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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
____________________
HORIZON GROUP PROPERTIES, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
44041U 10 2
(CUSIP Number)
MICHAEL W. RESCHKE
77 WEST WACKER DRIVE
SUITE 3900
CHICAGO, IL 60601
(312) 917-1500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
With a copy to:
WAYNE D. BOBERG, ESQ.
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, IL 60601
(312) 558-5600
JANUARY 5, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box: / /
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SCHEDULE 13D
CUSIP No. 44041U 10 2
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Michael W. Reschke
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
00
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS / /
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF SHARES 7. SOLE VOTING POWER - 8,206
BENEFICIALLY OWNED BY ---------------------------------------------
EACH PERSON WITH 8. SHARED VOTING POWER - 972,724
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9. SOLE DISPOSITIVE POWER - 8,206
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10. SHARED DISPOSITIVE POWER -972,724
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Individually beneficially owns 8,206 shares of Common Stock, par value
$0.01 per share, of the Issuer ("Common Stock"). May be deemed to share
beneficial ownership of: (i) 523,818 shares of Common Stock and 75,620
Common Units of Horizon Group Properties, L.P., a Delaware limited
partnership ("Common Units"), which Common Units are exchangeable on a
one for one basis for Common Stock at any time (or, at the Issuer's
election, cash of equivalent value), directly owned by Prime Group
Limited Partnership, an Illinois limited partnership ("PGLP"); (ii)
277,850 Common Units directly owned by Prime Financing Limited
Partnership, an Illinois limited partnership ("PFLP"); (iii) 42,281
Common Units directly owned by Prime Group II, L.P., an Illinois limited
partnership ("PG-II"); (iv) 3,081 Common Units directly owned by Prime
Group III, L.P., an Illinois limited partnership ("PG-III"); (v) 6,818
Common Units directly owned by Prime Group IV, L.P., an Illinois limited
partnership ("PG-IV"); and (vi) 35,050 Common Units directly owned by
Prime Group V, L.P., an Illinois limited partnership ("PG-V") by virtue
of his position as managing general partner of PGLP and his ability to
control PFLP, PG-II, PG-III, PG-IV and PG-V.
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /.
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Individually beneficially owns 8,206 shares of Common Stock which
constitute approximately 0.3% of the outstanding shares of Common Stock.
May be deemed to share beneficial ownership of the approximately: (i)
523,818 shares of Common Stock and 75,620 Common Units directly owned by
PGLP, which, assuming exchange of the Common Units, constitute
approximately 21.1% of the outstanding shares of Common Stock; (ii)
277,850 Common Units directly owned by PFLP which, assuming exchange of
the Common Units, constitute approximately 9.1% of the outstanding shares
of Common Stock; (iii) 42,281 Common Units directly owned by PG-II which,
assuming exchange of the Common Units, constitute approximately 1.5% of
the outstanding shares of Common Stock; (iv) 3,081 Common Units directly
owned by PG-III which, assuming exchange of the Common Units, constitute
approximately 0.1% of the outstanding shares of Common Stock; (v) 6,818
Common Units directly owned by PG-IV which, assuming exchange of the
Common Units, constitute approximately 0.3% of the outstanding shares of
Common Stock; and (vi) 35,050 Common Units directly owned by PG-V which,
assuming exchange of the Common Units, constitute approximately 1.3% of
the outstanding shares of Common Stock, by virtue of his position as
managing general partner of PGLP and his ability to control PFLP, PG-II,
PG-III, PG-IV and PG-V.
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14. TYPE OF REPORTING PERSON - IN
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This Amendment No. 3 to Schedule 13D relates to shares of Common
Stock, par value $0.01 per share ("Common Stock"), of Horizon Group
Properties, Inc., a Maryland corporation ("HGP" or the "Company"). The
principal executive offices of the Company are located at 77 West Wacker
Drive, Chicago, Illinois 60601.
This Amendment No. 3 to Schedule 13D is filed by Michael W.
Reschke, an individual and a citizen of the United States of America
("Reschke"). Except as set forth below, there are no changes to the
information set forth in Amendment No. 2 to Schedule 13D.
Reschke owns an approximate 50.75% equity interest in Prime
Group Inc., which owns an approximate 75.0% equity interest in Prime
Capital Holding, LLC.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 is supplemented in the following manner:
Prime Capital Holding, LLC anticipates using internal funds to make
the purchases described in Item 4 to this Amendment No. 3 to Schedule 13D.
The other consideration described in Item 4 are the assets of Prime Capital
Holding, LLC or its wholly owned subsidiary.
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ITEM 4. PURPOSE OF TRANSACTION.
Item 4 is supplemented in the following manner:
On January 5, 1999, Prime Capital Holding, LLC ("PCH") made a
proposal (the "Proposal") to Horizon Group Properties, Inc. ("HGP" or the
"Company") regarding a possible business combination. PCH, through a
subsidiary, operates as a fully integrated real estate finance company
providing senior and mezzanine financing to the real estate industry with
offices in New York, Chicago, and San Francisco.
The Proposal contemplates that PCH will contribute all of its
assets and liabilities to HGP in exchange for newly issued shares of common
stock of HGP (or common units of Horizon Group Properties, L.P., a Delaware
limited partnership, through which HGP conducts substantially all of its
operations, which are convertible into common stock of HGP) at a proposed
valuation of $7.00 per share. In addition, the Proposal provides that PCH
will purchase $20,000,000 of additional shares of common stock of HGP (or
common units of Horizon Group Properties, L.P.) for cash at $7.00 per share
and would receive an option exercisable within 180 days following the
consummation of the transaction to purchase up to an additional $30,000,000
in common stock of HGP (or common units of Horizon Group Properties, L.P.) at
a proposed exercise price of $7.00 per share. The Proposal provides that, on
a fully diluted basis, PCH would beneficially own a total of approximately
71% of all outstanding common stock of HGP subsequent to the transaction if
the option is not exercised and 79% of all outstanding common stock of HGP if
the option is exercised in full. After the transaction, the Company would be
engaged in two principal lines of business - real estate finance and HGP's
current business operations.
The consummation of the transaction contemplated by the Proposal is
subject to, among other things, (i) the satisfactory completion of due
diligence by both PCH and HGP with respect to HGP and its assets and PCH and
its assets, respectively, (ii) the negotiation and execution of mutually
acceptable definitive agreements regarding the transactions contemplated in
the Proposal, and (iii) obtaining all third-party consents required to
complete the transaction including the consent of the board of directors and
shareholders of HGP. PCH would also intend to review whether HGP should elect
real estate investment trust status under the Internal Revenue Code of 1986,
as amended, subsequent to the transaction. Such decision could affect the
Company's dividend policy. There can be no assurance as to whether any
transaction will result from such Proposal or as to the value, timing or
structure of any such transaction.
In connection with the transaction, it is anticipated that
approval would be sought for the appointment of additional directors of the
Company selected by PCH. Michael W. Reschke would serve as Chairman of the
newly constituted Board of Directors of the Company. In addition, PCH intends
to seek approval to amend the charter of the Company to change the name of
the Company to "Prime Capital Funding, Inc."
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
In December 1998, and pursuant to a Pledge and Security Agreement
dated as of October 1, 1996 by and between PGLP and The Northern Trust
Company, The Northern Trust Company released the pledge by PGLP of 2,150
Common Units as security for the obligations of PGLP under a guaranty issued
by PGLP with respect to a loan made by the Northern Trust Company to PGI.
In December 1998, and pursuant to a Pledge and Security Agreement
dated as of October 1, 1996 by and between PG-III and The Northern Trust
Company, The Northern Trust Company released the pledge by PG-III of 3,081
Common Units as security for the obligations of PG-III under a guaranty
issued by PG-III with respect to loans made by the Northern Trust Company to
PGI.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following documents are included in this Statement as Exhibits
hereto:
1. Letter, dated January 5, 1999, from Prime Capital
Holding, LLC to Horizon Group Properties, Inc.
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge
and belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
/s/ Michael W. Reschke
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Michael W. Reschke
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge
and belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PGLP, INC.
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge
and belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME FINANCE, INC.
By: /s/ Michael W. Reschke
---------------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: Managing General Partner
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME FINANCING LIMITED PARTNERSHIP
By: Prime Finance, Inc., its managing general
partner
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME GROUP II, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge
and belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME GROUP III, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge
and belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME GROUP IV, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 3 to Schedule 13D is true, complete and correct.
PRIME GROUP V, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
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Name: Michael W. Reschke
Title: President
Dated: January 5, 1999
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EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION PAGE NO.
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I. Customer Agreement by and between PGLP and Bear, Stearns Filed with Original
Securities Corp. dated as of December 21, 1994, incorporated Statement
by reference to the filing persons' statement on
Schedule 13D, Amendment No. 1, dated as of August 20, 1998.
II. Letter dated January 5, 1999 from Prime Capital Holding, LLC Filed Herewith
to Horizon Group Properties, Inc.
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EXHIBIT II
January 5, 1999
Gary Skoien
Chief Executive Officer
Horizon Group Properties
77 West Wacker Drive, Suite 3900
Chicago, IL 60601
Re: Proposed Business Combination with Horizon Group Properties, Inc.
("Horizon") and its affiliates
Dear Mr. Skoien:
The purpose of this letter is to propose a merger/business combination
transaction between Prime Capital Holding, LLC ("PCH") and Horizon. The
following will briefly describe PCH and will specifically address a number of
key terms of our offer.
Prime Capital Holding - PCH is a privately owned company, which through its
subsidiary, Prime Capital Funding, LLC ("PCF"), has 34 employees and operates
as a fully integrated real estate finance company with production offices in
New York, Chicago and San Francisco. The portfolio is serviced by PCF's loan
administration group in Chicago. PCH is owned 75% by The Prime Group Inc., a
diversified real estate company controlled by Michael W. Reschke, and 25% by
myself. Formed in September 1997, we have been active in providing senior and
mezzanine financing to the real estate industry since December of last year.
Our initial capitalization consisted of $45,000,000 of equity capital and two
warehouse lines of credit, which total $400,000,000.
To date, PCF has funded over $320,000,000 in mortgage loans. Over 80% of our
loan portfolio is comprised of shorter term, floating rate securitizable
loans. Because of our focus on the origination of floating-rate product, we
have avoided most of the inventory price declines experienced by fixed-rate
mortgage originators. PCF clearly has demonstrated that it fills a niche in
the marketplace as a full service real estate finance company.
THE PROPOSED TRANSACTION -
BUSINESS COMBINATION VALUATION - PCH will contribute all the assets and
liabilities of PCF, which has a current net asset value of $40,000,000 to
Horizon in exchange for 5,714,255 newly
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issued Horizon common shares (or OP units convertible into Horizon common
shares) at $7.00 per share, which represents a 75% premium to its current
market price of $4.00. In addition to the contribution of PCF assets, PCH
will purchase at closing an additional 2,857,127 of newly issued Horizon
common shares (or OP units convertible into Horizon shares) for a cash
purchase price of $20,000,000 ($7.00 per share) and will have the option to
purchase up to an additional $30,000,000 in Horizon stock (at $7.00 per
share) within 180 days after the closing of the transaction. Therefore, at a
minimum, PCH would beneficially own, on a fully diluted basis, a total of
8,571,383 common shares, representing approximately 71% of all outstanding
common shares and, if PCH exercises its above described option to purchase
the maximum additional shares, it would own 12,857,097 shares, which would
represent approximately 79% of all outstanding common shares.
TAX STATUS - We are currently studying the advantages and disadvantages of
the REIT vs. C-Corp. structure for the resulting company. A number of key
issues need to be resolved before a structure can be recommended. At this
time we anticipate that the resulting company will continue as a REIT.
CORPORATE STRUCTURE/MANAGEMENT - The resulting company will be engaged in two
principal lines of business, with each structured as separate operating
divisions and sharing common corporate level administrative support staff
(i.e., finance, accounting, legal, human resources, information technology,
etc.). This structure should produce G&A cost savings in excess of
$2,000,000. The first operating business is a fully integrated real estate
finance company. I will serve as the President-CEO of this operating
division. The second line of business is to continue its business plan of
maximizing value in its existing portfolio of outlet centers as well as to
seek additional acquisitions of undervalued retail properties for
repositioning and sale. You would continue as CEO of this division and I
would propose that we would serve as co-CEOs of the resulting company.
OTHER EMPLOYEES - Over the due diligence period, we will evaluate the
strengths and weaknesses of employees in redundant positions and select the
highest qualified person in each case.
BOARD COMPOSITION - At the closing, additional directors selected by PCH
shall be appointed to join the Board. A majority of the new Board shall be
"independent" as defined by the N.Y.S.E. Michael W. Reschke shall serve as
Chairman of the Board.
NAME CHANGE - At the closing, the Company shall change its name to
"Prime Capital Funding, Inc."
CONTINGENCIES - This offer is subject to (1) the satisfactory completion of
due diligence by both PCH and Horizon with respect to Horizon and its assets
and PCH and its assets, respectively, (2) the negotiation and execution of
mutually acceptable definitive agreements regarding the transactions
contemplated herein, and (3) obtaining all third-party consents required to
complete the transaction including the board and shareholders of Horizon and
the SEC.
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SCHEDULE - We are prepared to commit all necessary resources to completing
these transactions as expeditiously as possible. Assuming that we agree to
move forward, we would estimate a 30-day due diligence period after Board
approval of this proposal. During the 30-day due diligence period, the
parties would agree to negotiate and execute a definitive agreement, to
obtain all third party approvals, and to file proxy/registration material
with the SEC. The closing will occur upon receipt of shareholder approval.
This transaction will provide substantial benefits to the Horizon
shareholders.
TRANSACTION VALUES HORIZON AT A PREMIUM - Valuing Horizon at $7.00 per share
represents a 75% premium to its current market price of $4.00 per share.
INCREASES SHAREHOLDER VALUE - We believe the proposed transaction will create
substantial shareholder value. Based on our analysis of your public filings,
in combination with our business plan for PCH, we believe that the proposed
transaction will be accretive for the Horizon shareholders and that the
resulting company will benefit from an earnings multiple significantly better
than the current Horizon multiple.
LARGER CAPITAL BASE, INCREASED LIQUIDITY AND BROADER ACCESS TO THE CAPITAL
MARKETS - The investment of $60,000,000 equity (a minimum of $20,000,000 cash)
will provide new equity capital for growth. We are confident that the larger
capital base, the dynamic business plan, and tax efficiencies of the combined
companies will draw analyst coverage from the street and lead to improved
multiples for the company.
This letter supersedes all prior letters to you. I would like to reiterate my
strong conviction that this transaction is both accretive for Horizon
shareholders, and more importantly, positions the resulting company for
significant stock appreciation through FFO growth and multiple expansion. If
you have any questions, I can be reached at (212) 808-3037. I look forward
to working with you.
Sincerely,
/s/ James W. Roiter
James W. Roiter
President and Chief Executive Officer
cc: Michael W. Reschke
