection with the liquidation unless you (i) are a corporation or come within certain other exempt categories and, if required, demonstrate this fact, or (ii) provide your taxpayer identification number and certify as to not being subject to backup withholding, which you generally may do by providing us with a properly completed and signed IRS Form W-9. Any amount withheld will be creditable against your income tax liability. Individual U.S. shareholders who do not provide us with their correct taxpayer identification number may be subject to penalties imposed by the IRS. We may also be required to withhold on liquidating distributions made to any U.S. shareholders who fail to certify their non-foreign status.
Liquidating Distributions to Tax-Exempt U.S. Shareholders
Liquidating distributions made by us generally will not be unrelated business taxable income (“UBTI”) to a tax-exempt U.S. shareholder that does not hold its common shares as “debt-financed property” within the meaning of the Code. (However, tax-exempt U.S. shareholders may recognize UBTI with respect to assets (if any) transferred to a liquidating trust; see “—Liquidating Trust” below.) Tax-exempt U.S. shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans exempt from federal income taxation under Code sections 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, are subject to different UBTI rules which may require them to treat liquidating distributions as UBTI and as to which they should consult their tax advisors.
Liquidating Distributions to Non-U.S. Shareholders
For purposes of the discussion below, a “non-U.S. Shareholder” is any shareholder who is neither a U.S. shareholder nor a partnership or other entity treated as a partnership for U.S. federal income tax purposes. The discussion below assumes that a non-U.S. shareholder’s investment in our common shares is not effectively connected with a trade or business conducted in the United States by the non-U.S. shareholder, or, if an applicable tax treaty so provides, that its investment in our shares is not attributable to a United States permanent establishment maintained by the non-U.S. shareholder. Also, special rules apply to a non-U.S. shareholder who is an individual who has been present in the United States for 183 days or more during the taxable year in which a liquidating distribution is made to him, and such a non-U.S. shareholder should consult his tax advisor concerning these rules. We recommend that non-U.S. shareholders consult their own tax advisors to determine the U.S. federal, state, local and foreign income and other tax consequences to them of the liquidation.
The IRS takes the position that, under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), liquidating distributions by a REIT that are attributable to gain from the REIT’s sale or exchange of United States real property interests (“FIRPTA distributions”) generally are taxable to non-U.S. shareholders as if such gain were effectively connected with a U.S. trade or business. However, FIRPTA distributions made by us to a non-U.S. shareholder with respect to shares that are regularly traded on an established securities market located in the United States, such as our common shares, generally will not be subject to FIRPTA if the non-U.S. shareholder has not owned more than 5% of our common shares at any time during the one-year period ending on the date of the distribution. Provided our common shares continue to be regularly traded on an established U.S. securities market, non-U.S. shareholders qualifying for this exception generally will not be subject to U.S. federal income tax on liquidating distributions made to them. (However, non-U.S. shareholders may be subject to U.S. taxation with respect to assets (if any) transferred to a liquidating trust; see “—Liquidating Trust” below.) Non-U.S. shareholders not qualifying for this exception will be taxed on FIRPTA distributions at the same capital gain rates applicable to U.S. shareholders (subject to any applicable alternative minimum tax and special alternative minimum tax in the case of nonresident alien individuals), and we will be required to withhold U.S. tax equal to 35% from such distributions. The 35% tax withheld may be claimed by a non-U.S. shareholder as a credit against its reported U.S. federal income tax liability. In addition to regular U.S. income tax, corporate non-U.S. shareholders that do not qualify for the FIRPTA exception may be subject to a 30% branch profits tax on FIRPTA distributions made by us unless the shareholder is entitled to treaty relief or other exemption.
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Generally, we will be required to report annually to the IRS the amount of FIRPTA distributions paid to a non-U.S. shareholder, such shareholder’s name and address, and the amount of U.S. tax withheld, if any. Liquidating distributions paid to a non-U.S. shareholder may be subject to backup withholding tax (currently at a 28% rate) unless such shareholder establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or other applicable version of IRS Form W-8.
The Foreign Account Tax Compliance Act (“FATCA”) provisions of the Code and subsequent IRS guidance provide that a 30% withholding tax will be imposed on distributions made after June 30, 2014 to a non-U.S. entity if such entity fails to satisfy certain disclosure and reporting rules. In general, these rules require that (i) in the case of a foreign financial entity, the entity identify and provide information in respect of financial accounts held (directly or indirectly) by U.S. persons and U.S.-owned foreign entities, and (ii) in the case of a non-financial foreign entity, the entity identifies and provides information in respect of substantial U.S. owners of such entity. In the event of noncompliance with the FATCA requirements, withholding at a rate of 30% on our liquidating distributions (other than FIRPTA distributions made to a non-U.S. shareholder that does not qualify for the FIRPTA exemption discussed above) made to the non-complying non-U.S. shareholder which is a foreign financial entity will be required, and such shareholder will be required to seek a refund from the IRS to obtain a refund of any amounts withheld. Non-U.S. shareholders should consult their tax advisors concerning these rules.
Liquidating Trust
If we have not disposed of all our assets within 24 months after the adoption of the plan of liquidation, we intend to establish a liquidating trust to which we will transfer our unsold assets at the end of such 24 month period. A trust will be treated as a liquidating trust if it is organized for the primary purpose of liquidating and distributing the assets transferred to it, and if its activities are all reasonably necessary to and consistent with that purpose. Although neither the Code nor the Treasury regulations thereunder provide any specific guidance as to the length of time a liquidating trust may last, the IRS's ruling guidelines call for a term not to exceed three years, which period may be extended to cover the collection of installment obligations. If we establish a liquidating trust, we intend to comply with such IRS guidelines.
An entity classified as a liquidating trust generally is not subject to tax on any income or gain recognized by it. Instead, if you are a shareholder when a liquidating trust is established, you will be treated as the owner of your pro rata portion of each asset, including cash, received and held by the liquidating trust. Accordingly, you will be treated as having received a liquidating distribution equal to the amount of your share of the sum of any cash and the fair market value of any asset transferred to the liquidating trust, and will recognize gain at that time to the extent such amount is greater than your remaining tax basis in your common shares (as reduced by all prior liquidating distributions) notwithstanding that you may not currently receive a distribution of cash or any other assets with which to satisfy the resulting tax liability. You will recognize taxable gain or loss when all or part of your pro rata portion of an asset held by the liquidating trust is disposed of for an amount greater or less than the fair market value of such asset at the time it was transferred to the liquidating trust. In addition, you will be required to take into account in computing your taxable income, your pro rata share of each item of income, gain and loss of the liquidating trust, the character of which items will pass through to you.
The liquidating trustee will file tax returns for the liquidating trust, and will send to each holder of an interest in the liquidating trust a separate statement setting forth the holder's share of items of income, gain, loss, deduction and credit. Each holder must report such items on its federal income tax return regardless of whether the liquidating trust makes current cash distributions. An individual U.S. shareholder who itemizes deductions may be unable to deduct his pro rata share of fees and expenses of the liquidating trust for regular federal income tax purposes except to the extent that such amount, together with the U.S. shareholder's other miscellaneous itemized deductions, exceeds 2% of his adjusted gross income, and may be unable to deduct such expenses at all for alternative minimum tax purposes.
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Because shareholders would be treated as owning their respective shares of the liquidating trust's assets, they would be treated as directly engaging in the operations of the liquidating trust. As such, holders of interests in the liquidating trust that are tax-exempt entities may realize UBTI with respect to the trust’s operations, and non-U.S. holders may be considered to derive income that is effectively connected with a U.S. trade or business. In that event, non-U.S. holders would be subject to U.S. federal income tax and, for non-U.S. corporate holders, branch profits tax. Accordingly, the liquidating trust will withhold 35% of any distributions made to non-U.S. holders. That amount will be creditable against the non-U.S. holder’s U.S. federal income tax liability. Tax-exempt and non-U.S. shareholders should consult their own tax advisors regarding the U.S. federal income tax consequences that would apply to them if we were to transfer assets to a liquidating trust.
If the liquidating trust fails to qualify as such, the resulting tax consequences to the trust and the holders of trust interests will depend upon, among other things, the reasons for the trust’s failure to so qualify. If the board avails itself of the use of a liquidating trust, it is anticipated that every effort will be made to ensure that the liquidating trust will be classified as such for federal income tax purposes.
State and Local Income Tax
You may be subject to state or local taxes with respect to liquidating distributions received from us. The state or local tax treatment of liquidating distributions received from us may differ from the federal income tax treatment described above. If we transfer assets to a liquidating trust, you may be required to file income tax returns in states or localities in which the liquidating trust owns properties. You should consult your tax advisors regarding such taxes.
Transfer Taxes
Transfer taxes may be imposed in certain state and local jurisdictions in connection with sales of properties or in-kind distributions made to a liquidating trust.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of March 28, 2013May 15, 2014 (except as otherwise indicated) regarding the ownership of our Common Sharescommon shares by (i) each person who is known to us to be the beneficial owner of more than 5% of the outstanding Common Shares,common shares, (ii) each Trustee and Trustee nominee,member of the board, (iii) each executive officer named herein, and (iv) all current executive officers and Trusteeseach member of the board as a group. Except as otherwise indicated, each such Shareholdershareholder has sole voting and investment power with respect to the Common Sharescommon shares beneficially owned by such Shareholder.shareholder. As of March 28, 2013,May 15, 2014, there was 33,128,853 Common Shareswere 36,417,584 common shares outstanding.
Name and Address of Beneficial Owner | Position with the Trust | Amount and Nature of Beneficial Ownership | Percent of Class | Position with the Trust | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
FUR Investors, LLC (1) FUR Holdings LLC WEM-FUR Investors LLC | -- | 3,415,032 | 10.3% | -- | 2,671,369 | 7.3 | % | |||||||||||
| John Alba (1) | Chief Investment Officer | 3,950 | (5) | (5) | Chief Investment Officer | 78,950 | (4 | ) | * | |||||||||
| Michael L. Ashner(1) | Chairman and CEO | 3,766,909 | (2) | 11.4% | Chairman and CEO | 3,154,586 | (2 | ) | 8.7 | % | ||||||||
Arthur Blasberg, Jr. (3) | Trustee | 28,000 | * | Trustee | 28,000 | * | ||||||||||||
John Garilli(3) | Chief Financial Officer | -- | (5) | (5) | Chief Financial Officer | 75,000 | (4 | ) | * | |||||||||
Howard Goldberg (3) | Trustee | 74,193 | * | Trustee | 75,079 | * | ||||||||||||
| Thomas F. McWilliams(3) | Trustee | 10,000 | * | Trustee | 10,287 | * | ||||||||||||
| Scott Rudolph(4) | Trustee | 98,942 | ||||||||||||||||
| Lee Seidler(3) | Trustee | 17,071 | * | Trustee | 17,071 | * | ||||||||||||
Carolyn Tiffany(3) | President and Trustee | 9,410 | (5) | (5) | President and Trustee | 111,410 | (4 | ) | * | |||||||||
Steven Zalkind(3) | Trustee | 21,494 | * | Trustee | 22,153 | * | ||||||||||||
All Trustees and executive officers as a group | 4,029,969 | 12.2% | 3,572,536 | 9.8 | % | |||||||||||||
| Blackrock, Inc.(6) | -- | 2,076,853 | (6) | 6.3% | ||||||||||||||
Morgan Stanley Morgan Stanley Investment Management Inc.(7) | -- | 1,851,234 | (7) | 5.6% | ||||||||||||||
The Vanguard Group Inc.(8) | -- | 3,543,988 | (8) | 10.7% | ||||||||||||||
Vanguard Specialized Funds-Vanguard REIT Index Fund (8) | 1,971,931 | 6.0% | ||||||||||||||||
| Wellington Management Company, LLP(9) | 3,275,786 | (9) | 9.9% | |||||||||||||||
| Blackrock, Inc.(5) | -- | 2,744,688 | (5 | ) | 7.5 | % | ||||||||||||
| The Vanguard Group Inc.(6) | -- | 3,233,179 | (6 | ) | 8.9 | % | ||||||||||||
| Vanguard Specialized Funds-Vanguard REIT Index Fund (6) | 2,211,513 | (6 | ) | 6.1 | % | |||||||||||||
*Less than 1%
| (1) | The address for each of FUR Investors LLC, FUR Holdings LLC, WEM-FUR Investors LLC, Mr. Alba and Mr. Ashner is Two Jericho Plaza, Wing A, Suite 111, Jericho, NY 11753. |
| (2) | Comprised of |
| (3) | The address for each of Messrs. Blasberg, Garilli, Goldberg, McWilliams, Seidler and Zalkind and Ms. Tiffany is c/o Winthrop Realty Trust, 7 Bulfinch Place, Suite 500, Boston, MA 02114. |
| (4) |
| Messrs. Alba and Garilli and Ms. Tiffany are members of WEM-FUR Investors LLC, the managing member of FUR Holdings, LLC, the sole member of FUR Investors LLC. Accordingly, Messrs. Alba and Garilli and Ms. Tiffany have an indirect pecuniary interest in approximately 25,695, 22,865 and 55,000, respectively, of the Common Shares owned by FUR Investors LLC. However, Messrs. Alba and Garilli and Ms. Tiffany do not exercise investment control over the Common Shares held by FUR Investors LLC. Accordingly, Messrs. Alba and Garilli and Ms. Tiffany are not deemed to beneficially own any of such Common Shares under Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended. Includes 102,000, 75,000 and 75,000 restricted shares held by Ms. Tiffany, Mr. Garilli and Mr. Alba, respectively, which shares are subject to forfeiture. |
The address for Blackrock, Inc. (“Blackrock”) is 40 East 52nd Street, New York, New York 10022. Information is derived from the 13-G/A filing by Blackrock with the SEC on |
| The address for The Vanguard Group Inc. (“Vanguard”) and Vanguard Specialized Funds-Vanguard REIT Index Fund (“Vanguard Fund”) is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. Information is derived from the 13-G/A filing by Vanguard with the SEC on February |
34
The following selected historical financial data for the last five fiscal years has been derived from our audited consolidated financial statements incorporated by reference into this proxy statement. The selected historical financial data for the three month periods ended March 31, 2014 and March 31, 2013 has been derived from our unaudited consolidated financial statements incorporated by reference into this proxy statement. This information is only a summary, and you should read it together with the historical financial statements and related notes contained in the annual reports and other information that we have filed with the SEC and incorporated by reference herein. See “WHERE YOU CAN FIND MORE INFORMATION” on page 37.
| Operating Results: | Three Months Ended March 31, | Years Ended December 31, | ||||||||||||||||||||||||||
| (in thousands, except per share data) | 2014 | 2013 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||||||
| Revenue | $ | 25,004 | $ | 17,374 | $ | 72,692 | $ | 57,679 | $ | 54,771 | $ | 46,058 | $ | 37,543 | ||||||||||||||
| Income (loss) from continuing operations | (4,907 | ) | 9,733 | 16,426 | 23,909 | 12,744 | 20,668 | (86,128 | ) | |||||||||||||||||||
| Income (loss) from discontinued operations | 4,105 | 3,218 | 8,062 | 475 | (997 | ) | (3,303 | ) | 2,798 | |||||||||||||||||||
| Net (income) loss attributable to non-controlling interests | 1,443 | 795 | 4,290 | 247 | (814 | ) | (888 | ) | (1,017 | ) | ||||||||||||||||||
| Net income (loss) attributable to Winthrop Realty Trust | 641 | 13,746 | 28,778 | 24,631 | 10,933 | 16,477 | (84,347 | ) | ||||||||||||||||||||
| Preferred dividends | (2,787 | ) | (2,787 | ) | (11,146 | ) | (9,285 | ) | (924 | ) | (288 | ) | (147 | ) | ||||||||||||||
| Amount allocated to Restricted Common Shares | (96 | ) | (2 | ) | (307 | ) | - | - | - | - | ||||||||||||||||||
| Net income (loss) applicable to Common Shares | $ | (2,242 | ) | $ | 10,957 | $ | 17,325 | $ | 15,346 | $ | 10,009 | $ | 16,189 | $ | (84,494 | ) | ||||||||||||
| Per Common Share | ||||||||||||||||||||||||||||
| Income (loss) from continuing operations, basic | (0.18 | ) | 0.23 | 0.27 | 0.46 | 0.34 | 0.86 | (5.37 | ) | |||||||||||||||||||
| Income (loss) from discontinued operations, basic | 0.12 | 0.10 | 0.24 | - | (0.02 | ) | (0.14 | ) | 0.18 | |||||||||||||||||||
| Net income (loss) applicable to Common Shares, basic | $ | (0.06 | ) | $ | 0.33 | $ | 0.51 | $ | 0.46 | $ | 0.32 | $ | 0.72 | $ | (5.19 | ) | ||||||||||||
| Income (loss) from continuing operations, diluted | $ | (0.18 | ) | $ | 0.23 | $ | 0.27 | $ | 0.46 | $ | 0.34 | $ | 0.86 | $ | (5.37 | ) | ||||||||||||
| Income (loss) from discontinued operations, diluted | 0.12 | 0.10 | 0.24 | - | (0.02 | ) | (0.14 | ) | 0.18 | |||||||||||||||||||
| Net income (loss) applicable to Common Shares, diluted | $ | (0.06 | ) | $ | 0.33 | $ | 0.51 | $ | 0.46 | $ | 0.32 | $ | 0.72 | $ | (5.19 | ) | ||||||||||||
| Cash dividends declared per Common Share | $ | 0.1625 | $ | 0.1625 | $ | 0.65 | $ | 0.65 | $ | 0.65 | $ | 0.65 | $ | 0.9125 | ||||||||||||||
Balance Sheet Data: (in thousands) | ||||||||||||||||||||||||||||
| Total Assets | $ | 1,126,115 | $ | 919,077 | $ | 1,132,324 | $ | 923,163 | $ | 733,933 | $ | 610,128 | $ | 493,192 | ||||||||||||||
| Total Debt | $ | 564,367 | $ | 409,537 | $ | 562,075 | $ | 421,422 | $ | 300,090 | $ | 277,193 | $ | 238,067 | ||||||||||||||
| Non-Controlling redeemable preferred interest | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 3,221 | $ | 12,169 | ||||||||||||||
| Series D Cumulative Redeemable Preferred Shares | $ | 120,500 | $ | 120,500 | $ | 120,500 | $ | 120,500 | $ | 40,000 | $ | - | $ | - | ||||||||||||||
| Total Shareholders’ Equity | $ | 473,172 | $ | 460,311 | $ | 480,874 | $ | 454,510 | $ | 387,802 | $ | 295,771 | $ | 217,089 | ||||||||||||||
35
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act, which require us to file reports and other information with the SEC. You can inspect and copy reports, proxy statements and other information filed by us at the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can obtain copies of this material by mail from the Public Reference Room of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You can also obtain such reports, proxy statements and other information from the web site that the SEC maintains at http://www.sec.gov.
Reports, proxy statements and other information concerning us may also be obtained electronically at our website, http://www.winthropreit.com, and through a variety of databases, including, among others, the SEC’s Electronic Data Gathering and Retrieval (EDGAR) program, Knight-Ridder Information Inc., Federal Filing/Dow Jones and Lexis/Nexis. None of the information on those websites that is not otherwise expressly set forth in or incorporated by reference in this proxy statement is a part of this proxy statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” in this proxy statement the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this proxy statement, and information that we file later with the SEC prior to the date of the special meeting will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we will make prior to the date of the special meeting with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, requires our executive officers, Trusteeswhich is commonly referred to as the Exchange Act:
| · | Annual Report on Form 10-K for the year ended December 31, 2013; |
| · | Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2013 |
| · | Quarterly Reports on Form 10-Q for the quarter ended March 31, 2014; |
| · | Current Reports on Form 8-K or 8-K/A filed on May 2, 2014 (solely with respect to Item 8.01), March 7, 2014 (solely with respect to Item 8.01), January 17, 2014, and January 13, 2014; and |
| · | Definitive Proxy Statement on Schedule 14A dated April 8, 2014. |
You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:
Carolyn Tiffany
Winthrop Realty Trust
7 Bulfinch Place, Suite 500
Boston, MA 02114
(617) 570-4614
You should rely only on the information or representations provided in or incorporated by reference into this proxy statement. We have not authorized anyone else to provide you with different information. You should not assume that the information in this proxy statement or any amendment hereto is accurate as of any date other than the date on the front of those documents.
If you would like to request documents from us, please do so by __________, 2014 in order to ensure timely receipt before the special meeting.
You should rely only on the information contained in this document to vote your common shares at the special meeting. We have not authorized anyone to provide you with information that is different from what is contained in this document. This document is dated ______________. You should not assume that the information contained in this document is accurate as of any date other than that date, and persons who beneficially own greater than 10%the mailing of this document to shareholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a registered class of our equity securitiesproxy in any jurisdiction where, or to file certain reports which we referor from any person to as “Section 16 Reports” with the SEC with respectwhom, it is unlawful to ownership and changesmake such proxy solicitation in ownership of our Common Shares and other equity securities. Based solely on our review of the Section 16 Reports furnished to us as well as written representations from certain reporting persons, our officers, Trustees and greater than 10% beneficial owners, such persons have complied with all Section 16(a) requirements applicable to them.
| 2012 | ||||
| Base Asset Management Fee (1) | $ | 8,953,000 | ||
| Property Management (2) | 724,000 | |||
| Construction Management (2) | 128,000 | |||
SHAREHOLDER PROPOSALS
When we complete the liquidation, we will no longer have public shareholders or any shareholder meetings. If we have not completed the liquidation, or if the plan of liquidation is not approved by the shareholders, we intend to hold the next annual shareholder meeting in May 2015. In that case, you would continue to be entitled to attend and participate in the shareholder meetings if you continue to own common shares. Any Shareholdershareholder proposals intended to be presented at the 20142015 Annual Meeting of Shareholders must be received by us for inclusion in our Proxy Statement and form of proxy relating to that meeting on or before January 23, 2014.22, 2015. In addition, under our By-laws, Shareholdersshareholders must comply with specified procedures to nominate persons for election as Trusteesa member of the board or introduce an item of business at an annual meeting. Trustee nominations or an item of business to be introduced at an annual meeting must be submitted in writing and received by us not less than 120 days in advance of an annual meeting. To be in proper written form, a Shareholder’sshareholder’s notice must contain the specific information required by our By-laws. A copy of our By-laws, which specifies the advance notice procedures, can be obtained from us by request to the Trust’s Secretary and are also available on the Trust’s web-site in the Governance section under By-Laws. Any Shareholdershareholder who wishes to submit a Shareholdershareholder proposal, should send it to, Winthrop Realty Trust, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114, Attention: Trust’s Secretary.
If you would like additional copies of this document, or if you have questions about the proxy materials to their principals and to request instructions forliquidation or need assistance voting the proxies. Weyour shares, you should contact:
105 Madison Avenue
New York, NY 10016
(212) 929-5500 (Collect)
or
(800) 322-2885 (Toll-Free)
You may reimburse such banks, brokerage houses and other custodians, nominees and fiduciaries for their expenses in connection therewith.also contact us at:
7 Bulfinch Place, Suite 500
Boston, MA 02114
Attention: Corporate Secretary
Telephone: (617) 570-4614
Exhibit A – Plan of Liquidation
Exhibit B - March 31, 2014 Estimated Net Asset Value
EXHIBIT A
WINTHROP REALTY TRUST
PLAN OF LIQUIDATION
A-1
WINTHROP REALTY TRUST
PLAN OF LIQUIDATION AND DISSOLUTION
| 1. | This Plan of Liquidation (the "Plan") of Winthrop Realty Trust, an Ohio business trust (the "Trust"), has been approved by the Trust's Board of Trustees as being advisable and in the best interests of the Trust and the holders of Common Shares (as hereinafter defined) (“Shareholders”). The Board of Trustees has directed that the Plan be submitted to the Shareholders of the Trust for approval. The Plan shall become effective upon approval of the Plan by Shareholders holding at least a majority of the Trust’s outstanding common shares of beneficial interest, $1.00 par value (the "Common Shares"). The date of the Shareholders' approval is hereinafter referred to as the "Effective Date." |
| 2. | On or after the Effective Date, the Trust shall be voluntarily liquidated and dissolved in accordance with Section 331 of the Internal Revenue Code of 1986, as amended (the “Code”). Pursuant to the Plan, the Board shall cause the Trust to sell, convey, transfer and deliver or otherwise dispose of any and/or all of the assets of the Trust in one or more transactions, without further approval of the Shareholders. The Trust shall not engage in any business activities, except to the extent necessary for preserving the values of the Trust's assets, winding up its business and affairs, discharging and paying all Trust liabilities and distributing the Trust's assets to its Shareholders, all in accordance with the Trust's Second Amended and Restated Declaration of Trust, as amended, and the Trust’s Bylaws, as amended (collectively, the “Charter Documents”), and the Plan, including to satisfy any existing contractual obligations including any capital call requirements and acquisitions or dispositions pursuant to buy-sell provisions under existing venture documentation, pay for required tenant improvements and capital expenditures at our real estate properties, repurchase our Common Shares and other outstanding securities of the Trust if the Board of Trustees so chooses and make protective acquisitions or advances with respect to the Trust’s existing assets. Cash reserves of the Trust in excess of $500,000 will be invested only in short-term U.S. Treasuries or other short-term obligations. |
| 3. | The appropriate officers of the Trust shall take such actions as may be necessary or appropriate to marshal the assets of the Trust and convert the same, in whole or in parts, into cash or such other form as may be conveniently distributed to the Shareholders. |
| 4. | The Trust shall (i) pay or make reasonable provision to pay all claims and obligations of the Trust, including all contingent, conditional or unmatured contractual claims known to the Trust, (ii) make such provision as will be reasonably likely to be sufficient to provide compensation for any claim against the Trust in connection with any pending action, suit or proceeding to which the Trust is a party and (iii) make such provision as will be reasonably likely to be sufficient to provide compensation for claims that have not been made known to the Trust or that have not arisen but that, based on facts known to the Trust, are likely to arise or to become known to the Trust within ten years of the Effective Date. All such claims shall be paid in full and any such provision for payment made shall be made in full. After providing for the foregoing and complying with all debt covenants, the Trust shall distribute all available cash, other than minimum operating reserves and amounts required to comply with financial or other contractual covenants, at least semi-annually to the Shareholders. |
| 5. | After provision for all debts and other reserves as may be deemed necessary or appropriate by the Board of Trustees and after satisfying any then applicable obligations of the Trust including, without limitation amounts payable to FUR Advisors LLC, all of the Trust’s assets shall be distributed or applied as follows: |
| a. | First to satisfy the liquidation preference of the Trust’s 9.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series D Preferred Shares”) in accordance with the terms of the Charter Documents and the Certificate of Designations for the Series D Preferred Shares (the “Certificate of Designations”); |
| b. | Second, to satisfy (or provide reserves deemed sufficient to enable the Trust to satisfy) the obligations of the Trust with respect to its 7.75% Senior Notes due 2022 in accordance with the terms of the First Supplemental Indenture, dated August 15, 2012, between the Trust and The Bank of New York Mellon, as Trustee and Collateral Agent; and |
A-2
| c. | Thereafter, by means of one or more distributions (one or more of which distributions may be in the form of beneficial interests in a trust holding Trust assets), to the Shareholders. |
| 6. | Subject to the terms of the Charter Documents and in connection therewith, the officers of the Trust shall execute all checks, instruments, notices and any and all other documents necessary to effectuate such distribution. The final distribution shall be made no later than the second anniversary of the Effective Date. |
| 7. | Subject to Section 9 below and the Charter Documents and the Certificate of Designations, the distributions contemplated by Section 5 above shall be in complete liquidation of the Trust and in cancellation of all of the Common Shares and the Series D Preferred Shares then issued and outstanding, and all certificates representing such issued and outstanding Common Shares and Series D Preferred Shares shall thereupon be canceled. The Board of Trustees shall make such provisions as it deems appropriate regarding the cancellations, in connection with the making of distributions hereunder, of certificates representing the Common Shares and the Series D Preferred Shares (or certificates representing interests in the Liquidating Trust as provided in Section 10 hereof) outstanding. |
| 8. | In the course of the liquidation, the Board of Trustees shall use commercially reasonable efforts to continue to cause the Trust to maintain its status as a REIT; provided, however, the Board of Trustees may, in its discretion, elect to terminate the Trust’s status as a REIT if it determines that such termination would be in the best interest of the Shareholders. |
| 9. | Upon the complete distribution of all assets of the Trust to the holders of outstanding Common Shares (the “Final Distribution”), all such Common Shares will be canceled and no longer deemed outstanding and all rights of the holders thereof as shareholders of the Trust shall cease and terminate. The Trust shall use commercially reasonable efforts to cause the liquidation and dissolution of the Trust to occur and to make the Final Distribution to Shareholders no later than the second anniversary of the Effective Date. |
| 10. | In the event that it should not be feasible, in the opinion of the Board of Trustees, for the Trust to pay, or adequately provide for, all debts and liabilities of the Trust (including costs and expenses incurred and anticipated to be incurred in connection with the liquidation of the Trust) at the time of the Final Distribution, or, if earlier, the latest applicable date to avoid payment by the Trust of Federal income taxes, or the Board of Trustees shall determine that it is not advisable to distribute at such time any of the property then held by or for the account of the Trust because such property is not reasonably susceptible of distribution to Shareholders or otherwise: |
| a. | The Trust may transfer and assign to a liquidating trust created under the laws of Ohio or such other jurisdiction as the Board of Trustees deem advisable (the "Liquidating Trust") all of the assets of the Trust of every sort whatsoever, including its unsold properties, assets, claims, contingent claims and causes of action, subject to all of their unsatisfied debts, liabilities and expenses, known or unknown, contingent or otherwise. From and after the date of such transfer and assignment of assets (subject to liabilities) to the Liquidating Trust, the Trust shall have no interest of any character in and to any such assets and all of such assets shall thereafter by held by the Liquidating Trust. |
| b. | Upon such transfer and assignment to the Liquidating Trust, certificates for Common Shares and Series D Preferred Shares (to the extent the liquidation preference with respect thereto has not previously been satisfied) will be deemed to represent ownership interests in the Liquidating Trust equivalent to those held in the Trust immediately prior to such transfer and assignment. |
| c. | The Liquidating Trust shall be constituted pursuant to a declaration of trust or liquidating trust agreement (the “Liquidating Trust Agreement”) in such form as the Board of Trustees may approve and consistent with the terms hereof. |
| d. | The initial trustees of the Liquidating Trust shall be designated by the Board of Trustees and may consist of members of the Trust’s management and/or independent trustees. |
| e. | The documents governing the Liquidating Trust shall also provide that the Liquidating Trust’s activities shall be limited to conserving, protecting and selling the assets transferred to it and distributing the proceeds therefrom, including holding such assets for the benefit of the holders of beneficial interests in the Liquidating Trust, temporarily investing such proceeds and collecting income therefrom, providing for the debts, liabilities and expenses of the Liquidating Trust, making liquidating distributions to the holders of shares of beneficial interest in the Liquidating Trust and taking other actions as may be deemed necessary or appropriate by the trustees of the Liquidating Trust to conserve and protect the assets of the Liquidating Trust and provide for the orderly liquidation thereof. |
A-3
| f. | The Liquidating Trust Agreement will, unless otherwise determined by the Board of Trustees, also provide: (i) that shares of beneficial interest in the Liquidating Trust will not be transferable (except by will, intestate succession or operation of law); (ii) that beneficial interests in the Liquidating Trust will not be represented by certificates; (iii) that the Liquidating Trust will have a finite life and will terminate upon the earlier of the complete distribution of the Liquidating Trust’s assets or a specified number of years from the date that the Trust’s assets were first transferred to it, subject to extensions of determinate duration; and (iv) that the Liquidating Trust may distribute annual financial statements, which need not be audited, to holders of its beneficial interests (which statements, if prepared and distributed, shall be filed under cover of Form 10-K under the Trust’s Commission file number to the extent the Liquidating Trust is required to do so) but need not prepare or distribute any quarterly financial statements. |
| g. | Approval of this Plan shall constitute the approval by the shareholders of the transfer and assignment to the Liquidating Trust, the form and substance of the Liquidating Trust Agreement as approved by the Board of Trustees and the appointment of the Liquidating Trust’s trustees selected by the Board of Trustees. |
| 11. | Upon assignment and conveyance of the assets of the Trust to the Shareholders, in complete liquidation of the Trust as contemplated hereby, and the taking of all actions required under the law of the State of Ohio in connection with the liquidation and dissolution of the Trust, the appropriate officers of the Trust shall execute and cause to be filed with the Secretary of State of the State of Ohio, and elsewhere as may be required or deemed appropriate, such documents as may be required to dissolve the Trust. |
| 12. | Immediately prior to the transfer to the Liquidating Trust, or at such other time as the Board of Trustees considers appropriate, the Board of Trustees and officers of the Trust are authorized to cause the Trust to file a Form 15 (or take other appropriate action) to terminate the registration of its common stock under the Securities Exchange Act of 1934, as amended. |
| 13. | The Board of Trustees, or the trustees of the Liquidating Trust, and such officers of the Trust as the Board of Trustees may direct, are hereby authorized to interpret the provisions of the Plan and are hereby authorized and directed to take such further actions, to execute such agreements, conveyances, assignments, transfers, certificates and other documents, as may in their judgment be necessary or desirable in order to wind up expeditiously the affairs of the Trust and complete the liquidation thereof, including, without limitation, (i) the execution of any contracts, deeds, assignments or other instruments necessary or appropriate to sell or otherwise dispose of, any and all property of the Trust, whether real or personal, tangible or intangible, (ii) the appointment of other persons to carry out any aspect of this Plan, (iii) the temporary investment of funds in such medium as the Board of Trustees may deem appropriate, (iv) the entering into of agreements with, or modifying or amending existing agreements with, FUR Advisors LLC or any employee, officer, trustee or representative of the Trust including the exclusivity agreement with Michael L. Ashner, and (v) the modification of the Plan as may be necessary to implement the Plan. The death, resignation or other disability of any trustee or officer of the Trust shall not impair the authority of the surviving or remaining trustees or officers of the Trust (or any persons appointed as substitutes therefor) to exercise any of the powers provided for in this Plan. Upon such death, resignation or other disability, the surviving or remaining trustees shall have the authority to fill the vacancy or vacancies so created, but the failure to fill such vacancy or vacancies shall not impair the authority of the surviving or remaining trustees or officers to exercise any of the powers provided for in this Plan. |
| 14. | The Board of Trustees may terminate this Plan for any reason prior to its approval by the Shareholders. Notwithstanding approval of the Plan by the Shareholders, the Board of Trustees may modify or amend the Plan without further action by the Shareholders to the extent permitted under then current law. |
A-4
EXHIBIT B
March 31, 2014 Estimated Net Asset Value
B-1
WINTHROP REALTY TRUST
ESTIMATED NET ASSET VALUE
(In thousands, except square feet, units and per share data)
(Unaudited)
See Notes on Pages B-5 and B-6
| Trust | Carrying | |||||||||||||||||||||||||
| Cash, Accounts Payable and Dividends Payable | Ownership | Amount | Matched Debt | Estimated NAV Range | ||||||||||||||||||||||
| Cash and Cash Equivalents and Restricted Cash | 100% | $ | 118,841 | - | $ | 118,841 | to | $ | 118,841 | |||||||||||||||||
| Other Accounts Payable and Dividends Payable | 100% | $ | (36,062 | ) | - | $ | (36,062 | ) | to | $ | (36,062 | ) | ||||||||||||||
| Subtotal - Cash and Net Working Capital Estimated Net Asset Value Range | 100% | $ | 82,779 | to | $ | 82,779 | ||||||||||||||||||||
| REIT Securities: | Trust Ownership | Fair Value Carrying Amount | Matched Debt | Estimated NAV Range | ||||||||||||||||||||||
| REIT Common shares | 100% | $ | - | $ | - | $ | - | to | $ | - | ||||||||||||||||
| REIT Preferred shares | 100% | - | - | - | to | - | ||||||||||||||||||||
| Subtotal - REIT Securities Segment Estimated Net Asset Value Range | - | to | - | |||||||||||||||||||||||
| Par Value | ||||||||||||||||||||||||||
| Trust | Plus Accrued | |||||||||||||||||||||||||
| Loans: | Ownership | Interest | Matched Debt | Estimated NAV Range | ||||||||||||||||||||||
| Loan Assets, Loan Securities & Loan Equity | ||||||||||||||||||||||||||
Investments, with Expected Repayment | ||||||||||||||||||||||||||
The Shops at Wailea - B Note | 100% | 7,588 | - | 7,588 | to | 7,588 | [1 | ] | ||||||||||||||||||
Playa Vista - Mezzanine Loan | 100% | 12,346 | - | 14,846 | to | 16,346 | [2 | ] | ||||||||||||||||||
Churchill - Whole Loan | 100% | 366 | - | - | to | 366 | [1 | ] | ||||||||||||||||||
Rockwell - Mezzanine Loan | 100% | 1,137 | - | - | to | 50 | [1 | ] | ||||||||||||||||||
Pinnacle II - B Note | 100% | 5,108 | - | 5,108 | to | 5,108 | [1 | ] | ||||||||||||||||||
Poipu Shopping Village - B Note | 100% | 2,844 | - | 2,844 | to | 2,844 | [1 | ] | ||||||||||||||||||
Mentor - Whole Loan | 100% | 2,512 | - | 2,512 | to | 2,512 | [1 | ] | ||||||||||||||||||
Edens Norridge-Mezzanine Loa/GPInterest | 100% | 15,624 | 16,124 | to | 16,124 | [1 | ] | |||||||||||||||||||
Marc Realty-Mezzanine Loan | 100% | 4,523 | 4,523 | to | 4,523 | [1 | ] | |||||||||||||||||||
WBCMT 2007 - CMBS | 100% | 1,130 | - | 226 | to | 1,130 | [1 | ] | ||||||||||||||||||
| Total Estimated Value of Loans with Expected Repayment | $ | 53,771 | to | $ | 56,591 | |||||||||||||||||||||
| Par Value | ||||||||||||||||||||||||||
| Trust | Plus Accrued | Matched | ||||||||||||||||||||||||
| Ownership | Interest | Debt | Estimated NAV Range | |||||||||||||||||||||||
Loan Assets, Loan Securities & Loan Equity Investments, with Potential Equity Participation | ||||||||||||||||||||||||||
| Stamford - Mezzanine | 20% | 47,123 | - | 9,425 | to | 9,425 | ||||||||||||||||||||
| Total Estimated Value of Loans with Potential Equity | $ | 9,425 | to | $ | 9,425 | |||||||||||||||||||||
| Debt Platforms | ||||||||||||||||||||||||||
| Concord Debt Holdings/CDH CDO | 67%/49% | N/A | N/A | 11,016 | to | 22,433 | [3 | ] | ||||||||||||||||||
| RE CDO | 50% | N/A | N/A | 500 | to | 1,000 | ||||||||||||||||||||
| Total Estimated Value of Debt Platforms | $ | 11,516 | to | $ | 23,433 | |||||||||||||||||||||
| Subtotal - Loan Segment Estimated Net Asset Value Range | $ | 74,712 | to | $ | 89,449 | |||||||||||||||||||||
The estimate of net asset value (“NAV”) on pages B-2 to B-4 is based on estimated assets and liabilities as of March 31, 2014. No adjustments have been made for transaction costs that would be incurred if assets were sold including any prepayment penalty associated with the Trust’s debt. There have been no adjustments made to reflect acquisitions, dispositions or loan repayments subsequent to March 31, 2014. Although management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of such disposition and then market conditions. There can be no assurance that the ultimate realized value upon disposition of an asset will be within the range provided.
B-2
WINTHROP REALTY TRUST
ESTIMATED NET ASSET VALUE
(In thousands, except square feet, units and per share data)
(Unaudited)
See Notes on Pages B-5 and B-6
| Square | Three Months Ended March 31 , 2014 | Range of | Estimated | Matched | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trust | Feet/ | Annualized | Adjust- | Adjusted | Capitalization | Range of | Debt | Estimated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description | Ownership | Type | Units | NOI | ments | NOI | Rates | Property Value | Balance | NAV Range | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Operating Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wholly Owned | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amherst | Amherst, NY | 100 | % | Office | 200,000 | $ | 1,562 | 240 | $ | 1,802 | 7.75 | % | to | 7.50 | % | $ | 23,252 | to | $ | 24,027 | - | $ | 23,252 | to | $ | 24,027 | [5 | ] | ||||||||||||||||||||||||||||||||||
| Cerritos | Cerritos, CA | 100 | % | Office | 187,000 | 1,052 | 948 | 2,000 | 7.00 | % | to | 6.50 | % | 27,271 | to | 29,469 | 23,000 | 4,271 | to | 5,535 | [4 | ] | ||||||||||||||||||||||||||||||||||||||||
| One East Erie | Chicago, IL | 100 | % | Office | 126,000 | 3,008 | 148 | 3,156 | 7.50 | % | to | 6.50 | % | 42,080 | to | 48,554 | 19,763 | 22,317 | to | 28,791 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| Crossroads I | Englewood, CO | 100 | % | Office | 118,000 | 1,070 | 1,070 | 6.30 | % | to | 6.30 | % | 16,984 | to | 16,984 | - | 16,984 | to | 16,984 | [5 | ] | |||||||||||||||||||||||||||||||||||||||||
| Crossroads II | Englewood, CO | 100 | % | Office | 118,000 | 827 | 827 | 6.30 | % | to | 6.30 | % | 13,127 | to | 13,127 | - | 13,127 | to | 13,127 | [5 | ] | |||||||||||||||||||||||||||||||||||||||||
| 550 Corporetum | Lisle, IL | 100 | % | Office | 169,000 | 330 | 671 | 1,001 | 9.50 | % | to | 8.50 | % | 9,634 | to | 10,873 | 5,753 | 3,881 | to | 5,120 | [6 | ] | ||||||||||||||||||||||||||||||||||||||||
| Orlando | Orlando, FL | 100 | % | Office | 257,000 | 3,313 | 3,313 | 8.50 | % | to | 7.75 | % | 38,976 | to | 42,748 | 36,820 | 2,156 | to | 5,928 | |||||||||||||||||||||||||||||||||||||||||||
| Plantation | Plantation, FL | 100 | % | Office | 120,000 | 1,448 | 1,448 | 8.00 | % | to | 7.00 | % | 18,100 | to | 20,686 | 10,649 | 7,451 | to | 10,037 | |||||||||||||||||||||||||||||||||||||||||||
| South Burlington | South Burlington, VT | 100 | % | Office | 54,000 | 167 | 52 | 219 | 11.00 | % | to | 9.50 | % | 1,991 | to | 2,305 | - | 1,991 | to | 2,305 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| Atlanta - Kroger | Atlanta, GA | 100 | % | Retail | 61,000 | 259 | 259 | 13.00 | % | to | 12.00 | % | 1,992 | to | 2,158 | - | 1,992 | to | 2,158 | |||||||||||||||||||||||||||||||||||||||||||
| Greensboro - Kroger | Greensboro, NC | 100 | % | Retail | 46,000 | 220 | 220 | 9.00 | % | to | 8.00 | % | 2,444 | to | 2,750 | - | 2,444 | to | 2,750 | |||||||||||||||||||||||||||||||||||||||||||
| Louisville - Kroger | Louisville, KY | 100 | % | Retail | 47,000 | 214 | 214 | 11.00 | % | to | 10.00 | % | 1,945 | to | 2,140 | - | 1,945 | to | 2,140 | |||||||||||||||||||||||||||||||||||||||||||
| Waterford | Memphis, TN | 100 | % | Multi-Family | 320 Units | 1,567 | 243 | 1,810 | 6.25 | % | to | 6.00 | % | 28,960 | to | 30,167 | 13,052 | 15,908 | to | 17,115 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| Lake Brandt | Greensboro, NC | 100 | % | Multi-Family | 284 Units | 1,361 | 1,361 | 6.75 | % | to | 6.50 | % | 20,163 | to | 20,938 | 13,600 | 6,563 | to | 7,338 | |||||||||||||||||||||||||||||||||||||||||||
| Jacksonville | Jacksonville, FL | 100 | % | Warehouse | 588,000 | 615 | 256 | 871 | 8.50 | % | to | 8.25 | % | 10,247 | to | 10,558 | - | 10,247 | to | 10,558 | [5 | ] | ||||||||||||||||||||||||||||||||||||||||
| Churchill | Churchill, PA | 100 | % | Mixed Use | 52,000 | 703 | 167 | 870 | 12.00 | % | to | 9.00 | % | 7,250 | to | 9,667 | 5,016 | 2,234 | to | 4,651 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| Joint Venture Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Westheimer | Houston, TX | 32 | % | Office | 614,000 | 5,611 | (725 | ) | 4,886 | 7.00 | % | to | 6.00 | % | 69,800 | to | 81,433 | 45,919 | 7,642 | to | 11,365 | [8 | ] | |||||||||||||||||||||||||||||||||||||||
| 1050 Corporetum | Lisle, IL | 60 | % | Office | 54,000 | 145 | 311 | 456 | 9.00 | % | to | 7.00 | % | 5,067 | to | 6,514 | 5,449 | - | to | 639 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| 450 West 14th Street | New York, NY | var | Office /Retail | 105,000 | 2,376 | 3,002 | 5,378 | 5.75 | % | to | 5.35 | % | 93,530 | to | 100,523 | 51,637 | 25,065 | to | 27,512 | [9 | ] | [10 | ] | |||||||||||||||||||||||||||||||||||||||
| 1515 Market Street | Philadelphia, PA | 89 | % | Office | 502,000 | 4,260 | 1,171 | 5,431 | 7.50 | % | to | 7.00 | % | 71,137 | to | 76,310 | 42,193 | 28,944 | to | 34,117 | [11 | ] | [12 | ] | ||||||||||||||||||||||||||||||||||||||
| Luxury Residential | Various | 84 | % | Multifamily | 761 Units | 9,690 | 1,877 | 11,567 | 4.63 | % | to | 4.63 | % | 249,564 | to | 249,564 | 150,000 | 83,634 | to | 83,634 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| Summit Pointe | Oklahoma City, OK | 80 | % | Multifamily | 184 Units | 807 | 293 | 1,100 | 8.00 | % | to | 7.50 | % | 13,750 | to | 14,667 | 9,191 | 4,559 | to | 4,962 | [7 | ] | ||||||||||||||||||||||||||||||||||||||||
| Subtotal - Consolidated Operating Properties Net Asset Value Range | $ | 286,609 | to | $ | 320,792 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The estimate of net asset value (“NAV”) on pages B-2 to B-4 is based on estimated assets and liabilities as of March 31, 2014. No adjustments have been made for transaction costs that would be incurred if assets were sold including any prepayment penalty associated with the Trust’s debt. There have been no adjustments made to reflect acquisitions, dispositions or loan repayments subsequent to March 31, 2014. Although management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of such disposition and then market conditions. There can be no assurance that the ultimate realized value upon disposition of an asset will be within the range provided.
B-3
WINTHROP REALTY TRUST
ESTIMATED NET ASSET VALUE
(In thousands, except square feet, units and per share data)
(Unaudited)
See Notes on Pages B-5 and B-6
Three Months Ended March 31 , 2014 | Matched | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Trust | Square | Annualized | Adjust- | Adjusted | Range of | Estimated Range | Debt | Estimated | ||||||||||||||||||||||||||||||||||||||||||||
| Description | Ownership | Type | Feet/Units | NOI | ments | NOI | Capitalization Rates | of Property Value | Balance | NAV Range | ||||||||||||||||||||||||||||||||||||||||||
| Unconsolidated Operating Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marc Realty | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 223 West Jackson | Chicago, IL | 50% | Office | 168,000 | $ | 1,190 | 124 | $ | 1,314 | 7.75 | % | to | 6.75 | % | $ | 16,955 | to | $ | 19,467 | $ | 6,718 | $ | 5,118 | to | $ | 6,374 | [14] | |||||||||||||||||||||||||
| Other Joint Ventures | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sullivan Center | Chicago, IL | 50% | Retail/Office | 942,000 | 15,290 | (2,500 | ) | 12,790 | 6.00 | % | to | 5.35 | % | 213,167 | to | 239,065 | 113,500 | 73,158 | to | 82,999 | [15] | |||||||||||||||||||||||||||||||
| 701 7th Ave. | New York, NY | 75% | Retail/Office | Under Development | 363,961 | 96,529 | to | 96,529 | [16] | |||||||||||||||||||||||||||||||||||||||||||
| Northwest Atlanta | Atlanta, GA | 60% | Industrial/Office | 472,000 | 1,368 | 150 | 1,518 | 8.50 | % | to | 8.00 | % | 17,859 | to | 18,975 | 13,539 | 2,592 | to | 3,262 | [7] | ||||||||||||||||||||||||||||||||
| Mentor | Chicago, IL | 50% | Retail | 7,000 | 470 | 470 | 8.00 | % | to | 7.00 | % | 5,875 | to | 6,714 | 2,497 | 1,686 | to | 2,104 | ||||||||||||||||||||||||||||||||||
| Fenway Wateridge | San Diego, CA | 80% | Office | 62,000 | 752 | (164 | ) | 588 | 8.00 | % | to | 7.50 | % | 7,350 | to | 7,840 | 7,000 | 350 | to | 840 | [17] | |||||||||||||||||||||||||||||||
| Atrium | Chicago, IL | 50% | Retail | 71,000 | 387 | 1,107 | 1,494 | 9.50 | % | to | 8.00 | % | 14,726 | to | 17,675 | - | 7,363 | to | 8,838 | [18] | ||||||||||||||||||||||||||||||||
| Vintage (VHH) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27 Properties | Various | 75% | Multifamily | 4655 Units | 24,981 | 24,981 | 7.50 | % | to | 7.50 | % | 333,080 | to | 333,080 | 250,091 | 61,379 | to | 69,955 | [19] | |||||||||||||||||||||||||||||||||
| Tacoma | Tacoma, WA | 75% | Multifamily | Under Construction | 17,800 | 2,026 | to | 2,026 | [16] | |||||||||||||||||||||||||||||||||||||||||||
| Quilceda | Marysville, WA | 75% | Multifamily | Under Construction | 21,020 | 750 | to | 750 | [20] | |||||||||||||||||||||||||||||||||||||||||||
| Urban Center | Lynnwood, WA | 75% | Multifamily | Under Construction | 41,400 | 5,500 | to | 5,500 | [20] | |||||||||||||||||||||||||||||||||||||||||||
| Subtotal - Unconsolidated Operating Properties Net Asset Value Range | $ | 256,451 | to | $ | 279,177 | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate NAV | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and Net Working Capital | $ | 82,779 | to | $ | 82,779 | |||||||||||||||||||||||||||||||||||||||||||||||
| REIT Securities Net Asset Value Range | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan Segment Net Asset Value Range | 74,712 | to | 89,449 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Properties Net Asset Value Range | 543,060 | to | 599,969 | |||||||||||||||||||||||||||||||||||||||||||||||||
| All Segments Estimated Net Asset Value Range | $ | 700,550 | to | $ | 772,197 | |||||||||||||||||||||||||||||||||||||||||||||||
| Less: Corporate Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding Line of Credit | - | to | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding Senior Notes | (86,250 | ) | to | (86,250 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding Series D Preferred | (120,500 | ) | to | (120,500 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Asset Value Attributable to Common Shares | $ | 493,800 | to | $ | 565,447 | |||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding Common Shares (Excludes Restricted Shares) | 35,817 | 35,817 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Estimate Net Asset Value per Common Share Range | $ | 13.79 | to | $ | 15.79 | |||||||||||||||||||||||||||||||||||||||||||||||
The estimate of net asset value (“NAV”) on pages B-2 to B-4 is based on estimated assets and liabilities as of March 31, 2014. No adjustments have been made for transaction costs that would be incurred if assets were sold including any prepayment penalty associated with the Trust’s debt. There have been no adjustments made to reflect acquisitions, dispositions or loan repayments subsequent to March 31, 2014. Although management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of such disposition and then market conditions. There can be no assurance that the ultimate realized value upon disposition of an asset will be within the range provided.
B-4
WINTHROP REALTY TRUST
NOTES TO ESTIMATED NET ASSET VALUE
(Unaudited)
| Net Asset Value | |
| Footnotes |
| The estimate of net asset value (“NAV”) on the foregoing pages is based on estimated assets and liabilities as of March 31, 2014. No adjustments have been made for transaction costs that would be incurred if assets were sold including any prepayment penalty associated with the Trust’s debt. Although management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of such disposition and then market conditions. There can be no assurance that the ultimate realized value upon disposition of an asset will be within the range provided. | |
| 1) | Management’s estimate of NAV on the Trust’s loans expected to be repaid gives no effect to the above or below market yield earned on certain of the loans. Except for WBCMT, Rockwell and Churchill for which full recovery may not be realized, par is utilized as the estimate of value. |
| 2) | Property collateralizing the loan is being marketed for sale. NAV includes estimate of Winthrop's equity participation above par (based on expected sales price). |
| 3) | Represents the discounted cash flows of the CDO assuming different recovery rates on the loans. The non CDO loan assets are valued at estimated recovery with a range of values on the equity in MSREF portfolio at $0 to $5 million. |
| 4) | Gross Asset Value has been reduced to account for capital expenditures to offset speculative leasing. NAV has been reduced to reflect the B Note holder's 50% participation above $4.6 million. |
| 5) | Currently being marketed for sale. NAV reflects expected proceeds. |
| 6) | NAV has been reduced by $903,000 to account for capital expenditures to offset 2014 spec leasing. The increase to NOI is to reflect speculative leasing along with reversing the effect of annualization of first quarter higher expenses that are not expected to continue. |
| 7) | Adjustment to NOI is to reverse the effect of certain nonrecurring annualized expenses and leasing revenues not reflected in the first quarter as well as to reverse out certain GAAP adjustments. |
| 8) | This property is leased to Spectra Energy. The lease, which was set to expire in 2016 was extended until April 2026. Negotiated annual lease payments on the modified lease remain unchanged ($8.0 - $8.3 million annually) through the maturity date of the mortgage debt (April 2016) and then decreases to $4.3 million, subject to annual increases thereafter up to $5.5 million annually. The NOI was adjusted to reflect the future decline in rents. |
| 9) | Adjustment for leasing of 11,944 square feet of vacant retail space at $165 per square foot and to reverse the straight-lined non cash ground rent adjustment. |
| 10) | Management’s estimated NAV is calculated based on a sale of the property at a range of values using capitalization rates between 5.50% and 6.00% applied to stabilized NOI. The proceeds are then assumed to be distributed based upon the distribution provision of the 450 West 14th Street LLC Agreement which provides that cash is distributed as follows on the Trust’s capital contribution of $15.0 million and other equity holders’ capital of $3.0 million: 1) to the Trust until it receives an amount equal to a 10% return; 2) 75% to the Trust, 25% to other equity holders until the Trust has received a 15% cumulative annual compounded return on its aggregate investment amount; 3) 90% to the Trust, 10% to other equity holders until the Trust has received a return of its aggregate investment amount; 4) 10% to the Trust, 90% to other equity holders until other equity holders have received a return of any new investment amount and a 15% IRR thereon; 5) either (x) on or prior to the fifth anniversary of the Trust’s investment, 50% to the Trust and 50% to the other equity holders or (y) following the fifth anniversary of the Trust’s investment, 35% to the Trust and 65% to the other equity holders. Management assumed the 35% for this analysis. |
B-5
| Net Asset Value | |
| Footnotes |
| 11) | The adjustemt to NOI has been made to account for new leases entered into. The costs of the lease up have bee deducted from Gross Asset Value. |
| 12) | The Trust owns 89% of 1515 Market, but is entitled to receive 100% of proceeds up to $78.8 million less the mortgage amount, which was $42.4 million as of December 31, 2013. The Trust in entitled to receive 89% of any excess proceeds. |
| 13) | The Trust is entitled to 100% of capital proceeds until it receives a return of its capital ($4.9 million) plus a 12% return. Proceeds are next paid to the Trust's partner until it receives back its capital ($1.2 million) plus a 12% return. Thereafter, the Trust receives 60% of proceeds. |
| 14) | The Trust has agreed to grant an option to Marc Realty to acquire 223 West Jackson for a price to be not less than $5.0 million. |
| 15) | Management’s estimate of NAV is calculated based on the post-tax credit compliance period residual distribution provisions set forth in One South State Street LLC agreement which provide for payment of the WRT-Elad mezzanine loan under its terms, which has an outstanding balance of $56.8 million as of March 31, 2014 and of which the Trust owns 100% and then 76% profits participation by WRT-Elad. The NOI on this property was adjusted downward to reverse the effect of the straightlined rental income. |
| 16) | Asset is in a development stage. NAV represents cash invested by the Trust as of 3/31/2014 plus the unpaid accrued return on the cash invested. |
| 17) | The Trust has a preferred equity position. Proceeds of a capital transaction are distributed first to the Trust until it receives all of its $233k remaining preferred investment plus 12% thereon; second to the Trust to repay its $1.7million equity plus a 12% return thereon ; third to the Trust’s partner, Fenway, until it has received its $1.5 million investment plus a 12% return thereon; and thereafter 60% to Fenway and 40% to the Trust.. The adjustment down to NOI is to reflect the loss of two tenants at the property. |
| 18) | NAV has been reduced by $1.0 million to account for TIs and leasing costs associated with a newly executed lease with Walgreens and planned renovations. The NOI has been adjusted to reflect the new Walgreens lease |
| 19) | Each of the Vintage properties is owned in a partnership which includes outside investors and is subject to its individual partnership agreement waterfall. The VHH Operating Agreement provides that aggregate properties operating cash flow to VHH is distributed as follows: 1) to the Trust until it receives a 12% preferred return on its unreturned capital; 2) to the Trust’s joint venture partner until he receives at 12% return; 3) the remainder is distributed 50% to the Trust and 50% to the Trust’s partner Capital proceeds from the sale or refinancing of any of the underlying properties are distributed 75% to the Trust and 25% to our joint venture partner until all capital is returned and unpaid returns are paid and any excess after the return of capital is distributed 50%/50%. Management estimated the range of NAV based on the forecasted distributions to be received on this investment discounted at a range between 9% and 12%. Forecasted residual proceeds were calculated based on sales of the underlying properties using a capitalization rate of 7.5%. |
| 20) | Asset is in a development stage. NAV reflects cash invested. |
B-6
  |   | |||
Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., | ||||
 | Vote by Internet • Go to www.envisionreports.com/FUR • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website | |||
| Vote by telephone | ||||
| • | Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone | |||
| • | Follow the instructions provided by the recorded message | |||
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. | x |
| 1234 5678 9012 345 |
▼IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼
A Proposals — The Board recommends a vote FOR all nominees Proposals 1 and FOR Proposals 2 and 3.2.
| 1. | ||||||||||||
| the plan of liquidation of Winthrop Realty Trust including the sale of our assets and the dissolution of our company described therein, and the approval and ratification of the transactions described in the proxy statement which Winthrop Realty Trust and its board of trustees have undertaken in connection with the plan of liquidation. | o | o | o | |||||||||
| 2. | Approval of the proposal to permit the board of trustees to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve Item 1. | o | o | Abstain | ||||||||
| For | Against | Abstain | For | Against | Abstain | |||||
| 2. | Proposal to ratify PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013. | o | o | o | 3. | To adopt an amendment to the Winthrop Realty Trust 2007 Long Term Stock Incentive Plan to increase the number of shares issuable thereunder. | o | o | o | |
4. | To consider and act upon such other matters as may properly come before the Annual Meeting or any adjournment thereof. |
B Non-Voting Items
Change of Address — Please print new address below. | Comments — Please print your comments below. | Meeting Attendance | ||||
| Mark the box to the right if you plan to attend the Annual Meeting. | o |
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||
| / / |
Winthrop Realty Trust Shareholders
Katten Muchin Rosenman LLP
575 Madison Avenue, 11th Floor
New York, New York 10022
Upon arrival, please present this admission ticket
and photo identification at the registration desk.
YOUR VOTE IS IMPORTANT
If you do not vote by telephone or Internet, please sign and date this proxy card and return it promptly in the enclosed postage-paid envelope to Computershare Investor Services at P.O. Box 43101, Providence RI 02940-3101, so your shares are represented at the AnnualSpecial Meeting. If you vote by telephone or Internet, it is not necessary to return this proxy card.
▼IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼
Proxy — WINTHROP REALTY TRUST |
Notice of 2013 Annual2014 Special Meeting of Shareholders
Katten Muchin Rosenman LLP, 575 Madison Avenue, 11th Floor, New York, New York 10022
Proxy Solicited by Board of Trustees for AnnualSpecial Meeting – Tuesday, May 21, 2013[_____], [_____], 2014
Michael L. Ashner and Carolyn Tiffany, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the AnnualSpecial Meeting of Shareholders of Winthrop Realty Trust to be held on Tuesday, May 21, 2013[_____], [_____], 2014 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nomineesProposals 1 and FOR Proposals 2 and 3.2.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side.)
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