| · | Until the Common Shares awarded are no longer subject to forfeiture, all cash dividends payable thereon will be payable as follows: (i) the holder will receive a liquidating trust priorportion of the dividend equal to (i) five percent, multiplied by (ii) the number of full calendar quarters that have transpired between January 1, 2013 and the applicable dividend payment date, less any required tax withholding and (ii) the remaining portion of the dividend will be held by us in escrow and will only be paid to the subsequent sale of such assetsholder thereof if and when the distribution to you of the related net cash proceeds, if any. Such transfer also may have adverse tax consequences for tax-exempt and foreign shareholders.You may not receive any profits resulting from the sale of one or more of our properties, or receive such profits in a timely manner, because we may provide financing to the purchaser of such property.
If you approve the plan of liquidation, you may experience a delay before receiving your share of the net proceeds of such liquidation. In a liquidation, we may sell our assets eitherCommon Shares awarded are no longer 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 to 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 net proceeds of a sale until such time as the installment payments are received.
Other Risks Relating to the Proposals
Our entity value may be adversely affected by adoption of the plan of 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 Trust as a whole. It may also preclude other possible courses of action not yet identified by our board.
We will not be able to make new investments.
In accordance with applicable tax law, upon implementation of the plan of liquidation, we will not be permitted to make any new investments other than those required to satisfy existing contractual obligations and commitments, 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 existing common shares, Series D Preferred Shares and Senior Notes if we so choose and make protective acquisitions or advances with respect that our existing assets. Accordingly, in the event that market conditions change in a manner such that there is an increase in opportunistic investments that satisfy our investment strategy and minimum return parameters, we will not be able to use our cash to participate in such investments which could generate a greater return to shareholders.
The adoption 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 your common shares.
Certain institutional shareholders may be required to sell their common shares or our common shares may fail to meet the requirements to be on certain indexes as a result of the plan of liquidation.
Upon the adoption of the plan of liquidation, the governing documents of certain of our institutional 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 other investors who invest in stocks included on such index would be required to divest of the common shares they hold which would create downward pressure on the trading price of our common shares. If this were to occur, shareholders who sell common shares prior to the completion of the liquidation may receive less than the estimated liquidation proceeds.
There can be no assurance that our adoption of the plan of liquidation will result in greater returns to you on your investment within a reasonable period of time than you would receive through other alternatives reasonably available to us at this time.
If our shareholders approve the plan of liquidation, you will no longer participate in any future earnings or growth of our assets or benefit from any increases in the value of our assets once such assets are sold. While our board believes 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, such belief relies on certain assumptions and judgments concerning future events. Therefore, it is possible that continuing with the status quo or pursuing one or more of the other alternatives could provide you with a greater return within a reasonable period of time. In that case, we will be foregoing those opportunities if we implement the plan of liquidation.forfeiture. If the plan of liquidation is not approved by you and our other shareholders, our board intends to evaluate our remaining strategic alternatives.
Our board may amendCommon Shares awarded are forfeited, then 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 plan 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 accordance 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 liabilities be recorded to reflect the anticipated effects of an orderly liquidation.
Until the plan of liquidation is approved, we will continue to use the going-concern basis of accounting. If our shareholders do not approve the plan of liquidation, we will continue to account for our assets and liabilities under the going-concern basis of accounting. Under the going-concern basis, long-lived assets to be sold or disposed of should be reported at the lower of carrying amount or estimated fair value less cost to sell. For long-lived assets to be held and used, when a change in circumstances occurs, our management must assess whether we can recover the carrying amounts of our long-lived assets. If our management determines that, based on all of the available information, we cannot recover those carrying amounts, an impairment of value of our long-lived assets has occurred and the assets should be written down to their estimated fair value.
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 assetsdividends 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 propertiesescrow will assume certain mortgages on the underlying property, which contain penalties in the event of the prepayment of those mortgages. The sale 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 maysimilarly 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 they may be incapable of being realized. Such forward-looking statements include statements with respect to:
| · | the declaration or payment of dividends by us;forfeited. |
| · | the ownership, management and operation of properties; |
In addition to the foregoing, in connection with the adoption of the Trust’s plan of liquidation, the Compensation Committee has permitted the full vesting of a total of 8,750 restricted Common Shares issued under the Plan to certain non-executive employees of FUR Advisors whose employment terminated as a result of the Trust’s liquidation of assets. | · | potential acquisitions or dispositions of our properties, assets or other businesses; |
Summary Compensation Table | · | our policies regarding investments, acquisitions, dispositions, financings and other matters; |
We do not pay any compensation directly to our named executive officers as they are paid directly by our advisor. However, as noted above, during 2013 and 2014 our named executive officers received restricted stock grants pursuant to the Plan. The following table contains certain summary compensation information for our named executive officers for the fiscal years ended December 31, 2014, 2013 and 2012: | · | our qualification as a real estate investment trust under the Internal Revenue Code of 1986, as amended; |
Name and Principal Position | | Year | | Salary ($) | | | Bonus ($) | | | Stock Awards(1) ($) | | | All Other Compensation ($) | | | Total ($) | | | | | | | | | | | | | | | | | | | | | Michael L. Ashner Chief Executive Officer | | 2014 | | | - | | | | - | | | | - | | | | - | | | | - | | | | | 2013 | | | - | | | | - | | | | 2,537,433 | | | | - | | | | 2,537,433 | | | | | 2012 | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | Carolyn Tiffany President | | 2014 | | | - | | | | - | | | | - | | | | - | | | | - | | | | | 2013 | | | - | | | | - | | | | 1,307,567 | | | | - | | | | 1,307,567 | | | | | 2012 | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | John Garilli Chief Financial Officer | | 2014 | | | - | | | | - | | | | 30,680 | | | | - | | | | 30,680 | | | | | 2013 | | | - | | | | - | | | | 971,250 | | | | - | | | | 971,250 | | | | | 2012 | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | John Alba Chief Investment Officer | | 2014 | | | - | | | | - | | | | 30,680 | | | | - | | | | 30,680 | | | | | 2013 | | | - | | | | - | | | | 971,250 | | | | - | | | | 971,250 | | | | | 2012 | | | - | | | | - | | | | - | | | | - | | | | - | |
| · | the real estate industry and real estate markets in general; | (1) | Shares are subject to forfeiture. The amount reported in this column is based on the closing price of $12.55 per common share on the date of the grant with respect to those shares granted on February 28, 2013, $12.95 per common share on the date of the grant with respect to those shares granted on May 28, 2013 and $15.34 with respect to those shares granted on September 5, 2014. |
| · | the availability of debt and equity financing; |
Grant of Plan Based Awards
The following table sets forth information for each named executive officer with respect to the grant of plan based awards by the Company during 2014 and 2013, and the value of such stock awards on such grant dates:
Name and Principal Position | | | Grant Date | | All Other Stock Awards; Number of Shares of Stocks or Units) (#) | | | Grant Date Fair Value of Stock Awards(1) ($) | | | | | | | | | | | Michael L. Ashner Chief Executive Officer | | | · | general economic conditions; | February 28, 2013May 28, 2013 | | · | supply of real estate investment opportunities and demand; |
66,667131,333 | | · | trends affecting us or our assets; |
836,6711,700,762 | | | | | | | | | | Carolyn Tiffany President | | | · | the effect of acquisitions or dispositions on capitalization and financial flexibility; | February 28, 2013May 28, 2013 | | · | 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 |
33,33368,667 | | · | our ability, and that of our assets and acquired properties and businesses, to grow. |
You are cautioned 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 forward-looking statements as a result of various factors. The information contained or incorporated by reference in this proxy statement, including, without limitation, the information 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.418,329
889,238 | | | | | | | | | | | John Garilli Chief Financial Officer | | | THE SPECIAL MEETINGMay 28, 2013
September 5, 2014 | | | Date, Time and Place75,000
2,000 | | | 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 August971,250
30,680 | | | | | | | | | | | John Alba Chief Investment Officer | | | May 28, 2013 September 5, 2014 at 1:00 p.m. 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 June 26, 2014. | | | Purposes75,000
2,000 | | | At the special meeting, you will be asked to consider and vote upon the plan of liquidation. The board is not 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.971,250
Record Date for Voting; Number of Votes
Only shareholders of record at the close of business on June 19, 2014 are entitled to receive notice of and to vote at the special meeting. On such date there were issued and outstanding 36,417,584 common shares.
Quorum
A majority of the votes eligible to be cast represented in person or by proxy constitutes a quorum for the meeting. If a quorum is not present, the special meeting may be adjourned without further notice to a date not more than eleven months after the original record date at which a quorum is present, and shares represented by proxies may be voted for such adjournment.
Common shares present but abstaining and broker non-votes will be included in the number of shares present at the special meeting for purposes of 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 Proxies
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.30,680
|
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 June 19, 2014, the record date, there were 36,417,584 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 special meeting at any time before it is voted at the 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. |
Shareholders holding shares | (1) | The amount reported in street name at a broker or bank custodian must follow the procedures of such broker or bank custodian if they wish to revoke a previous voting instruction.Information Regarding Tabulation of the Vote
All proxies, ballots and votes tabulated at a meeting of our shareholders are confidential, and the votes will not be revealed to anyone, other than the inspector of elections, unless it is necessary to meet applicable legal requirements. Nevertheless, we intend to issue a press release stating the results of the vote on the plan of liquidation and any other matter that may properly be brought at the special meeting.
Solicitation of Proxies and Expenses
We will bear the entire 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 plus reasonable out-of-pocket expenses in connection with the solicitation. Copies of solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding in their names common shares beneficially owned by others to forward to those beneficial owners. We will reimburse persons representing beneficial owners of the common shares for their expenses in forwarding solicitation materials to those beneficial owners. Original solicitation of 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.
BACKGROUND OF THE TRUST’S DECISION TO LIQUIDATE
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 traditionally 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 total return value approach to real estate investing. As a result of this emphasis on total return, we have sought to achieve consistent growth in underlying asset value as well as a 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 has provided us with both the ability to capitalize on evolving market conditions and the flexibility to pursue diverse opportunities.
In 2007 our common share price, as with other REITs, declined significantly during the recession. Although our common share price initially outperformed the REIT market after the recession, in 2011 our price began to lag as compared to other REITs. In August 2012, responding to investor feedback which described our investments as complex, we began reporting an analysis of a range of our estimated net asset value for each of our assets and deducted corporate liabilities to estimate a range of net asset value per common share. We expected this would assist the market in understanding our company and assets. We updated the net asset value on a quarterly basis. Unfortunately, during the period in which we have been reporting our net asset value our common share price has, for the most part, been below our low case estimated net asset value and in all cases well below our high case estimated net asset value.
As a REIT we are reliant on raising funds in the market 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 then trading price for our common shares but, more significantly, to our net asset value resulting in the necessity to achieve higher returns on investments in order for the proceeds derived from such offering to be accretive to shareholders.
In addition to the foregoing, in the fourth 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 8K 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 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.
In presenting our net asset values, we have provided a low case and high case analysis. In both cases, the net asset value is determined based on an estimate of asset values and liabilities as of the end of the applicable period and without making any adjustments for transaction costs that would be incurred if assets were sold including any prepayment penalty associated with the Trust’s debt. In addition, with respect to specific assets, the net asset value for such assetscolumn is based on the assumptions provided in the notes to the net asset value tables. The difference in the low case and high case estimates relate primarily to the capitalization rate used in determining the valueclosing price of the operating property, the occupancy and leasing assumptions used in certain instances and, in the case of certain loan assets, the difference between par value or a mark-to-market value.�� The net asset value does not include in its range of value any potential profit for the following investments, each of which is valued at our cost basis: the Luxury Residential Portfolio, Urban Center and Quilceda. In addition, the Trust’s investments in 701 Seventh Avenue and Tacoma are valued at our cost basis plus our unpaid 12% priority return through March 31, 2014 with no value added for additional return or profit potential that may result from the completion of construction and/or occupancy of the properties.
Chronology of Events
In view of the foregoing as well as the continuing costs associated with operating a public company, at the November 5, 2013 board meeting our trustees discussed at length the Trust’s options including whether to seek to acquire another company or continue under the current or a revised business plan, seek an acquirer for the Trust or liquidate. At the meeting our trustees agreed that management should begin such discussions with investment banking firms to determine a process for sourcing strategic alternatives. In addition, we retained legal counsel to assist us in the process.
On November 18, 2013, management reported that it discussed the Trust’s options with two investment banking firms with whom the Trust had an existing relationship and the board and management agreed to retain Barclays to represent us in connection with the pursuit of a strategic transaction. Barclays recommended that after they spend time diligencing the Trust and its reported net asset value, at our direction, they would look for target companies to be acquired by us as well as make inquiries to likely potential acquirers of the Trust. Upon our request, Barclays engaged in this process during November and the early portion of December 2013. In connection with this process, Barclays and our management generated a list of potential interested parties and built-out an electronic data site containing information about us and our assets and operations and to which potential acquirers would be given access.
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 late December 2013 through February 7, 2014 each company that signed a confidentiality agreement had access to the 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 discuss our assets. Michael Ashner, our Chairman and Chief Executive Officer, and Carolyn Tiffany, our 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 such potential acquirers to address their questions.
At the December 23, 2013 board meeting, Mr. Ashner advised the members of the board that one of the potential acquirers was showing strong interest in acquiring the Trust. The board determined that any offers for the Trust would need to be weighed against the potential liquidation value as well as continuing to operate the Trust either under its current business plan or an alternative business plan.
The board met again on January 13, 2014 at which time Mr. Ashner and Ms. Tiffany updated the members of the board as to the progress of the interested parties and the nature of meetings and requests of such parties.
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$12.55 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 on the status of the 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.
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 and would occur over a five year period. 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. The liquidation analysis assumed that after payment of the Series D Preferred Shares liquidation preference and redemption of the Senior Notes there would be periodic dividend payments made to shareholders from operating cash flow and sales proceeds during the projected five year period and that the last distribution of liquidation proceeds would be 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.
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. To date, such third-party has not made a offer to the Trust.
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; |
| · | 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;
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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. |
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; |
| · | 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;
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| · | 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.
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| · | 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. |
| · | 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.
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.
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 $9,545,000 at August 5, 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 $12.81 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 $15.74 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.
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.
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. taxationgrant 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 taxedthose shares granted on FIRPTA distributions atFebruary 28, 2013, $12.95 per common share on 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.
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”) provisionsdate 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.
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 UBTIgrant with respect to those shares granted on May 28, 2013 and $15.34 per common share on 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 itselfdate 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 taxesgrant 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.those shares granted on September 5, 2014.
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For narrative disclosures concerning the information set forth in the Summary Compensation Table and the Grant of Plan Based Awards Table, please see “Equity Compensation” commencing on page 16 in this Proxy Statement.
Outstanding Equity Awards at Fiscal Year Ended December 31, 2014
The following table sets forth information for each named executive officer with respect to the outstanding unvested equity awards as of fiscal year-end 2014, and the market value of such stock at fiscal year-end 2014:
Name and Principal Position | | Number of Shares or Units of Stock That Have Not Vested(1) (#) | | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) | | | | | | | Michael L. Ashner Chief Executive Officer | | 198,000 | | 3,086,820 | | | | | | | Carolyn Tiffany President | | 102,000 | | 1,590,180 | | | | | | | John Garilli Chief Financial Officer | | 77,000 | | 1,200,430 | | | | | | | John Alba Chief Investment Officer | | 77,000 | | 1,200,430 |
Transfer Taxes | (1) | Shares are subject to forfeiture as noted above under “Equity Compensation”. |
Transfer taxes may be imposed in certain state and local jurisdictions in connection with sales | (2) | Value determined by multiplying the number 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 asunvested shares by $15.59, the closing price of June 19, 2014 (except as otherwise indicated) regarding the ownership of our common shares by (i) each person who is known to us to beon the beneficial owner of more than 5%last business day of the outstanding common shares, (ii) each member of the board, (iii) each executive officer named herein, and (iv) all current executive officers and each member of the board as a group. Except as otherwise indicated, each such shareholder has sole voting and investment power with respect to the common shares beneficially owned by such shareholder. As of June 19, 2014 there were 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 | | | | | | | | | | | | | | | | FUR Investors, LLC (1) FUR Holdings LLC WEM-FUR Investors LLC | | | -- | | | | 2,671,369 | | | | | 7.3 | % | | | | | | | | | | | | | | | | | John Alba (1) | | Chief Investment Officer | | | | 78,950 | | (4 | ) | | * | | | | | | | | | | | | | | | | | Michael L. Ashner(1) | | Chairman and CEO | | | | 3,154,586 | | (2 | ) | | 8.7 | % | | | | | | | | | | | | | | | | Arthur Blasberg, Jr. (3) | | Trustee | | | | 28,000 | | | | | * | | | | | | | | | | | | | | | | | John Garilli(3) | | Chief Financial Officer | | | | 75,000 | | (4 | ) | | * | | | | | | | | | | | | | | | | | Howard Goldberg (3) | | Trustee | | | | 75,079 | | | | | * | | | | | | | | | | | | | | | | | Thomas F. McWilliams(3) | | Trustee | | | | 10,287 | | | | | * | | | | | | | | | | | | | | | | | Lee Seidler(3) | | Trustee | | | | 17,071 | | | | | * | | | | | | | | | | | | | | | | | Carolyn Tiffany(3) | | President and Trustee | | | | 111,410 | | (4 | ) | | * | | | | | | | | | | | | | | | | | Steven Zalkind(3) | | Trustee | | | | 22,153 | | | | | * | | | | | | | | | | | | | | | | | All Trustees and executive officers as a group | | | | | | | 3,572,536 | | | | | 9.8 | % | | | | | | | | | | | | | | | | | 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%
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COMPENSATION COMMITTEE REPORT The Compensation Committee is comprised entirely of independent Trustees. The Compensation Committee has reviewed 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. | Members of the Compensation Committee | | | | Steven Zalkind (Chairman) | | Thomas F. McWilliams | | Lee Seidler |
Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933 or the Exchange Act that might incorporate SEC filings, in whole or in part, the foregoing Audit Committee Report will not be incorporated by reference into any such filings. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION There were no relationships among members of the Compensation Committee, members of the Board or our executive officers who served during our 2014 fiscal year that require disclosure under Item 407(e)(4) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended. All current members of the Compensation Committee are considered independent under our Corporate Governance Guidelines. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of April 2, 2015 (except as otherwise indicated) regarding the ownership of our Common Shares by (i) each person who is known to us to be the beneficial owner of more than 5% of the outstanding Common Shares, (ii) each Trustee and Trustee nominee, (iii) each executive officer named herein, and (iv) all current executive officers and Trustees as a group. Except as otherwise indicated, each such Shareholder has sole voting and investment power with respect to the Common Shares beneficially owned by such Shareholder. As of April 2, 2015, there was 36,425,084 Common Shares outstanding. Name and Address of Beneficial Owner | Position with the Trust | Amount and Nature of Beneficial Ownership | | Percent of Class | FUR Investors, LLC (1) FUR Holdings LLC WEM-FUR Investors LLC | -- | 2,671,369 | | 7.3% | | John Alba (1) | Chief Investment Officer | 80,950 | (4) | * | | Michael L. Ashner(1) | Chairman and CEO | 3,154,586 | (2) | 8.7% | Arthur Blasberg, Jr. (3) | Trustee | 28,000 | | * | John Garilli(3) | Chief Financial Officer | 77,000 | (4) | * | Howard Goldberg (3) | Trustee | 75,079 | | * | | Thomas F. McWilliams(3) | Trustee | 10,287 | | * | | Lee Seidler(3) | Trustee | 17,071 | | * |
Name and Address of Beneficial Owner | Position with the Trust | Amount and Nature of Beneficial Ownership | | Percent of Class | | | | | | | Carolyn Tiffany(3) | President and Trustee | 111,410 | (4) | * | Steven Zalkind(3) | Trustee | 22,153 | | * | All Trustees and executive officers as a group | | 3,576,536 | | 9.8% | The Vanguard Group Inc.(5) | -- | 3,338,746 | (5) | 9.2% | Vanguard Specialized Funds-Vanguard REIT Index Fund (5) | | 2,571,733 | (5) | 7.1% | | Cardinal Capital Management LLC (6) | -- | 2,503,730 | (6) | 6.9% | Apollo Capital Management L.P.; Apollo Capital Management GP, LLC; Apollo Principal Holdings II GP, LLC; Apollo Management Holdings, L.P. (7) | -- | 2,291,908 | (7) | 6.3% | | Bulldog Investors LLC (8) | -- | 2,016,984 | (8) | 5.5% |
*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 2,671,369 Common Shares owned by FUR Investors LLC, 437,882 Common Shares held directly by Mr. Ashner and his spouse (198,000 of which are restricted shares and subject to forfeiture) and 45,335 Common Shares held by The Ashner Family Evergreen Foundation, a New York not for profit corporation (the “Foundation”). Mr. Ashner is the managing member of WEM-FUR Investors LLC, the managing member of FUR Holdings, LLC, the sole member of FUR Investors LLC. As such, Mr. Ashner may be deemed to beneficially own all Common Shares owned by FUR Investors. Mr. Ashner is a director of the Foundation and, as such, may be deemed to beneficially own all Common Shares owned by the Foundation. |
| (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. |
(5) | 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 January 30, 2014.
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(6) | 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 12, 2014 and a 13-G/A filing by Vanguard Fund with the SEC on February 4, 2014. |
SELECTED HISTORICAL FINANCIAL DATA
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 | |
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, which 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 June 3, 2014, May 21, 2014, 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 July 25, 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 June 26, 2014. You should not assume that the information contained in this document is accurate as of any date other than that date, and 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 proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make such proxy solicitation in that jurisdiction.
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 shareholder proposals intended to be presented at the 2015 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 22, 2015. In addition, under our By-laws, shareholders must comply with specified procedures to nominate persons for election as a 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’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 shareholder who wishes to submit a shareholder proposal, should send it to, Winthrop Realty Trust, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114, Attention: Trust’s Secretary.MA 02114.
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OTHER MATTERS
We| (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 awaredeemed to beneficially own any of any businesssuch Common Shares under Section 13 or matter other than those indicated aboveSection 16 of the Securities Exchange Act of 1934, as amended. Includes 102,000, 77,000 and 77,000 restricted shares held by Ms. Tiffany, Mr. Garilli and Mr. Alba, respectively, which may properly be presented atshares are subject to forfeiture. |
| (5) | 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 special meeting. If, however, any other matter comes before13-G/A filing by Vanguard with the special meeting,SEC on February 12, 2015 and a 13-G/A filing by Vanguard Fund with the proxy holders will, in their discretion, vote thereon in accordanceSEC on February 4, 2015. |
| (6) | The address for Cardinal Capital Management LLC (“Cardinal”) is 4 Greenwich Office Park, Greenwich, CT 06831. Information is derived from the 13-G filing by Cardinal with their best judgment.the SEC on February 12, 2015. |
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you have questions about the liquidation or need assistance voting your shares, you should contact:
| (7) |  105 Madison Avenue
Street, 43rd Floor, New York, NY 10016 (212) 929-5500 (Collect)
or
(800) 322-2885 (Toll-Free)
You may also contact us at:
7 Bulfinch Place, Suite 500
Boston, MA 02114
Attention: Corporate Secretary
Telephone: (617) 570-4614
EXHIBITS
Exhibit 10019. Information is derived from the 13-G/A – Plan of Liquidation
Exhibit B - March 31, 2014 Estimated Net Asset Value
EXHIBIT A
WINTHROP REALTY TRUST
PLAN OF LIQUIDATIONfiling by Apollo with the SEC on February 12, 2015.
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| (8) | The address for Bulldog Investors LLC (“Bulldog”) is Park 80 West, 250 Pehle Avenue, Suite 708, Saddle Brook, NJ 07663. Information is derived from the 13G filing by Bulldog with the SEC on March 2, 2015. |
| 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. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, Trustees and persons who beneficially own greater than 10% of a registered class of our equity securities to file certain reports which we refer to as “Section 16 Reports” with the SEC with respect to ownership and changes 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. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS FUR Advisors administers our business pursuant to the terms of an advisory agreement. FUR Advisors is controlled by and partially owned by our executive officers. Pursuant to the terms of the advisory agreement, FUR Advisors is responsible for providing asset management services to us and coordinating with our shareholder transfer agent and property managers. For providing these services, FUR Advisors is entitled to receive a base management fee and, in certain instances, an incentive fee and termination fee. Under the Advisory Agreement, FUR Advisors was entitled to receive a base management fee and an incentive fee in accordance with the terms of the Advisory Agreement. The base management fee, which is paid on a quarterly basis, equals to 1.5% of (i) the issuance price of our outstanding equity securities plus (ii) 0.25% of any equity contribution by an unaffiliated third party to a venture managed by the Trust. Pursuant to the terms of the Advisory Agreement, no incentive fee was payable during the year ended December 31, 2014. The base asset management fee attributable to third party equity contributions amounted to $21,000 for the year ended December 31, 2014. Winthrop Management L.P., an affiliate of FUR Advisors and our executive officers, provides property management responsibilities for certain of our properties. Pursuant to the terms of the property management agreement, Winthrop Management L.P. receives a fee equal to 3% of the monthly revenues of such properties. In addition, Winthrop Management L.P. is also entitled to receive construction management fees with respect to capital improvements at the properties it manages for us. The following table sets forth the fees and reimbursements paid by us for the year ended December 31, 2014 to FUR Advisors and Winthrop Management L.P.: | | | 2014 | | | Base Asset Management Fee (1) | | $ | 9,040,000 | | | Property Management (2) | | $ | 1,394,000 | | | Construction Management (2) | | $ | 378,000 | |
| 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. |
(1) Payable to FUR Advisors(2) Payable to Winthrop Management L.P.
| 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. |
WRP Sub-Management LLC, which we refer to as WRP Sub-Management, an affiliate of FUR Advisors provides its personnel to (i) WRP Management LLC, a subsidiary of the Trust that is the collateral manager for Concord Real Estate CDO-1, Ltd. and the administrative manager of Concord Debt Holdings LLC and (ii) RE CDO Management LLC, a 50% owned subsidiary of the Trust that was the collateral manager for Sorin Real Estate CDO IV, Ltd.. For providing its personnel, for the year ended December 31, 2014, WRP Management LLC and RE CDO Management LLC reimbursed WRP Sub-Management $1,000,000 and $74,000, respectively.
| 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. |
| 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. |
SHAREHOLDER PROPOSALS | 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. |
Any Shareholder proposals intended to be presented at the 2016 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 28, 2016. In addition, under our By-laws, Shareholders must comply with specified procedures to nominate persons for election as Trustees 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’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 Shareholder who wishes to submit a Shareholder proposal, should send it to, Winthrop Realty Trust, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114, Attention: Trust’s Secretary.
| 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. |
MISCELLANEOUS
| 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. |
EXHIBIT B
March 31, 2014 Estimated Net Asset Value
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.
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.
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.
WINTHROP REALTY TRUST
NOTES TO ESTIMATED NET ASSET VALUE
(Unaudited)
As of the date of this Proxy Statement, the Board does not know of any other matter to be brought before the Annual Meeting. However, if any other matters not mentioned in the Proxy Statement are brought before the Annual Meeting or any adjournments thereof, the persons named in the enclosed Proxy or their substitutes will have discretionary authority to vote proxies given in said form or otherwise act, in respect of such matters, in accordance with their best judgment. We have retained MacKenzie Partners, Inc. to aid in the solicitation of proxies. MacKenzie Partners, Inc. will receive a fee as well as reimbursement for certain out of pocket expenses incurred by them in connection with their services, all of which will be paid by us. All of the costs and expenses in connection with the solicitation of proxies with respect to the matters described herein will be borne by us. In addition to solicitation of proxies by use of the mails, our Trustees, officers and employees (who will receive no compensation therefor in addition to their regular remuneration) may solicit the return of proxies by telephone, telegram or personal interview. We will request banks, brokerage houses and other custodians, nominees and fiduciaries to forward copies of the proxy materials to their principals and to request instructions for voting the proxies. We may reimburse such banks, brokerage houses and other custodians, nominees and fiduciaries for their expenses in connection therewith. It is important that proxies be returned promptly or that you vote by telephone or the internet. Shareholders are, therefore, urged to fill in, date, sign and return the Proxy immediately. No postage need be affixed if mailed in the enclosed envelope in the United States. 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.
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Net Asset Value | Footnotes  | |  | | 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., Eastern Time, on May 28, 2015. | |  | 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 |
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.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 |
Annual Meeting Proxy Card | 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.▼  | |  | | | Electronic Voting Instructions
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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., Eastern Time, on August 5, 2014.
| |  | 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 |
A Proposals — The Board recommends a vote FOR all nominees and FOR Proposals 2. 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 |
Special Meeting Proxy Card
| 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.▼
| 1. | Election of Trustees: | | | For | Withhold | | | For | Withhold | | | For | Withhold | | 01 - Michael L. Ashner | o | o | | 02 - Arthur Blasberg, Jr. | o | o | | 03 - Howard Goldberg | o | o | | | | | | | | | | | | |
| A 04 - Proposals — The Board recommends a vote FOR Proposals 1 and 2.Thomas F. McWilliams
| o | o | | 05 - Lee Seidler | o | o | | 1. 06 - Carolyn Tiffany | o | o | | | | | | | | | | | | | | 07 - Steven Zalkind | o | Approval of 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. | For
o | | Against
o
| | Abstain
| | | | | | | | |
| | | For | Against | Abstain | | | | | 2. | Proposal to ratify PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015. | o | o | o | | 3. | To consider and act upon such other matters as may properly come before the Annual Meeting or any adjournment thereof. |
Change of Address — Please print new address below. | | Comments — Please print your comments below. | | Meeting Attendance | | | 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.
| For
o
| | Against
o | | Abstaino
|
| | | | 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. B Non-Voting ItemsDate (mm/dd/yyyy) — Please print date below.
| | Change of Address — Please print new address below.Signature 1 — Please keep signature within the box.
| | Signature 2 — Please keep signature within the box. | | / / | | | 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.
| / / | | | | |
2014 Special Meeting Admission Ticket
2015 Annual Meeting Admission Ticket 2015 Annual Meeting of Winthrop Realty Trust Shareholders Tuesday, August 5, 2014 1:Thursday, May 28, 2015 11:00 P.M.a.m. Local Time
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. 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 SpecialAnnual 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 2014 Special2015 Annual Meeting of Shareholders
Katten Muchin Rosenman LLP, 575 Madison Avenue, 11th Floor, New York, New York 10022 Proxy Solicited by Board of Trustees for SpecialAnnual Meeting – Tuesday, August 5, 2014Thursday, May 28, 2015
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 SpecialAnnual Meeting of Shareholders of Winthrop Realty Trust to be held on Tuesday, August 5, 2014Thursday, May 28, 2015 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 Proposals 1all nominees and FOR Proposal 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.)  | |  | | 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 |
Shareholder Meeting Notice | 1234 5678 9012 345 |
Important Notice Regarding the Availability of Proxy Materials for the Winthrop Realty Trust Shareholder Meeting to be Held on May 28, 2015 Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’ meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at: | | www.envisionreports.com/FUR |  | | Easy Online Access — A Convenient Way to View Proxy Materials and Vote When you go online to view materials, you can also vote your shares. Step 1: Go to www.envisionreports.com/FUR to view the materials. Step 2: Click on Cast Your Vote or Request Materials. Step 3: Follow the instructions on the screen to log in. Step 4: Make your selection as instructed on each screen to select delivery preferences and vote. | | | |
When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. | | | | | Obtaining a Copy of the Proxy Materials – If you want to receive a copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before May 14, 2015 to facilitate timely delivery. | | | |
Shareholder Meeting Notice | |
Winthrop Realty Trust’s Annual Meeting of Shareholders will be held on May 28, 2015 at the offices of Katten Muchin Rosenman LLP, 575 Madison Avenue, 11th Floor, New York, New York 10022, at 11:00 a.m. Eastern Time. Proposals to be voted on at the meeting are listed below along with the Board of Trustees’ recommendations. The Board of Trustees recommends a vote FOR all nominees and FOR Proposals 2. | 1. | | To elect seven Trustees to our Board of Trustees to serve for a term of one year and until their respective successors shall be elected and shall qualify: | | | | 01 - Michael L. Ashner | | 02 - Arthur Blasberg, Jr. | | 03 - Howard Goldberg | | 04 - Thomas F. McWilliams | | | | | 05 - Lee Seidler | | 06 - Carolyn Tiffany | | 07 - Steven Zalkind | | | | | | | | | | | | | | | | 2. | | To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2015 fiscal year; | | | | | | | | | | | | | 3. | | To consider and act upon such other matters as may properly come before the Annual Meeting or any adjournment thereof. |
PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote online or request a paper copy of the proxy materials to receive a proxy card. If you wish to attend and vote at the meeting, please bring this notice with you. | | | | | | | Here’s how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or email options below. Email copies: Current and future email delivery requests must be submitted via the Internet following the instructions below. If you request an email copy of current materials you will receive an email with a link to the materials. PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. | | | | | | | | → | | Internet – Go to www.envisionreports.com/FUR. Click Cast Your Vote or Request Materials. Follow the instructions to log in and order a copy of the current meeting materials and submit your preference for email or paper delivery of future meeting materials. | | | | | | | | → | | Telephone – Call us free of charge at 1-866-641-4276 and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. | | | | | | | | → | | Email – Send email to investorvote@computershare.com with “Proxy Materials Winthrop Realty Trust” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the email that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. | | | | | | | | | | To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 14, 2015. |
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