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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
(Amendment No. ____)
CLEVETRUST REALTY INVESTORS
(Name of Issuer in its charter)
CLEVETRUST REALTY INVESTORS
(Name of Person Filing Statement)
Shares of Beneficial Interest (par value $1.00 per share)
(Title of Class of Securities)
(CUSIP Number of Class of Securities)
186780 10 2
Raymond C. Novinc, Esq.
CleveTrust Realty Investors
2001 Crocker Road, Suite 400
Westlake, Ohio 44145
(216) 899-0909
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
Copies to:
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Glenn E. Morrical, Esq.
Arter & Hadden
1100 Huntington Building, 925 Euclid Avenue
Cleveland, Ohio 44115
(216) 696-3431
August 21, 1995
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS).
Calculation of Filing Fee
Transaction Valuation* Amount of filing fee
$2,000,000 $400
*Assumes purchase of an aggregate of 500,000 Shares at $4.00 per share.
[ ]
(Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number of the Form or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is CleveTrust Realty Investors, a
Massachusetts Business Trust (the "Company"), which has its principal executive
offices at 2001 Crocker Road, Suite 400, Westlake, Ohio 44145.
(b) This Schedule 13E-4 relates to the offer by the Company to
purchase up to an aggregate of 500,000 Shares of Beneficial Interest, par value
$1.00 per share, of the Company (collectively, the "Shares") at a price, net to
the seller in cash, of $4.00 per Share, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated August 21, 1995 (the "Offer
to Purchase"), and related Letter of Transmittal, copies of which are attached
hereto as Exhibits (a)(1) and (a)(2), respectively. The information contained
in the "Introduction", "Section 1. Number of Shares; Proration", "Section 8.
Purpose of the Offer; Certain Effects of the Offer" and "Section 12. Interest
of Trustees and Executive Officers; Transactions and Arrangements Concerning
the Shares" of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in the "Introduction" and "Section 7.
Price Range of Shares; Distributions" of the Offer to Purchase is incorporated
herein by reference.
(d) This statement is being filed by the Company.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 9. Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE.
(a)-(j) The information set forth in the "Introduction", "Section 8.
Purpose of the Offer; Certain Effects of the Offer", "Section 11. Certain
Information Concerning the Company" and "Section 12. Interest of Trustees and
Executive Officers; Transactions and Arrangements Concerning the Shares" of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Section 8. Purpose of the Offer, Certain
Effects of the Offer" and "Section 12. Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Shares" of the Offer to
Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in the "Introduction" and "Section 12.
Interest of Trustees and Executive Officers; Transactions and Arrangements
Concerning the Shares" of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Section 16. Fees and Expenses" of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The financial information set forth in "Section 11. Certain
Information Concerning the Company" and the Financial Statements set forth in
the Offer to Purchase is incorporated herein by reference.
ii
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ITEM 8. ADDITIONAL INFORMATION.
(a) The information set forth in the "Introduction", "Section 11.
Certain Information Concerning the Company" and "Section 12. Interest of
Trustees and Executive Officers; Transactions and Arrangements Concerning the
Shares" of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in "Section 13. Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(c) Not applicable.
(d) Not applicable.
(e) Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, and incorporated in their entirety herein by
reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated August 21, 1995.
(a)(2) Form of Letter of Transmittal
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to brokers, dealers, commercial banks, trust companies
and other nominees dated August 21, 1995.
(a)(5) Form of Letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees dated August 21, 1995.
(a)(6) Form of Letter to shareholders from the Chairman and Chief Executive
Officer of the Company dated August 21, 1995.
(a)(7) Form of Press Release dated August 18, 1995.
(b)(1) Credit Agreement, dated as of November 30, 1994, among the Company,
National City Bank, a national banking association, as Agent, and the
Banks identified therein (filed as Exhibit (4) (11) to the Company's
Annual Report on Form 10-K for the fiscal year ended September 30,
1994, and incorporated herein by reference).
(b)(2) Amendment to Credit Agreement dated effective April 28, 1995, among
the Company, National City Bank a national banking association, as
Agent, and the Banks identified therein (filed as Exhibit (99) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995, and incorporated herein by reference).
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
CLEVETRUST REALTY INVESTORS
/s/Raymond C. Novinc, Esq.
Vice President and Secretary
Dated: August 18, 1995
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EXHIBIT (a)(1)
FORM OF OFFER TO PURCHASE DATED AUGUST 21, 1995.
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CLEVETRUST REALTY INVESTORS
OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 500,000 SHARES
OF BENEFICAL INTEREST,
EACH AT A PURCHASE PRICE OF $4.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT SAVINGS TIME,
ON SEPTEMBER 22, 1995 UNLESS THE OFFER IS EXTENDED.
CleveTrust Realty Investors, a Massachusetts Business Trust (the
"Company" or the "Trust"), is offering to purchase up to an aggregate of
500,000 Shares of Beneficial Interest of the Company, par value $1.00 per share
(the "Shares"), at a price, net to the seller in cash, of $4.00 per Share (the
"Purchase Price"), upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer").
The Company will, under certain circumstances, upon the terms and
subject to the conditions of the Offer, accept Shares for purchase first from
Odd Lot Owners (as defined in Section 2) who properly tender their Shares and
then on a pro rata basis from other shareholders whose Shares are properly
tendered and not withdrawn. Any shareholder may tender Shares subject to the
condition that all or a specified minimum number of Shares (which may be
represented by designated stock certificates) or none of such Shares be
purchased.
THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF
SHARES BEING TENDERED. THIS OFFER IS, HOWEVER,
SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
The Shares are quoted on the NASDAQ National Market System ("NASDAQ")
under the symbol "CTRIS". On August 17, 1995, the last full trading day on
the NASDAQ prior to the announcement and commencement of the Offer, the closing
price for the Shares on the NASDAQ was $3.546875. The bid and asked prices on
August 17, 1995 were $3.50 and $3.875 respectively. SHAREHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7.
NEITHER THE COMPANY NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO
SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. BECAUSE
THE OFFER TO PURCHASE IS MADE BY THE COMPANY, IT WOULD HAVE A CONFLICT OF
INTEREST IN MAKING ANY SUCH RECOMMENDATION. THE COMPANY HAS BEEN ADVISED THAT
NONE OF ITS TRUSTEES OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT
TO THE OFFER. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN INVESTMENT AND TAX
ADVISORS. SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES
AND, IF SO, HOW MANY SHARES TO TENDER.
August 21, 1995
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IMPORTANT
Any shareholder desiring to tender all or any portion of his Shares
should either (1) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal and
deliver it and all other required documents to American Stock Transfer and
Trust Company (the "Depositary") and either mail or deliver the stock
certificates for such Shares to the Depositary or follow the procedure for
book-entry delivery set forth in Section 3, or (2) request his broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him. Shareholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee should contact such person or
institution if they desire to tender such Shares. Shareholders desiring to
tender Shares and whose certificates for such Shares are not immediately
available or who cannot comply with the procedure for book-entry transfer by
the expiration of the Offer must tender such Shares by following the procedures
for guaranteed delivery set forth in Section 3. SHAREHOLDERS MUST PROPERLY
COMPLETE THE LETTER OF TRANSMITTAL IN ORDER TO EFFECT A VALID TENDER OF THEIR
SHARES.
Questions and requests for assistance may be directed to the
Information Agent at its address and telephone number set forth on the back
cover of this Offer to Purchase. Additional copies of this Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be obtained
from the Information Agent.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION
ON BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN
FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED
ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
TENDERS WILL NOT BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES
IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCES THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION AFTER GOOD
FAITH EFFORTS BY THE COMPANY TO COMPLY.
III
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TABLE OF CONTENTS
SECTION PAGE
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Introduction
1. Number of Shares; Proration . . . . . . . . . . . . . . . . . . 2
2. Tenders by Holders of Fewer than 100 Shares . . . . . . . . . . 3
3. Procedure for Tendering Shares . . . . . . . . . . . . . . . . . 3
4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . 5
5. Acceptance for Payment and Payment for Shares . . . . . . . . . 6
6. Certain Conditions of the Offer . . . . . . . . . . . . . . . . 6
7. Price Range of Shares; Distributions . . . . . . . . . . . . . . 8
8. Purpose of the Offer; Certain Effects of the Offer . . . . . . . 9
9. Source and Amount of Funds . . . . . . . . . . . . . . . . . . . 10
10. Shares Outstanding and Significant Shareholders . . . . . . . . 10
11. Certain Information Concerning the Company . . . . . . . . . . . 11
12. Interest of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares . . . . . . . . . . . . . . . 14
13. Certain Legal Matters; Regulatory Approvals . . . . . . . . . . 14
14. Certain Federal Income Tax Consequences . . . . . . . . . . . . 14
15. Extension of the Offer; Termination; Amendments . . . . . . . . 17
16. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 18
17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 18
Index to Financial Statements
IV
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TO THE HOLDERS OF SHARES OF BENEFICIAL INTEREST OF
CLEVETRUST REALTY INVESTORS:
INTRODUCTION
The Company hereby invites its shareholders to tender Shares of the
Company at a price, net to the seller in cash, of $4.00 per Share (the
"Purchase Price"), upon the terms and conditions set forth in this Offer. The
Company seeks to purchase up to an aggregate of 500,000 Shares. All Shares
properly tendered prior to the Expiration Date (as defined in Section 1) and
not withdrawn will be purchased at the Purchase Price, net to the seller in
cash, upon the terms and subject to the conditions of the Offer, including the
proration terms and the NASDAQ Continued Listing Condition (as defined in
Section 1) contained herein.
THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THIS OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
THE BOARD HAS UNANIMOUSLY APPROVED THE MAKING OF THIS OFFER, HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO
SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. BECAUSE
THE OFFER TO PURCHASE IS MADE BY THE COMPANY, IT WOULD HAVE A CONFLICT OF
INTEREST IN MAKING ANY SUCH RECOMMENDATION. THE COMPANY HAS BEEN ADVISED THAT
NONE OF ITS TRUSTEES OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT
TO THE OFFER. SEE SECTION 12. SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
Each shareholder who has properly tendered and not withdrawn Shares
will receive the Purchase Price, net to the shareholder in cash, for all Shares
purchased, upon the terms and subject to the conditions of the Offer, including
the provisions relating to proration and the conditions described herein. The
Company will, upon the terms and subject to the conditions of the Offer, accept
Shares for purchase first from Odd Lot Owners (as defined in Section 2) who
properly tender their Shares and then on a pro rata basis from other
shareholders whose Shares are properly tendered and not withdrawn.
Notwithstanding the foregoing, the Company reserves the right not to accept
Shares from Odd Lot Owners on a preferential basis under certain circumstances
as described below. Any shareholder may tender Shares subject to the condition
that all or a specified minimum number of Shares (which may be represented by
designated stock certificates) or none of such Shares be purchased. See
Section 1. The Company will return all Shares not purchased, including Shares
not purchased because of proration or conditional tenders. Tendering
shareholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by the Company pursuant to the Offer.
The Company will pay all fees and expenses of the Depositary and Beacon Hill
Partners, Inc. (the "Information Agent") in connection with the Offer.
As of August 17, 1995 the Company had issued and outstanding 5,456,696
Shares of Beneficial Interest and had reserved 315,100 shares for issuance upon
exercise of outstanding stock options. The aggregate of 500,000 Shares that
the Company is offering to purchase represents approximately 9.16% of the
Shares outstanding as of such date. The Shares are quoted on the NASDAQ under
the symbol "CTRIS". On August 17, 1995, the last trading date before public
announcement of the Offer, the last reported transaction price for the
Company's shares was $3.546875. The bid and asked prices on August 17, 1995
were $3.50 and $3.875 respectively. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES. See Section 7.
Shares acquired by the Company pursuant to the Offer will be retired
by the Company.
The Board of Trustees of the Company has determined to make this Offer
because it believes that the Offer is an attractive investment, and because the
Company believes that the current market price of the Shares does not
adequately reflect the value of the Company's business, assets and prospects,
and that the purchase of the Shares at this time is an attractive investment
that will benefit the Company and its continuing shareholders. The Offer gives
shareholders who are considering the sale of all or a portion of their Shares
the opportunity to sell such Shares for a higher price than that available in
the open market immediately prior to the announcement of the Offer, without the
usual transaction costs associated with market sales.
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1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company
will accept for payment and purchase up to an aggregate of 500,000 Shares at
the Purchase Price. If the Offer is oversubscribed, Shares tendered prior to
the Expiration Date will be subject to proration. The proration period also
expires on the Expiration Date. The term "Expiration Date" means 5:00 p.m.
eastern daylight savings time, on Friday, September 22, 1995, unless the
Company, in its sole discretion, shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall refer
to the latest time and date at which the Offer, as so extended by the Company,
shall expire. For a description of the Company's right to extend the period of
time during which the Offer is open, and to delay, terminate or amend the
Offer, see Section 15.
The Company reserves the right, in its sole discretion, to purchase
additional outstanding Shares, or to reduce the number of Shares it shall
purchase, pursuant to the Offer. If (i) the Company increases or decreases the
price to be paid for Shares, increases the number of Shares being sought and
such increase in the number of Shares being sought exceeds two percent (2%) of
the outstanding Shares or decreases the number of Shares being sought and (ii)
the Offer is scheduled to expire at any time earlier than the expiration of a
period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given in the
manner described in Section 15, the Offer will be extended until at least the
expiration of such 10 business-day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period 12:01 a.m. through 12:00 midnight eastern
daylight savings time.
All Shares purchased pursuant to the Offer will be purchased at the
Purchase Price. All Shares not purchased pursuant to the Offer, including
Shares not purchased because of proration or conditional tenders and Shares
tendered and withdrawn, will be returned to the tendering shareholders at the
Company's expense as promptly as practicable (which, in the event of proration,
is expected to be up to approximately seven business days) following the
Expiration Date or as promptly as practicable following withdrawal, as the case
may be.
If the Company determines that, after purchase of the tendered Shares,
there will be at least 400 beneficial owners of the Company's Shares, and the
Shares will otherwise continue to be eligible for quotation on the NASDAQ, the
Company will, upon the terms and subject to the conditions of the Offer,
purchase at the Purchase Price up to an aggregate of 500,000 Shares so
tendered. For the purpose of this condition, beneficial owners of Shares will
be determined in accordance with the provisions of Rule 13d-3 under the
Securities Exchange Act of 1934 ("Exchange Act"). This condition is referred
to as the "NASDAQ Continued Listing Condition". If the Company determines that
there would be fewer than 400 beneficial owners of the Company's Shares if
tendered Shares up to the limits described above were purchased, or that the
Shares will not continue to be eligible for quotation on the NASDAQ, the Offer
will not be completed (in accordance with the conditions set forth in Section
6) and the Company will promptly return all tendered Shares.
Upon the terms and subject to the conditions of the Offer, the Company
will accept Shares for purchase in the following order of priority:
(a) first, all Shares properly tendered prior to the
Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined
in Section 2) who:
(1) tenders all Shares beneficially owned by such
Odd Lot Owner (partial tenders and conditional tenders (as
described below), will not qualify for this preference); and
(2) completes the section entitled "Odd Lots" on the
Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery; and
(b) then, after purchases of all of the foregoing Shares, all
other Shares properly and unconditionally tendered, and all other
Shares properly and conditionally tendered for which the condition is
satisfied on the basis of the number of Shares tendered and the
conditions thereto, in each case before the Expiration Date (and not
withdrawn), on a pro rata basis, if necessary (with adjustments to
avoid purchases of fractional Shares).
(c) If the effect of accepting tenders on a pro rata basis is
to reduce the number of Shares to be purchased from any shareholder
below the minimum number specified by such shareholder, such tender
will automatically be deemed withdrawn, except as provided below in
this paragraph, and Shares tendered by
2
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such shareholder will be returned as soon as practicable after the
Expiration Date. If any conditional tenders would be deemed
withdrawn, then to the extent feasible, the Company will select enough
of such conditional tenders, which would otherwise have been deemed
withdrawn, to purchase that number of Shares remaining from the
maximum number to be purchased. In selecting among such conditional
tenders, the Company will select by random lot and will limit its
purchase in each case to the designated minimum number of Shares to be
purchased. Conditional tenders will be selected by lot only from
shareholders who tender all of their Shares.
Notwithstanding the foregoing, the Company reserves the right not to
accept Shares tendered by Odd Lot Owners on a preferential basis (and instead
to accept such Shares on a pro rata basis with Shares tendered by other owners)
if the Company, in its sole discretion, determines that accepting such Shares
on a preferential basis would cause the NASDAQ Continued Listing Condition not
to be satisfied.
In the event that proration of tendered Shares is required, the
Company will determine the final proration factor as promptly as practicable
after the Expiration Date. Proration for each shareholder tendering Shares
other than Odd Lot Owners shall be based on the ratio of the number of Shares
tendered by such shareholder to the total number of Shares tendered by all
shareholders other than Odd Lot Owners. Although the Company does not expect
to be able to announce the final results of such proration until approximately
seven business days after the Expiration Date, it will announce preliminary
results of proration by press release as promptly as practicable after the
Expiration Date. Shareholders may obtain such preliminary information from the
Information Agent and may be able to obtain such information from their
brokers.
As described in Section 14, the number of Shares that the Company will
purchase from a shareholder may affect the federal income tax consequences to
the shareholder of such purchase and therefore may be relevant to a
shareholder's decision whether to tender Shares. Shareholders may designate
the order in which their Shares shall be purchased in the event less than all
of the Shares tendered are purchased as a result of proration.
If as a result of the number of Shares tendered and the conditions
thereto the number of Shares to be purchased from any shareholder making a
conditional tender is reduced below the minimum number specified by such
shareholder, such tender will automatically be regarded as withdrawn, and all
Shares tendered by such shareholder will be returned as promptly as practicable
after the Expiration Date at the Company's expense, provided that such Shares
will be deemed re-tendered if selected by lot for purchase in accordance with
Section 1 hereof.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES
For purposes of the Offer, the term "Odd Lots" means all Shares
properly tendered, in accordance with the procedures set forth in Section 3, by
the Expiration Date and not withdrawn, by or on behalf of shareholders ("Odd
Lot Owners") who beneficially held, as of the close of business on August 17,
1995, an aggregate of fewer than 100 Shares. As set forth above, Odd Lots
will, under certain circumstances, be accepted for purchase before any
proration. In order to qualify for this preference, an Odd Lot Owner must
properly tender all Shares beneficially owned by him and must not make a
conditional tender. Partial tenders will not qualify for this preference. The
preference is not available to holders of 100 or more Shares, even if holders
have separate stock certificates for fewer than 100 Shares. ANY ODD LOT OWNER
WISHING TO TENDER ALL SHARES BENEFICIALLY OWNED FREE OF PRORATION MUST COMPLETE
THE SECTION ENTITLED "ODD LOTS" IN THE LETTER OF TRANSMITTAL AND, IF
APPLICABLE, ON THE NOTICE OF GUARANTEED DELIVERY. Shareholders owning an
aggregate of less than 100 Shares, all of whose Shares are purchased pursuant
to the Offer, not only will avoid the payment of brokerage commissions, but
also will avoid any applicable odd-lot discounts payable on a sale of their
Shares in a brokered transaction.
3. PROCEDURE FOR TENDERING SHARES
PROPER TENDER OF SHARES. To tender Shares pursuant to the Offer, (i)
a properly completed and duly executed Letter of Transmittal (or manually
executed facsimile thereof) with any required signature guarantees and any
other documents required by the Letter of Transmittal must be received by the
Depositary at its address set forth on the back cover of this Offer to
Purchase, and either certificates for the Shares to be tendered must be
transmitted to and received by the Depositary at such address or such Shares
must be tendered pursuant to the procedures for book-entry transfer described
below (and a confirmation of such tender received by the Depositary), in each
case by the Expiration Date, or (ii) the guaranteed delivery procedure
described below must be followed.
In addition, Odd Lot Owners who tender all their Shares must complete
the section entitled "Odd Lots" in the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery in order to qualify for the
preferential treatment which may be available to Odd Lot Owners as set forth in
Sections 1 and 2.
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If any shareholder tenders Shares held by him and does not wish to
have such Shares subject to proration that would result in the purchase of
fewer than a specified number of Shares, such shareholder may tender Shares
subject to the condition that all or a specified minimum number of Shares or
none be purchased. Any shareholder desiring to make such a conditional tender
should so indicate in the box captioned "Conditional Tender" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery. It is
the tendering shareholder's responsibility to determine the minimum number of
Shares to be purchased. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE EFFECT OF PRORATION OF THE OFFER AND THE ADVISABILITY OF MAKING
A CONDITIONAL TENDER. See Section 14.
Notwithstanding any other provision hereof, payment for Shares
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or a timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities, as defined below), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and any other documents
required by the Letter of Transmittal.
BOOK-ENTRY DELIVERY. The Depositary will establish accounts with
respect to the Shares at The Depository Trust Company, Midwest Securities
Trust Company and the Philadelphia Depository Trust Company (collectively
referred to herein as "Book-Entry Transfer Facilities") for purposes of the
Offer within two business days after the date of this Offer to Purchase, and
any financial institution that is a participant in the system of any Book-Entry
Transfer Facility as described above may make delivery of Shares into the
Depositary's account in accordance with the procedures of such Book-Entry
Transfer Facility. However, although delivery of Shares may be effected
through book-entry transfer into the Depositary's account at a Book-Entry
Transfer Facility, a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) with any required signature guarantees
and any other required documents must, in any case, be transmitted to and
received by the Depositary at one of the addresses set forth on the back cover
of this Offer to Purchase by the Expiration Date, or the guaranteed delivery
procedure described below must be complied with. Delivery of the Letter of
Transmittal and any other required documents to a Book-Entry Transfer Facility
does not constitute delivery to the Depositary.
SIGNATURE GUARANTEES. No signature guarantee is required on the
Letter of Transmittal if the Letter of Transmittal is signed by the registered
holder of the Shares exactly as the name of the registered holder appears on
the certificate (which term, for purposes of this Section 3 includes any
participant in a Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Shares) tendered therewith, and payment is to
be made directly to such registered holder, or if Shares are tendered for the
account of a financial institution that is a member of the Securities Transfer
Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP)
or the New York Stock Exchange Medallion Signature Program (MSP) (each such
entity, an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 1 on the Letter of Transmittal. If a certificate representing
Shares is registered in the name of a person other than the signer of a Letter
of Transmittal, or if payment is to be made, or Shares not purchased or
tendered are to be issued to a person other than the registered holder, the
certificate must be endorsed or accompanied by an appropriate stock power, in
either case signed exactly as the name of the registered holder appears on the
certificate with the signature on the certificate or stock power guaranteed by
an Eligible Institution.
METHOD OF DELIVERY. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF
CERTIFICATES FOR SHARES ARE TO BE SENT BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
FEDERAL INCOME TAX BACKUP WITHHOLDING. To prevent federal income tax
backup withholding equal to 31% of the gross payments made pursuant to the
Offer, each shareholder who has not previously submitted a Substitute Form W-9
to the Company or who does not otherwise establish an exemption from such
withholding must notify the Depositary of such shareholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing a
Form W-9 included in the Letter of Transmittal. Foreign shareholders may be
required to submit Form W-8, certifying non-United States status, in order to
avoid backup withholding. See Instructions 13 and 14 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares
pursuant to the Offer and cannot deliver certificates for such Shares (or the
procedures for book-entry transfer cannot be completed on a timely basis) or
time will not permit all required documents to reach the Depositary by the
Expiration Date, such Shares may nevertheless be tendered if all of the
following conditions are met:
(a) such tender is made by or through an Eligible Institution;
4
<PAGE> 9
(b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the
Company, is received by the Depositary by the Expiration Date; and
(c) the certificates for all tendered Shares in proper form
for transfer (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer
Facility), together with a properly completed and duly executed Letter
of Transmittal (or manually executed facsimile thereof) and any other
documents required by the Letter of Transmittal, are received by the
Depositary within five business days after the date the Depositary
received such Notice of Guaranteed Delivery. The Notice of Guaranteed
Delivery may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such
Notice.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares
to be accepted, the form of documents and the validity, eligibility (including
time of receipt) and acceptance for payment of any tender of Shares will be
determined by the Company, in its sole discretion, which determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any or all tenders of Shares determined by it not to be in proper form
or the acceptance for payment of or payment for which may be unlawful. The
Company also reserves the absolute right to waive any of the conditions of the
Offer or any defect or irregularity in any tender of Shares. No tender of
Shares will be deemed to be properly made until all defects and irregularities
have been cured or waived. None of the Company, the Information Agent, the
Depositary, or any other person will be under any duty to give notification of
any defect or irregularity in tenders or incur any liability for failure to
give any such notice.
TENDER CONSTITUTES AN AGREEMENT. The tender of Shares pursuant to any
one of the procedures described above will constitute a binding agreement
between the tendering shareholder and the Company upon the terms and subject to
the conditions of the Offer.
It is a violation of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for a person, directly
or indirectly, to tender shares for his own account unless, at the time of the
tender and at the end of the proration period, the person so tendering (i) has
(x) a net long position equal to or greater than the amount of shares tendered
or (y) other securities immediately convertible into, exercisable, or
exchangeable for the amount of shares tendered and will acquire such shares for
tender by conversion, exercise or exchange of such other securities and (ii)
will cause such shares to be delivered in accordance with the terms of the
offer. Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. The tender of Shares
pursuant to any one of the procedures described above will constitute the
tendering shareholder's acceptance of the terms and conditions of the Offer as
well as the tendering shareholder's representation and warranty that (i) such
shareholder has a net long position in the Shares being tendered within the
meaning of Rule 14e-4 promulgated under the Exchange Act, and (ii) the tender
of such Shares complies with Rule 14e-4. The foregoing is only a summary of
Rule 14e-4, and shareholders are encouraged to review Rule 14e-4 in its
entirety prior to tendering Shares.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares
pursuant to the Offer will be irrevocable. Shares tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment by the Company as provided in this Offer to
Purchase, may also be withdrawn after 12:00 Midnight, eastern daylight savings
time, 40 business days after commencement.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder, if different from that of the person who tendered such
Shares. If the certificates have been delivered or otherwise identified to the
Depositary, then, prior to the release of such certificates, the tendering
shareholder must submit the serial numbers shown on the particular certificates
evidencing the Shares to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Shares tendered by an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 3, the
notice of withdrawal must specify the name and the number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of such facility. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Company, in its sole discretion, which
determination shall be final and binding. None of the Company, the Depositary,
the Information Agent or any other person shall be obligated to give any notice
of any defects or irregularities in any notice of withdrawal and none of them
shall incur any liability for failure to give any such notice. Any Shares
properly withdrawn will thereafter be deemed not tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by the Expiration Date by
again following any of the procedures described in Section 3.
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<PAGE> 10
If as a result of proration the number of Shares to be purchased from
any shareholder making a conditional tender is reduced below the minimum number
specified by such shareholder, such tender will automatically be regarded as
withdrawn, provided that such Shares will be deemed retendered if selected by
lot for purchase in accordance with Section 1 hereof.
If the Company extends the Offer, is delayed in its purchase of Shares
or is unable to purchase Shares pursuant to the Offer for any reason, then,
without prejudice to the Company's rights under the Offer, the Depositary may,
subject to applicable law, retain on behalf of the Company all tendered Shares,
and the Shares may not be withdrawn except to the extent tendering shareholders
are entitled to withdrawal rights as described in this Section 4.
5. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including
proration and the NASDAQ Continued Listing Condition), the Company will accept
for payment as soon as practicable after the Expiration Date up to an aggregate
of 500,000 Shares (or such greater number of Shares as the Company may elect
to purchase). For purposes of the Offer, the Company will be deemed to have
accepted for payment (and thereby purchased), subject to proration, Shares that
are tendered and not withdrawn when, as and if the Company gives oral or
written notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer.
Payment for Shares accepted for payment pursuant to the Offer will be
made by depositing the aggregate Purchase Price for such Shares with the
Depositary, which will act as agent for the tendering shareholders for the
purpose of receiving payment from the Company and transmitting such payments to
tendering shareholders.
In the event of proration, the Company will determine the proration
factor and pay for those tendered Shares accepted for payment as soon as
practicable after the Expiration Date; however, the Company does not expect to
be able to announce the final results of any such proration until approximately
seven business days after the Expiration Date. Certificates for all Shares not
purchased, including Shares not purchased due to proration or conditional
tenders, will be returned (or, in the case of Shares tendered by book-entry
transfer, such Shares will be credited to the account maintained within such
Book-Entry Transfer Facility by the participant therein who so delivered such
Shares) as soon as practicable after the Expiration Date or termination of the
Offer without expense to the tendering shareholder. Under no circumstances
will interest be paid by the Company by reason of any delay in paying for any
Shares or otherwise. In addition, if certain events occur, the Company may not
be obligated to purchase Shares pursuant to the Offer. See Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer, except if (i) payment
of the Purchase Price is to be made to, or (ii) (in the circumstances permitted
by the Offer) if Shares not tendered or not accepted for purchase are to be
registered in the name of any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person signing the Letter of Transmittal. In such circumstances, the amount of
all stock transfer taxes, if any (whether imposed on the registered holder or
such other person), payable on account of the transfer to such person will be
deducted from the Purchase Price unless evidence satisfactory to the Company of
the payment of such taxes or exemption therefrom is submitted. See Instruction
6 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY
AND SIGN THE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO
FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS PROCEEDS PAID
TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall
not be required to accept for payment, purchase or pay for any Shares tendered
and may terminate or amend the Offer or may postpone the acceptance for payment
of, or the payment for, Shares tendered, if the NASDAQ Continued Listing
Condition is not satisfied. See Section 1 for an explanation of the NASDAQ
Continued Listing Condition. The Company does not intend to waive the NASDAQ
Continued Listing Condition.
In addition, the Company shall not be required to accept for payment,
purchase or pay for any Shares tendered and may terminate or amend the Offer or
may postpone the acceptance for payment of, or the payment for, Shares tendered
if at any time on or after August 21, 1995 and at or before the payment for any
such Shares, any of the following events shall have occurred (or shall have
been determined by the Company to have occurred) which, in the Company's sole
judgment in any such case and regardless of the circumstances (including any
action or omission to act by the Company), makes it inadvisable to proceed with
the Offer or with such acceptance for purchase or payment:
6
<PAGE> 11
(a) there shall have been threatened, instituted or pending
any action or proceeding by any government or governmental authority
or regulatory or administrative agency, domestic or foreign, or by any
other person, domestic or foreign, before any court or governmental
authority or regulatory or administrative agency, domestic or foreign,
(i) that challenges or seeks to make illegal, or delay or otherwise
directly or indirectly restrain or prohibit the making of the Offer,
the acceptance for payment of or payment for some or all of the Shares
by the Company or otherwise directly or indirectly relating in any
manner to or affecting the Offer, or (ii) that otherwise, in the sole
judgment of the Company, has or may have a material adverse effect on
the business, financial condition, income, operations or prospects of
the Company and its subsidiaries taken as a whole or has materially
impaired or may materially impair the contemplated benefits of the
Offer to the Company; or
(b) any action shall have been threatened, instituted,
pending or taken or approval withheld or any statute, rule,
regulation, judgment or order or injunction proposed, sought, enacted,
enforced, promulgated, amended, issued or deemed applicable to the
Offer or the Company or any of its subsidiaries by any court,
government or governmental authority or regulatory or administrative
agency, domestic or foreign, that, in the sole judgment of the Company
might, directly or indirectly, result in any of the consequences
referred to in clauses (i) or (ii) of paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or on the NASDAQ, (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks
in the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation by any
governmental, regulatory or administrative authority or agency or any
other event that, in the sole judgment of the Company, might affect
the extension of credit by banks or other lending institutions, (v)
any significant decrease in the market price of the Shares or any
change in the general political, market, economic or financial
conditions in the United States or elsewhere that has or may have
material adverse effects with respect to the Company's business,
operations or prospects or the trading in the Shares, (vi) any decline
in either the Dow Jones Industrial Average or the Standard and Poor's
Index of 500 Industrial Companies by an amount in excess of 10%,
measured from the close of business on August 21, 1995; or (vii) in
the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof; or
(d) a tender or exchange offer for some or all of the Shares
(other than the Offer) or a proposal with respect to a merger,
consolidation or other business combination with or involving the
Company or any subsidiary shall have been proposed to be made or shall
have been made by another person; or
(e) (1) any entity, "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) or person (other than entities,
groups or persons, if any, who have filed with the Securities and
Exchange Commission (the "Commission"), on or before August 21, 1995,
a Schedule 13G or a Schedule 13D with respect to any of the Shares)
shall have acquired or proposed to acquire beneficial ownership of
more than 5% of the outstanding Shares; or
(2) such entity, group or person that has publicly
disclosed any such beneficial ownership of more than 5% of the
Shares prior to such date shall have acquired, or proposed to
acquire, beneficial ownership of additional Shares
constituting more than 2% of the outstanding Shares or shall
have been granted any option or right to acquire beneficial
ownership of more than 2% of the outstanding Shares; or
(3) any entity, person or group shall have filed a
Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976 reflecting an intent to
acquire the Company or any of its Shares; or
(f) any change or changes have occurred (or any development
shall have occurred involving any prospective change or changes) in
the business, assets, liabilities, condition (financial or otherwise),
operations, results of operations or prospects of the Company or any
of its subsidiaries that, in the sole judgment of the Company, have or
may have a material adverse effect with respect to the Company and its
subsidiaries taken as a whole.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company in its sole discretion regardless of the
circumstances (including any action or inaction by the Company) giving rise to
any such conditions, or may be waived by the Company in its sole discretion, in
whole or in part at any time. The failure by the Company at any time to
exercise its rights under any of the foregoing conditions shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances; and each such right shall be deemed an
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<PAGE> 12
ongoing right which may be asserted at any time or from time to time. Any
determination by the Company concerning the events described in this Section 6
shall be final and binding on all parties.
7. PRICE RANGE OF SHARES; DISTRIBUTIONS
The Shares are quoted on the NASDAQ National Market System. The
following table sets forth, for the periods indicated, the high and low closing
prices for the Company's Shares (as reported on the NASDAQ as compiled from
published financial sources) and the cash distributions paid per Share in each
such period. These quotations represent inter-dealer prices, without retail
mark-down or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW DISTRIBUTIONS
----------- ---- --- -------------
<S> <C> <C> <C>
1993:
1st quarter . . . . . . . . . . 2 3/4 2 .03
2nd quarter . . . . . . . . . . 3 3/4 2 5/16 .03
3rd quarter . . . . . . . . . . 4 3 .03
4th quarter . . . . . . . . . . 4 1/8 3 5/8 .03
1994:
1st quarter . . . . . . . . . . 4 1/8 2 3/4 .03
2nd quarter . . . . . . . . . . 3 1/2 2 7/8 .04
3rd quarter . . . . . . . . . . 3 1/2 2 3/4 .04
4th quarter . . . . . . . . . . 3 1/8 2 5/8 .04
1995:
1st quarter . . . . . . . . . . 3 3/8 2 7/8 .04
2nd quarter . . . . . . . . . . 3 5/16 2 5/8 .04
3rd quarter . . . . . . . . . . 3 3/4 3 1/4 .04
4th quarter (through 8/17/95) . 3 7/8 3 3/8 .04
</TABLE>
On August 17, 1995, the last full trading day on the NASDAQ prior to the
announcement of the Offer, the closing per share price was $3.546875 as
reported by NASDAQ. The bid and asked prices on August 17, 1995 were $3.50 and
$3.875 respectively.
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<PAGE> 13
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
The Board of Trustees of the Company has determined to make this Offer
because it believes that the Offer is an attractive investment, and because the
Company believes that the current market price of the Shares does not
adequately reflect the value of the Company's business, assets and prospects,
and that the purchase of the Shares at this time is an attractive opportunity
that will benefit the Company and its continuing shareholders.
The Offer gives shareholders who are considering the sale of all or a
portion of their Shares an opportunity to sell such Shares for a higher price
than that available in the open market immediately prior to the announcement of
the Offer, without the usual transaction costs associated with market sales.
To the extent that the purchase of Shares in the Offer results in a reduction
in the number of Shareholders of record, the costs of the Company for services
to shareholders may be reduced.
Shareholders whose Shares are not purchased in the Offer will realize
an increase in their percentage ownership interest in the Company and thus, in
the Company's future earnings and assets. Because of the smaller number of
Shares outstanding after consummation of the Offer, increases or decreases in
net earnings will result in proportionately greater increases or decreases in
earnings per Share. See Section 11.
The Company does not have any current plans to acquire or dispose of
additional Shares. The company may in the future acquire Shares (in addition
to those purchased pursuant to the Offer) on the open market, in privately
negotiated transactions, through tender offers, mergers or otherwise, in such
amounts, at such prices and at such times as the Company may determine. Rule
13e-4 under the Exchange Act generally prohibits the Company and its affiliates
from purchasing any Shares, other than pursuant to the Offer, until at least
ten business days after the Expiration Date. The Company will not acquire any
additional Shares until at least ten business days after the Expiration Date.
Future acquisitions of Shares, if any, may be on the same terms as, or on terms
more or less favorable than, those of the Offer. Any possible future purchases
of Shares by the Company will depend on many factors, including the market
price of the Shares, the results of the Offer, the Company's business and
financial position and general economic and market conditions.
The Company currently intends to propose at the next annual meeting of
shareholders, to be held in February 1996, that its shareholders approve a
reverse stock split of up to one for five of the Company's outstanding Shares.
Management of the Company believes that such action will result in greater
marketability for the Company's Shares as it should result in a reduced spread
between the bid and asked prices sought by the market makers in the Company's
Shares when measured as a percentage of such prices. At the close of business
on August 17, 1995, the Company had an aggregate of 5,456,696 Shares
outstanding . A reverse stock split of one to five would reduce this number of
the Shares outstanding to approximately 1,091,300, subject to further reduction
based on fractional shares. Except as disclosed in this Offer to Purchase, the
Company has no present plans or proposals which relate to or would result in
the following: (a) the acquisition by any person of additional securities of
the Company or the disposition of securities of the Company; (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation; (c) a sale or transfer of a material amount of assets of the
Company; (d) any change in the present Board of Trustees or Management of the
Company, including but not limited to, any plan or proposal to change the
number or the term of office of trustees, or to change any material term of the
employment contract of any executive officer (except for the annual election of
trustees at the Company's 1996 Annual Meeting of Shareholders); (e) any
material change in the present distribution policy or indebtedness or
capitalization of the Company (other than as described in Section 9 hereof);
(f) any other material change in the Company's corporate structure or business;
or (g) any change in the Company's Second Amended and Restated Declaration of
Trust or By-Laws.
NEITHER THE COMPANY NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION
TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL
OF SUCH SHAREHOLDER'S SHARES AND NEITHER HAS AUTHORIZED ANY PERSON TO MAKE ANY
SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND
MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES
TO TENDER.
Shares that the Company acquires pursuant to the Offer will be retired
by the Company. The Company's purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and is likely
to reduce the number of shareholders. Nonetheless, it is a condition to the
Offer that the number of beneficial owners of Shares after acceptance of
tendered Shares pursuant to the terms of the Offer be at least 400
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<PAGE> 14
and that the Company otherwise continue to qualify for quotation on the NASDAQ
National Market System. See Section 6.
The Shares are registered under the Exchange Act which requires, among
other things, that the Company furnish certain information to its shareholders
and to the Commission and comply with the Commission's proxy rules in
connection with meetings of the Company's shareholders.
9. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 500,000 Shares pursuant to the
Offer at a Purchase Price of $4.00 per Share, the Company expects the maximum
aggregate cost of the Offer, including estimated fees and expenses applicable
to the Offer, to be be approximately $2,070,000. The funds necessary to
purchase the Shares pursuant to the Offer will come from borrowings under the
Company's Credit Agreement, dated as of November 30, 1994 by and among the
Company, National City Bank, a national banking association ("NCB") and the
Banks identified therein. Copies of such Credit Agreement are filed as
exhibits to the Schedule 13E-4 and are incorporated herein by reference. See
Section 11 "Certain Information Concerning the Company -- Additional
Information".
The NCB Credit Agreement is for up to $25,000,000 (but is limited by
the value of the collateral provided). Of this amount a maximum of $15,000,000
is currently available and $10,000,000 will be available upon payment of an
activation fee of 3/4 of 1% on the $10,000,000. Loans made under the Credit
Agreement will be at either i) 1/4 of 1% over the prime rate of NCB; ii) 250
basis points over the London inter-bank offered rate ("LIBOR"); or iii) NCB's
fixed interest rate available from time to time. Additionally a commitment fee
of 3/8 of 1% is due on any funds available but not borrowed. Prime Rate means
the fluctuating rate of interest which is publicly announced from time to time
by NCB at its principal place of business as being its "prime rate" or "base
rate". The interest rate for LIBOR loans varies with the interest period
chosen by the Company, which may be from one month to a period which
corresponds with the balance of the term of the Credit Agreement. The current
rate on Prime Rate Loans would be 9%, the current rate for LIBOR loans for a
three month interest period would be approximately 8.625% and the current rate
on NCB's fixed interest rate loans is 8.625%. The initial loan term under the
Credit Agreement is for three years with an annual review and extension for an
additional year at the option of NCB. The Credit Agreement also includes
representations and warranties, covenants, events of default and other terms
customary to financings of this type.
The Company expects to repay the borrowings used to purchase Shares
pursuant to the Offer through, depending on business and market conditions,
internally generated funds, net sales proceeds from the disposition of assets,
public or private offerings of securities, additional bank borrowings or
refinancings of assets, or other financings or such combination of the
foregoing as the Company may deem appropriate. Although the Company currently
does not have any specific plans to refinance such borrowings, the Company may
replace all or a portion of the borrowings under the Credit Agreement with
other borrowings, which may include intermediate or long-term borrowings at
fixed rates, which may be higher than the rates under the NCB Credit Agreement.
10. SHARES OUTSTANDING AND SIGNIFICANT SHAREHOLDERS
As of August 17, 1995 the Company had issued and outstanding 5,456,696
Shares of Beneficial Interest and had reserved 315,100 Shares for issuance upon
exercise of outstanding stock options. The aggregate of 500,000 shares that
the Company is offering to purchase pursuant to the Offer represents
approximately 9.16% of the shares outstanding as of such date.
The Company has been advised that no trustee or executive officer of
the Company intends to tender any shares pursuant to the Offer.
On the assumption that no Shares will be tendered by officers and
trustees of the Company, and that an aggregate of 500,000 Shares are tendered
and accepted by the Company, after completion of the Offer, the Shares and
options held by the officers and trustees will be a higher percentage (an
increase from 70.48% to 77.30% of all the outstanding Shares on a
fully-diluted basis) than it was prior to commencement of the Offer.
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<PAGE> 15
11. CERTAIN INFORMATION CONCERNING THE COMPANY
DESCRIPTION OF BUSINESS
The Company is a business trust organized under the laws of
Massachusetts and commenced operations in 1971. The Company's principal
offices are located at 2001 Crocker Road, Suite #400, Westlake, Ohio 44145,
telephone: (216) 899-0909.
The Company principally owns equity investments in real estate. The
Company directly manages all of its improved properties. The Company's
investment portfolio consists primarily of ownership interests in seven
multi-tenanted office buildings, four multi-tenanted shopping centers, and two
retail centers. The Company currently has 22 full time employees. The Company
intends to acquire additional ownership interests in suburban office buildings
located in the Midwest and/or Southwest United States.
SELECTED HISTORICAL FINANCIAL INFORMATION
Set forth below is certain consolidated historical financial information of the
Company. The financial information included in this Offer to Purchase at and
for the nine months ended June 30, 1995 and 1994 is derived from the Company's
financial statements in the Company's Quarterly Report on Form 10-Q for the
quarters ended June 30, 1995 and 1994. The financial information included in
this Offer to Purchase at and for the fiscal years ended September 30, 1994 and
1993 is derived from the Company's audited financial statements. The following
selected historical financial information should be read in conjunction with,
and is qualified in its entirety by reference to, such unaudited and audited
financial statements and their related notes. See "Index to Financial
Statements". Additional information concerning the Company, including copies
of its most recent annual and quarterly reports to the Securities and Exchange
Commission may be obtained as set forth under "Additional Information," below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
JUNE 30, SEPTEMBER 30,
-------- -------------
1995 1994 1994 1993
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operations:
Rental income $ 7,698 $ 7,217 $ 9,650 $ 9,348
Interest income 47 44 76 263
Other income 21 19 29 41
------- ------- ------- -------
Operating revenues 7,766 7,280 9,755 9,652
Funds from operations (1) 1,805 1,285 1,857 1,417
Operating income (loss) 416 (197) (115) (732)
Gains on sales of real estate 2,499 361 445 563
Extraordinary items 52 0 253 286
Net income 2,967 164 583 117
Per Share of Beneficial Interest:
Operating income (loss) 0.08 (0.04) (0.02) (0.22)
Gains on sales of real estate 0.46 0.08 0.09 0.17
Extraordinary items 0.01 0.00 0.05 0.09
------- ------- ------- -------
Net income 0.55 0.04 0.12 0.04
Weighted average number of Shares
of Beneficial Interest outstanding 5,468 4,787 4,959 3,292
Financial Condition:
Total assets $43,121 $46,161 $51,004 $45,499
Mortgage notes payable 9,309 16,755 11,111 17,126
Bank notes payable 5,600 3,511 11,180 8,800
Shareholders' equity 25,414 22,926 23,150 17,669
Shareholders' equity per Share of
Beneficial Interest 4.66 4.19 4.23 4.75
<FN>
(1) "Funds from operations" means net income (computed in accordance with
generally accepted accounting principles), plus depreciation and excluding the
gains on the sales of real estate and extraordinary items. The funds from
operations are computed in accordance with the definition adopted by the
National Association of Real Estate Investment Trusts ("NAREIT").
</TABLE>
11
<PAGE> 16
<TABLE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
JUNE 30, SEPTEMBER 30,
-------- -------------
1995 1994 1994 1993
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED CHARGES
Interest expense $1,392 $1,613 $2,120 $2,650
Rent expense representing interest 40 39 53 51
------ ------ ------ ------
Total fixed charges 1,432 1,652 2,173 2,701
Operating income (loss) 416 (197) (115) (732)
Add back fixed charges 1,432 1,652 2,173 2,701
------ ------ ------ ------
Earnings, for computational purposes 1,848 1,455 2,058 1,969
Ratio of earnings to fixed charges (b) 1.30 ---(a) ---(a) ---(a)
<FN>
(a) For the years ended September 30, 1994 and 1993 and the nine month
period ended June 30, 1994, fixed charges exceeded earnings; the
coverage deficiency for these periods was $115,000, $732,000 and
$197,000, respectively.
(b) The Company has not included gains on sales of real estate in
operating income used in its computation of ratio of earnings to fixed
charges. If these gains were included, the ratio of earnings to fixed
charges would be: 1.15 for the year ended September 30, 1994 and
1.10 for the nine months ended June 30, 1994. For the year ended
September 30, 1993 fixed charges would exceed earnings; the coverage
deficiency for that period would have been $169,000.
</TABLE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information sets forth historical
information as adjusted to give effect to the purchase of 500,000 Shares in
this Offer at a Purchase Price of $4.00 per Share. The pro forma adjustments
assume that the transaction occurred, for purposes of income statement data, as
of the first day of the period presented, and for purposes of balance sheet
data, as of the balance sheet date. The pro forma information does not purport
to be indicative of the results that may be obtained in the future or that
would actually have been obtained had the transaction occurred during the
periods indicated. The pro forma information should be read in conjunction
with the Company's financial statements and related notes set forth in this
Offer to Purchase.
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, 1995 YEAR ENDED SEPTEMBER 30, 1994
------------------------------- ------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operations:
Revenues $ 7,766 $ --- $ 7,766 $ 9,755 $ --- $ 9,755
Expenses 7,350 144(a) 7,494 9,870 176(a) 10,046
Operating income 416 (144) 272 (115) (176) (291)
Net income 2,967 (144) 2,823 583 (176) 407
Net income per share 0.55 (0.03) 0.52 0.12 (0.04) 0.08
Weighted average number of Shares of
Beneficial Interest outstanding 5,468 (500)(b) 4,968 4,959 (500)(b) 4,459
Ratio of earnings to fixed charges 1.30 (0.08) 1.22 ---(d) --- ---(d)
Financial Condition:
Total assets $43,121 $ --- $43,121 $51,004 $ --- $51,004
Mortgage notes payable 9,309 --- 9,309 11,111 --- 11,111
Bank notes payable 5,600 2,070(c) 7,670 11,180 2,070(c) 13,250
Shareholders' equity 25,414 (144) 25,270 23,150 (176) 22,974
Shareholders' equity
per share outstanding 4.66 (0.03) 4.63 4.23 (0.04) 4.19
</TABLE>
12
<PAGE> 17
NOTES TO ACCOMPANY PRO FORMA FINANCIAL INFORMATION
(a) The increase in expenses for both the nine month period ended June 30, 1995
and the twelve month period ended September 30, 1994 is due to increased
interest expense as a result of the increase in bank notes payable
attributed to the borrowing of the total funds needed to purchase the
Shares and pay for all costs associated with the purchase of the Shares
pursuant to the Offer as if the purchase had occurred at the beginning of
each of the periods.
(b) To reflect the Trust's purchase of the Shares pursuant to the Offer.
(c) To reflect the borrowing of the funds necessary to purchase the Shares and
pay all costs pursuant to the Offer.
(d) For the year ended September 30, 1994 fixed charges exceeded earnings; the
coverage deficiency was $115,000. The pro forma coverage deficiency for
the year ended September 30, 1994 was $291,000.
13
<PAGE> 18
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. The Company is required to disclose in
such proxy statements certain information, as of particular dates, concerning
the Company's trustees and officers, their compensation, stock options granted
to them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company. The Company has
also filed an Issuer Tender Offer Statement on Schedule 13E-4 with the
Commission. Such material and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and (except for the
Issuer Tender Offer Statement) also should be available for inspection and
copying at the following regional offices of the Commission: Seven World Trade
Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661. Copies of such material can also
be obtained by mail, upon paying the Commission's customary charges, by writing
to the Public Reference Section at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
12. INTEREST OF TRUSTEES AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES
Neither the Company, nor any executive officer or trustee of the
Company, any person controlling the Company, any executive officer or director
of any person controlling the Company or any associate or subsidiary of any
such person (including any executive officer or trustee of any such
subsidiary), has engaged in any transaction involving Shares during the period
of forty business days prior to the date hereof. The Company has been advised
that no trustee or executive officer of the Company intends to tender any
Shares pursuant to the Offer. See Section 8 entitled "Purpose of the Offer;
Certain Effects of the Offer" for a discussion of the reverse stock split
intended to be proposed at the 1996 Annual Meeting of Shareholders.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
The Company is not aware of any license or regulatory permit that it
believes is material to the Company's business that might be adversely affected
by the Company's acquisition of shares as contemplated herein or of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
the acquisition or ownership of Shares by the Company as contemplated herein.
Should any such approval or other action be required, the Company will make a
good faith effort to obtain such approval or other action. The Company is
unable to predict whether it will be required to delay the acceptance for
payment of, or payment for, Shares tendered pursuant to the Offer pending the
outcome of any such matter. There can be no assurance that any such approval
or other action, if needed, would be obtained or would be obtained without
substantial cost or that the failure to obtain any such approval or other
action might not result in adverse consequences to the Company's business. The
Company's obligations under the Offer to accept for payment and pay for Shares
are subject to certain conditions. See Section 6.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain of the United
States federal income tax consequences of the Offer. This summary is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change. No rulings as to any of the matters discussed in this
summary have been requested or received from the Internal Revenue Service
("IRS").
EACH SHAREHOLDER IS URGED TO CONSULT AND RELY ON THE SHAREHOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE SHAREHOLDER OF
TENDERING SHARES PURSUANT TO THE OFFER.
IN GENERAL. A shareholder's exchange of Shares for cash pursuant to
the Offer will be a taxable transaction for federal income tax purposes, and
may also be a taxable transaction under applicable state, local, or foreign tax
laws. This summary does not discuss any aspects of state, local or foreign tax
laws. Certain shareholders (including insurance companies, tax-exempt
organizations, institutions, and broker dealers) may be subject to special
rules not discussed below. Special rules apply in the case of Shares acquired
pursuant to the exercise of options granted to employees under the Company's
incentive compensation plans (see "Employee Plans" below).
14
<PAGE> 19
TREATMENT AS A SALE OR EXCHANGE. Under Section 302 of the Internal
Revenue Code of 1986, as amended (the "Code"), a transfer of Shares to the
Company pursuant to the Offer will, as a general rule, be treated as a sale or
exchange of the Shares (rather than as a dividend distribution) if the receipt
of cash upon the sale (a) is "substantially disproportionate" with respect to
the shareholder, (b) results in a "complete termination" of the shareholder's
interest in the company or (c) is "not essentially equivalent to a dividend"
with respect to the shareholder. These tests (the "Section 302 tests") are
explained more fully below.
If any of the Section 302 tests is satisfied, a tendering shareholder
will ordinarily recognize gain or loss equal to the difference between the
amount of cash received by the shareholder pursuant to the Offer and the
shareholder's basis in the Shares sold pursuant to the Offer. If the Shares
are held as capital assets, the gain or loss will be capital gain or loss,
which will be long-term capital gain or long-term capital loss if the Shares
have been held for more than one year. A shareholder will not be permitted to
recognize loss on the sale of a Share pursuant to the Offer if the shareholder
purchases a Share within a period beginning 30 days prior to and ending 30 days
after the completion of the Offer.
TREATMENT AS A DIVIDEND. If none of the Section 302 tests is
satisfied and, as anticipated, the Company has sufficient earnings and profits
for the current fiscal year (even though it has no accumulated earnings and
profits), a tendering shareholder will be treated as having received a dividend
includible in gross income in an amount equal to the entire amount of cash
received by the shareholder pursuant to the Offer. This amount will not be
reduced by the shareholder's basis in the Shares sold pursuant to the offer,
and (except as described below for corporate shareholders eligible for the
dividends received deduction) the shareholder's basis in those Shares will be
added to the shareholder's basis in his remaining Shares. No assurance can be
given that any of the Section 302 tests will be satisfied as to any particular
shareholder, and thus no assurance can be given that any particular shareholder
will not be treated as having received a dividend taxable as ordinary income.
TAX RATES. Net capital gain (which is the excess of net long-term
capital gain over net short-term capital loss) of individuals, trusts and
estates is currently taxed at a maximum federal income tax rate of 28%.
Short-term capital gains of individuals, trusts and estates are taxed at
ordinary income rates. Ordinary income is currently taxable to individuals,
trusts and estates at a maximum federal income tax rate of 39.6% (although it
may be taxed at higher marginal rates due to the phase-out of certain
exemptions and deductions). Capital gains and ordinary income of corporations
are both taxed at the same federal income tax rate, currently a maximum of 35%
(although they may be taxed at higher marginal rates due to the phase-out of
the 15%, 25% and 34% brackets).
Shareholders are urged to consult their own tax advisors concerning
the possible impact of the receipt of cash from the Company pursuant to the
Offer on their obligation to make estimated tax payments.
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the
Section 302 tests is satisfied, a shareholder must take into account not only
Shares actually owned by the shareholder, but also Shares that are
constructively owned within the meaning of Section 318 of the Code. Under
Section 318, a Shareholder may constructively own Shares actually owned, and in
some cases constructively owned, by certain related individuals and certain
entities in which the shareholder has an interest, as well as any Shares the
shareholder has a right to acquire by exercise of an option or by the
conversion or exchange of a security. It is unclear whether Shares
constructively owned by a shareholder by reason of such shareholder's right to
acquire the shares from the Company are to be considered outstanding for
purposes of applying the Section 302 tests to other shareholders.
THE SECTION 302 TESTS. One of the following tests must be satisfied
in order for the exchange of Shares pursuant to the Offer to be treated as a
sale rather than as a dividend distribution.
a. SUBSTANTIALLY DISPROPORTIONATE TEST. The receipt of cash
by a shareholder will be substantially disproportionate with respect
to the shareholder if the percentage of the outstanding Shares
actually and constructively owned by the shareholder immediately
following the exchange of Shares pursuant to the Offer (treating
shares exchanged pursuant to the Offer as not outstanding) is less
than 80% of the percentage of the outstanding Shares actually and
constructively owned by the shareholder immediately before the
exchange (treating Shares exchanged pursuant to the Offer as
outstanding).
b. COMPLETE TERMINATION TEST. The receipt of cash by a
shareholder will be a complete termination of the shareholder's
interest if either (i) all of the Shares actually and constructively
owned by the shareholder are sold pursuant to the Offer or (ii) all of
the Shares actually owned by the shareholder are sold pursuant to the
Offer, the shareholder is eligible to waive, and effectively waives,
the attribution of Shares constructively owned by the shareholder in
accordance with the procedures described in Section 302(c)(2) of the
Code (relating to the waiver of family attribution), and the
shareholder is not considered to own any other shares pursuant to
other attribution rules contained in Section 318 of the Code.
15
<PAGE> 20
c. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. The
receipt of cash by a shareholder will not be essentially equivalent to
a dividend if the shareholder's exchange of Shares pursuant to the
Offer results in a "meaningful reduction" of the shareholder's
proportionate interest in the Company. Whether the receipt of cash by
a shareholder will result in a meaningful reduction of the
shareholder's proportionate interest will depend on the shareholder's
particular facts and circumstances. However, in the case of a small
minority shareholder, even a small reduction may satisfy this test
where, as with the Offer, payments will not be pro rata with respect
to all outstanding Shares. The IRS has indicated in a
published ruling that, in the case of a small minority shareholder of
a publicly-held corporation who exercises no meaningful control over
corporate affairs, a reduction in the shareholder's proportionate
interest in the corporation from .0001118% to .0001081% (which
represented only a 3.3% reduction in the shareholder's percentage
ownership of outstanding shares for purposes of the substantially
disproportionate test) would constitute a meaningful reduction.
Shareholders should consult their tax advisors concerning the
application of the Section 302 tests to their particular circumstances.
Under certain circumstances, it may be possible for a tendering
shareholder to satisfy one of the Section 302 tests by contemporaneously
selling or otherwise disposing of all or some of the Shares that are actually
or constructively owned by the shareholder but that are not exchanged pursuant
to the Offer. Correspondingly, a shareholder may not be able to satisfy any of
the Section 302 tests because of contemporaneous acquisitions of Shares by the
shareholder or by a related party whose Shares are constructively owned by the
shareholder. Shareholders should consult their tax advisors regarding the
consequences of such sales or acquisitions in their particular circumstances.
In the event that the Offer is oversubscribed, the Company's purchase
of Shares pursuant to the Offer will be prorated. Thus, even if all of the
Shares actually and constructively owned by a shareholder are tendered pursuant
to the Offer, not all of the Shares will be purchased by the Company, which in
turn may affect the shareholder's ability to satisfy the Section 302 tests
described above. See Section 3 for information regarding each shareholder's
option to make a conditional tender of a minimum number of Shares. A
SHAREHOLDER WHO DECIDES TO MAKE A CONDITIONAL TENDER IS URGED TO CALCULATE THE
MINIMUM NUMBER OF SHARES IN CONSULTATION WITH HIS TAX ADVISOR.
SPECIAL RULES FOR CORPORATE SHAREHOLDERS. If the exchange of Shares by
a corporate shareholder does not satisfy any of the Section 302 tests and is
therefore treated as a dividend, the shareholder may be entitled to a
dividends-received deduction equal to 70% of the dividend. There are a number
of limitations on the availability of the dividends-received deduction,
however. Section 246(c) of the Code disallows the dividends-received deduction
with respect to stock that is held for 45 days or less. For this purpose, the
length of time a corporation is considered to have held stock may be reduced by
periods during which the corporation's risk of loss with respect to the stock
is diminished due to the existence of certain options or other transactions.
Further, under Section 246A of the Code, if a corporate shareholder has
incurred indebtedness directly attributable to an investment in Shares, the 70%
dividends received deduction may be reduced by a percentage generally computed
based on the amount of the indebtedness and the corporation's adjusted tax
basis in the Shares. Finally, because the Company's payments of cash pursuant
to the Offer will not be pro rata with respect to all of the outstanding
Shares, any amount that is received by a corporate shareholder that is treated
as a dividend will constitute an "extraordinary dividend" under Section 1059 of
the Code to a corporate shareholder that has held the shares for less than two
years. As a result, such a corporate shareholder will be required to reduce
its tax basis in its Shares (but not below zero) by the non-taxed portion of
the dividend (that is, the portion of the dividend equal to the
dividends-received deduction). If the non-taxed portion of the dividend
exceeds the corporate shareholder's tax basis in its Shares, the excess must be
treated as gain from the sale of the Shares for the taxable year in which a
sale or disposition of the Shares occurs. It is unclear whether, if the
non-taxed portion of the dividend exceeds the corporate shareholder's tax basis
in its Shares, the excess is only treated as gain upon a later disposition that
requires treatment of such excess as gain, despite treatment of the cash
received as a dividend pursuant to Section 302.
EMPLOYEE PLANS. Special rules govern the taxation of cash received in
exchange for Shares acquired pursuant to the exercise of an incentive stock
option granted to an employee under an incentive compensation plan. An employee
who exchanges Shares acquired pursuant to the exercise of an incentive option
granted under a stock option plan of the Company will be taxed in accordance
with the rules described in the preceding sections unless the disposition of a
Share pursuant to the Offer occurs before the end of the required holding
period for the Share. The required holding period for a Share ends on the
later of (i) two years after the date the option with respect to the Share was
granted or (ii) one year after the date the Share was acquired pursuant to the
exercise of the option. If an exchange occurs before the end of the required
holding period for a Share and one of the Section 302 tests is
16
<PAGE> 21
satisfied, the employee will be required to recognize ordinary income in an
amount equal to the excess of the fair market value of the Share at the time
the option was exercised over the exercise price of the option (the "spread").
Any remaining gain will be capital gain, which will be long-term capital gain
if the Share has been held for more than one year. If an exchange occurs
before the end of the required holding period for a Share and none of the
Section 302 tests is satisfied, the employee may be required to treat the
exchange of the Share as a disposition that requires inclusion of the spread in
ordinary income as well as including in income the total amount of cash
received as a dividend pursuant to Section 302.
If an employee exercises a nonqualified stock option granted under a
stock option plan of the Company in order to acquire Shares to tender pursuant
to the Offer, the employee will be required to recognize as ordinary income an
amount equal to the excess of the fair market value of the Shares on the date
the option is exercised over the exercise price. The employee's basis in the
Shares will be equal to the fair market value of the Shares on the date the
option is exercised, and the employee's holding period for purposes of
determining eligibility for long-term capital gain will begin after the option
is exercised. The exchange of the Shares pursuant to the Offer will be taxed
in accordance with the rules described in the preceding sections.
BACKUP WITHHOLDING. See Section 3 concerning the potential
application of federal backup withholding.
FOREIGN SHAREHOLDERS. The Company will assume that the exchange is a
dividend as to foreign shareholders and will therefore withhold federal income
tax at a rate equal to 30% of the gross proceeds paid to a foreign shareholder
or his agent pursuant to the Offer, unless the Depositary determines that a
reduced rate of withholding is available pursuant to a tax treaty or that an
exemption from withholding is applicable because the gross proceeds are
effectively connected with the conduct of a trade or business by the foreign
shareholder within the United States. For this purpose, a foreign shareholder
is any shareholder that is not (a) a citizen or resident of the United States,
(b) a corporation, partnership or other entity created or organized in or under
laws of the United States or any political subdivision thereof, or (c) any
estate or trust the income of which is subject to United States federal income
taxation regardless of the source of such income.
Generally, the determination of whether a reduced rate of withholding
is applicable is made by reference to a foreign shareholder's address or to a
properly completed Form 1001 furnished by the shareholder, and the
determination of whether an exemption from withholding is available on the
grounds that gross proceeds paid to a foreign shareholder are effectively
connected with a United States trade or business is made on the basis of a
properly completed Form 4224 furnished by the shareholder. The Depositary will
determine who is a foreign shareholder unless facts and circumstances indicate
that such reliance is not warranted or unless applicable law requires some
other method for determining whether a reduced rate of withholding is
applicable. These forms can be obtained from the Depositary. See the
instructions to the Letter of Transmittal.
A foreign shareholder with respect to whom tax has been withheld may
be eligible to obtain a refund of all or a portion of the withheld tax if the
shareholder satisfies one of the Section 302 tests for capital gain treatment
or is otherwise able to establish that no tax or a reduced amount of tax was
due. Foreign shareholders are urged to consult their own tax advisers
regarding the application of United States federal income tax withholding,
including eligibility for a withholding tax reduction or exemption and the
refund procedure.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, and
regardless of whether or not any of the conditions specified in Section 6 shall
have occurred, at any time or from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary, followed by a public announcement thereof no later
than 9:00 a.m., eastern daylight savings time, on the next business day after
the previously scheduled Expiration Date. There can be no assurance that the
Company will exercise its right to extend the Offer. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer.
The Company expressly reserves the right, in its sole discretion, (i)
to delay payment for any Shares not theretofore paid for, or to terminate the
Offer and not to accept for payment any Shares not theretofore accepted for
payment, upon the occurrence of any of the conditions specified in Section 6,
or (ii) at any time or from time to time to amend the Offer in any respect,
including increasing or decreasing the number of Shares the Company may
purchase or the price it may pay pursuant to the Offer.
Any such extension, delay, termination or amendment will be followed
as promptly as practicable by a public announcement thereof. Without limiting
the manner in which the Company may choose to make any public
17
<PAGE> 22
announcement, except as provided by applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If the Company makes a material change in the terms of the Offer or
the information concerning the Offer, or if it waives a material condition of
the Offer, the Company will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) under the Exchange Act, which require that the
minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer (other
than a change in price or a change in percentage of securities sought) will
depend upon the facts and circumstances, including the relative materiality of
such terms or information.
The Company confirms that its reservation of the right to delay
payment for Shares which it has accepted for payment is limited by Rule
13e-4(f)(5) under the Exchange Act, which requires that an issuer pay
consideration offered or return the tendered securities promptly after the
termination or withdrawal of a tender offer. If (i) the Company increases or
decreases the price to be paid for Shares, or the Company increases the number
of Shares being sought and such increase in the number of Shares being sought
exceeds 2% of the outstanding Shares, or the Company decreases the number of
Shares being sought and (ii) the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that notice of such decrease is first published, sent
or given, the Offer will be extended until the expiration of such period of ten
business days.
16. FEES AND EXPENSES
The Company has retained Beacon Hill Partners, Inc. to act as
Information Agent and American Stock Transfer & Trust Company to act as
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telegraph and personal interviews
and may request brokers, dealers and other nominee shareholders to forward
materials relating to the Offer to beneficial owners. The Information Agent
and the Depositary will each receive reasonable and customary compensation for
their respective services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws. The Depositary has also rendered transfer services to
the Company in the past for which it has received customary compensation, and
can be expected to continue to render similar services to the Company in the
future. NEITHER THE DEPOSITARY NOR THE INFORMATION AGENT HAS BEEN RETAINED TO,
OR IS AUTHORIZED TO, MAKE RECOMMENDATIONS IN CONNECTION WITH THE OFFER.
The Company will not pay any fees or commissions to any broker or
dealer or any other person (other than the Information Agent and the
Depositary) for soliciting tenders of Shares pursuant to the Offer. Brokers,
dealers, commercial banks and trust companies will, upon request, be reimbursed
by the Company for reasonable and necessary costs and expenses incurred by them
in forwarding materials to their customers.
17. MISCELLANEOUS
The Company is not aware of any jurisdiction in which the making of
the Offer or the acceptance for payment of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction. If the Company
becomes aware of any jurisdiction where the making of the Offer would not be in
compliance with such laws, the Company will make a good faith effort to comply
with such laws or seek to have such laws declared inapplicable to the Offer.
If after such good faith effort the Company cannot comply with any such laws,
the Offer will not be made to, nor will tenders be accepted from or on behalf
of, holders of Shares in any such jurisdictions.
CLEVETRUST REALTY INVESTORS
August 21, 1995
18
<PAGE> 23
CLEVETRUST REALTY INVESTORS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1995
Statement of Financial Condition -- June 30, 1995 and September 30, 1994 . . . . . . . . . . . . F-1
Statement of Operations -- Three Months and Nine Months ended June 30,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Statement of Cash Flows -- Nine Months ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . F-3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1994 (1)
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Statement of Financial Condition -- September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . F-8
Statement of Operations -- Years ended September 30, 1994, 1993 and 1992 . . . . . . . . . . . . F-9
Statements of Cash Flows -- Years ended September 30, 1994, 1993 and 1992 . . . . . . . . . . . . F-10
Statement of Changes in Shareholders' Equity --Years ended September 30,
1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Financial Statement Schedules:
Schedule IX -- Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24
Schedule X -- Supplemental Income Statement Information . . . . . . . . . . . . . . . . . . F-25
Schedule XI -- Real Estate and Accumulated Information . . . . . . . . . . . . . . . . . . . F-26
Schedule XII -- Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . . F-28
<FN>
(1) Included in Item 14(a)(1) and (2) of the Trust's Annual Report on Form
10K for the year ended September 30, 1994.
</TABLE>
<PAGE> 24
CLEVETRUST REALTY INVESTORS
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, 1995 SEPTEMBER 30, 1994
------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
--------------------------------------------------
Invested assets - NOTE B:
Investments in real estate:
Improved properties $ 63,018 $ 70,715
Less: Accumulated Depreciation 22,087 25,648
--------- ---------
40,931 45,067
Land held for sale or development 202 313
--------- ---------
41,133 45,380
Real estate mortgage loans 325 236
--------- ---------
41,458 45,616
Cash and cash equivalents 421 251
Certificates of deposit 0 500
Insurance settlement proceeds - NOTE B 0 3,341
Other assets 1,242 1,296
--------- ---------
TOTAL ASSETS $ 43,121 $ 51,004
======== ========
LIABILITIES
--------------------------------------------------
Mortgage notes payable - NOTE C $ 9,309 $ 11,111
Bank notes payable - NOTE D 5,600 11,180
Accrued interest on notes payable 22 27
Accrued fire repairs - NOTE B 1,006 3,341
Accrued expenses and other liabilities 1,770 2,195
--------- ---------
TOTAL LIABILITIES 17,707 27,854
SHAREHOLDERS' EQUITY
--------------------------------------------------
Shares of Beneficial Interest, par value
$1 per Share - NOTE E:
Authorized - - Unlimited
Issued and outstanding shares
(6/30/95 - 5,456,696; 9/30/94 - 5,470,696) 5,457 5,471
Additional paid-in capital 39,760 39,794
Accumulated deficit (19,803) (22,115)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 25,414 23,150
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 43,121 $ 51,004
======== ========
</TABLE>
See notes to financial statements.
F-1
<PAGE> 25
CLEVETRUST REALTY INVESTORS
STATEMENT OF OPERATIONS
The following statement of operations of CleveTrust Realty Investors for the
three-month and nine-month periods ended June 30, 1995 and 1994, respectively,
are unaudited, but in the opinion of management include all adjustments
necessary to present fairly the results of operations. All such adjustments
were of a normal recurring nature. The results of operations of the
three-month and nine-month periods ended June 30, 1995 are not necessarily
indicative of the results of operations for succeeding periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
6/30/95 6/30/94 6/30/95 6/30/94
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME
Real estate operations:
Rental Income $ 2,477 $ 2,412 $ 7,698 $ 7,217
Less: Real estate operating expenses 1,232 1,253 3,956 3,752
Less: Depreciation expense 432 498 1,389 1,482
------- ------- ------- -------
1,664 1,751 5,345 5,234
------- ------- ------- -------
Income from real estate operations 813 661 2,353 1,983
Interest income 7 18 47 44
Other 2 2 21 19
-------- -------- ------- -------
822 681 2,421 2,046
EXPENSES
Interest:
Mortgage notes payable - NOTE C 231 412 766 1,245
Bank notes payable - NOTE D 150 73 626 368
------- -------- ------- -------
381 485 1,392 1,613
General and administrative 186 176 613 630
------- ------- ------- -------
567 661 2,005 2,243
------- ------- ------- -------
OPERATING INCOME (LOSS) 255 20 416 (197)
Gains on sales of real estate - NOTE B 91 0 2,499 361
-------- -------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEM 346 20 2,915 164
Extraordinary item - NOTE C 52 0 52 0
-------- -------- ------- -------
NET INCOME $ 398 $ 20 $ 2,967 $ 164
======= ======= ======= =======
Per Share of Beneficial Interest - NOTE G:
Operating income (loss) $ 0.05 $ 0.00 $ 0.08 $ (0.04)
Gains on sales of real estate 0.02 0.00 0.46 0.08
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEM 0.07 0.00 0.54 0.04
Extraordinary item 0.01 0.00 0.01 0.00
------- ------- ------- -------
NET INCOME PER SHARE $ 0.08 $ 0.00 $ 0.55 $ 0.04
======= ======= ======= =======
Weighted Average Number of Shares of
Beneficial Interest Outstanding 5,462 5,573 5,468 4,787
======= ======= ======= =======
</TABLE>
See notes to financial statements.
F-2
<PAGE> 26
CLEVETRUST REALTY INVESTORS
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
6/30/95 6/30/94
------- -------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 2,967 $ 164
Non-cash revenues and expenses included in income:
Depreciation expense 1,389 1,482
Decrease in other assets 54 114
Decrease in accrued interest on notes payable (5) (33)
(Decrease) increase in accrued expenses and other
liabilities (425) 98
Reconciliation to net cash flow from operating activities:
Gains on sales of real estate (2,499) (361)
Extraordinary item (52) 0
------- -------
Cash Flow From Operating Activities 1,429 1,464
CASH FLOW FROM INVESTING ACTIVITIES:
Equity investments:
Improvements to existing properties (401) (496)
Proceeds from properties sold 5,546 507
Net insurance proceeds 1,006 1,000
Real estate mortgage loan repayments 123 156
------- -------
Cash Flow From Investing Activities 6,274 1,167
CASH FLOW FROM FINANCING ACTIVITIES:
Mortgage notes payable:
Principal amortization payments (287) (371)
Principal prepayments (1,463) 0
Bank notes payable:
Repayments (5,549) (5,174)
Principal amortization payments (31) (115)
Certificates of deposit 500 0
Shares of beneficial interest:
Shares issued pursuant to rights offering 0 5,905
Shares purchased and subsequently retired (48) (297)
Distributions to shareholders (655) (515)
------- -------
Cash Flow Used In Financing Activities (7,533) (567)
------- -------
Increase in cash and short-term investments 170 2,064
Balance at beginning of year 251 315
------- -------
Balance at end of period $ 421 $ 2,379
======= =======
</TABLE>
See notes to financial statements.
F-3
<PAGE> 27
CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE A - INCOME TAXES
Commencing with fiscal 1993 the Trust no longer qualified as a REIT with the
change in status to a taxable entity retroactive to October 1, 1992. As of
October 1, 1992 the Trust adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109
had no effect on net income.
The Trust had no income tax expense for the nine-month periods ended June 30,
1994 and 1995 or for the fiscal year ended September 30, 1994, and it expects
to have no income tax expense for the fiscal year ended September 30, 1995.
The Trust had a net deferred tax asset position at June 30, 1995 and September
30, 1994 of approximately $3,057,000 and $4,066,000, respectively. The Trust
maintains a valuation reserve equal to its net deferred tax asset as there is
doubt as to whether the net deferred tax will be realized.
NOTE B - INVESTED ASSETS
On February 28, 1995 the Trust completed a $2,650,000 sale of the 197 room
Quality Hotel located at the airport in St. Louis, Missouri. This sale
resulted in a gain of $452,000.
On March 15, 1995 the Trust completed a $2,595,000 sale of the 124 unit
Parkwood Place Apartments located in Greeley, Colorado. This sale resulted in
a gain of $1,859,000.
On March 20, 1995 the Trust completed an $800,000 sale of the 51,000 square
foot Walnut Hill West office building located in Dallas, Texas. This sale
resulted in a gain of $97,000.
On May 31, 1995 the Trust completed a $212,000 sale of 17.7697 acres of vacant
land located in Akron, Ohio. This sale resulted in a gain of $91,000. The
Trust received a purchase money mortgage for the total $212,000 purchase price
in connection with the sale.
On March 7, 1994 the Trust completed an $834,000 sale of 69.96 acres of vacant
land located in Akron, Ohio. This sale resulted in a gain of $361,000. The
Trust received a purchase money mortgage for $290,000 of the purchase price in
connection with the sale.
On January 18, 1994 the Trust's Petroleum Club Building, located in Tulsa,
Oklahoma, sustained a major fire. In July, 1994 the Trust and its insurance
company agreed on a settlement. The total settlement of $6,025,000 has been
remitted to the Trust by the insurance company. Building repairs and other
costs associated with the fire are currently estimated to be adequately covered
by the settlement. At June 30, 1995 the Trust had $1,006,000 accrued for
repairs and other costs related to the fire. The Trust used $1,006,000 of the
settlement proceeds to make a paydown on its 1994 Credit (see Note D). The
Trust has the ability, subject to the conditions of the loan agreement, to
borrow these funds back, when needed, to make payments for the fire repair work
and other costs associated with the fire.
F-4
<PAGE> 28
CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE C - MORTGAGE NOTES PAYABLE
On March 16, 1995 the Trust repaid a $498,000 first mortgage loan on its
shopping center located in Ardmore, Oklahoma. This loan had a maturity date of
June 16, 1996.
On May 1, 1995 the Trust settled at a discount, a $1,017,000 first mortgage
loan on its office building located in Englewood, Colorado, which had a
maturity date of February 1, 1999. This settlement resulted in an
extraordinary gain of $52,000.
NOTE D - BANK NOTES PAYABLE
On September 30, 1994 the Trust borrowed $7,689,000 under the terms of a demand
note from National City Bank of Cleveland, Ohio ("NCB"). The funds were used
to repay a maturing mortgage loan. This demand note had an interest rate of
prime. This demand note was converted to a revolving line of credit ("1994
Credit") issued by NCB and M & T Bank of Buffalo, New York ("M&T"), which was
signed effective November 30, 1994. The 1994 Credit is for up to $25,000,000
(but is limited by the value of the collateral provided). Of this amount a
maximum of $15,000,000 is currently available and $10,000,000 will be available
upon payment of an activation fee of 3/4 of 1% on the $10,000,000. Interest,
which is at the option of the Trust, will be at either i) 1/4 of 1% over the
prime rate; ii) 250 basis points over the LIBOR rate; or iii) NCB's fixed
interest rate available from time to time. Additionally, a commitment fee of
3/8 of 1% is due on any funds available but not borrowed. Each year the
lenders will review the 1994 Credit with the right to extend it for one
additional year. At June 30, 1995 the outstanding balance was $5,600,000. The
1994 Credit is secured by certain of the Trust's real estate and contains
certain covenants including a covenant for a minimum shareholders' equity. At
June 30, 1995 the amount of shareholders' equity free from such restrictions
was approximately $5,414,000.
On February 28, 1995 with the proceeds from the sale of the hotel located in
St. Louis, Missouri (see Note B) the Trust made a $2,200,000 paydown on a loan
it had with another bank. On March 15, 1995 with a portion of the proceeds
from the sale of the apartments located in Greeley, Colorado (see Note B) the
Trust paid off the $1,260,000 balance on this loan. This loan had a maturity
date of December 25, 1997. The interest rate was prime plus 1% with a minimum
rate of 7.5%. The Trust was required to make monthly amortization payments
based on a twenty year amortization schedule.
Effective December 31, 1994 the Trust terminated the December 31, 1990 Credit
Agreement ("1990 Credit") it had with Society National Bank. Effective January
1, 1994 the Trust and the lender had amended the 1990 Credit by converting the
loan to a revolving line of credit. During January and February, 1994 the
Trust paid down the $4,508,000 balance of the 1990 Credit. There were no
borrowings outstanding when the 1990 Credit was terminated.
NOTE E - SHARES OF BENEFICIAL INTEREST
On November 23, 1993 the Trust mailed a prospectus and certificate of rights to
all shareholders of record as of November 12, 1993. The certificate entitled
the shareholder the right to purchase one share of beneficial interest of the
Trust for every two shares that the shareholder owned at a price of $3.25 per
share. Additionally, this offering also provided for an oversubscription
privilege that entitled each holder of a right to subscribe for shares not
purchased by other holders of rights. Oversubscription was to be allocated
prorata based on the number of shares owned should oversubscription requests
exceed the number of shares available. The offering expired January 28, 1994.
All 1,857,969 shares available in the offering were sold. The Trust received
$6,038,000 less estimated expenses of $133,000 or net proceeds of $5,905,000.
F-5
<PAGE> 29
CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE E - SHARES OF BENEFICIAL INTEREST (CONTINUED)
On June 24, 1994 the Trust purchased 103,210 of its Shares of Beneficial
Interest at a price of $2.875 per share. All 103,210 shares were retired by
the Trust.
On April 17, 1995 the Trust purchased 14,000 of its Shares of Beneficial
Interest at a price of $3.40 per share. All 14,000 shares were retired by the
Trust.
NOTE F - DISTRIBUTIONS
The Trustees at their April 25, 1995 meeting declared a quarterly cash
distribution of $.04 per share payable July 21, 1995 to shareholders of record
as of July 7, 1995. The Trustees at their July 25, 1995 meeting declared a
quarterly cash distribution of $.04 per share payable on October 20, 1995 to
shareholders of record as of October 6, 1995.
NOTE G - NET INCOME PER SHARE
Net income per Share of Beneficial Interest has been computed using the
weighted average number of Shares of Beneficial Interest outstanding each
period.
F-6
<PAGE> 30
[LOGO] ERNST & YOUNG LLP - 1300 Huntington Building - Phone: 216 861 5000
925 Euclid Avenue
Cleveland, Ohio 44115-1405
Report of Independent Auditors
Trustees and Shareholders
CleveTrust Realty Investors
Westlake, Ohio
We have audited the accompanying statement of financial condition of CleveTrust
Realty Investors as of September 30, 1994 and 1993, and the related statements
of operations, changes in shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1994. Our audits also included
the financial statement schedules listed in the Index at Item 14(a). These
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CleveTrust Realty Investors at
September 30, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1994 in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
-----------------------------
December 2, 1994
F-7
<PAGE> 31
<TABLE>
STATEMENT OF FINANCIAL CONDITION
CLEVETRUST REALTY INVESTORS
<CAPTION>
SEPTEMBER 30,
-------------
1994 1993
---- ----
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Invested assets - - NOTE A:
Investments in real estate - - NOTES C and I:
Improved properties $ 70,715 $ 72,482
Less: Accumulated depreciation 25,648 23,902
-------- --------
45,067 48,580
Land held for sale or development 313 814
-------- --------
45,380 49,394
Real estate mortgage loans - - NOTES D and I 236 150
-------- --------
45,616 49,544
Less allowance for possible investment losses - - NOTE E 0 6,089
-------- --------
45,616 43,455
Cash and cash equivalents - - NOTE A 251 315
Certificates of deposit 500 500
Insurance settlement proceeds - - NOTE C 3,341 0
Other assets 1,296 1,229
-------- --------
TOTAL ASSETS $ 51,004 $ 45,499
======== ========
LIABILITIES
Mortgage notes payable - - NOTE F $ 11,111 $ 17,126
Bank notes payable - - NOTE G 11,180 8,800
Accrued interest on notes payable - - NOTE G 27 60
Accrued fire repairs - - NOTE C 3,341 0
Accrued expenses and other liabilities 2,195 1,844
-------- --------
TOTAL LIABILITIES 27,854 27,830
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest, par value
$1 per Share - - NOTE H:
Authorized - - Unlimited
Issued and outstanding shares
(9/30/94 - 5,470,696; 9/30/93 - 3,715,937) 5,471 3,716
Additional paid-in capital 39,794 35,916
Accumulated deficit (22,115) (21,963)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 23,150 17,669
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 51,004 $ 45,499
======== ========
<FN>
See notes to financial statements.
</TABLE>
F-8
<PAGE> 32
<TABLE>
STATEMENT OF OPERATIONS
CLEVETRUST REALTY INVESTORS
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1994 1993 1992
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INCOME
Real estate operations:
Rental income $ 9,650 $ 9,348 $ 9,400
Less:
Real estate operating expenses - - NOTE J 4,981 4,797 5,079
Depreciation expenses 1,972 2,149 2,197
--------- -------- --------
6,953 6,946 7,276
-------- -------- --------
Income from real estate operations 2,697 2,402 2,124
Interest income 76 263 325
Other 29 41 60
--------- -------- --------
2,802 2,706 2,509
EXPENSES
Interest:
Mortgage notes payable - - NOTE F 1,678 1,734 1,875
Bank notes payable - - NOTE G 442 916 1,235
--------- -------- --------
2,120 2,650 3,110
General and Administrative 797 788 739
--------- -------- --------
2,917 3,438 3,849
--------- -------- --------
OPERATING INCOME (LOSS) (115) (732) (1,340)
Gains on sales of real estate - - NOTE I 445 563 51
--------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 330 (169) (1,289)
Extraordinary items - - NOTES C and F 253 286 0
--------- -------- --------
NET INCOME (LOSS) $ 583 $ 117 $ (1,289)
========= ======== ========
Per Share of Beneficial Interest - - NOTE A:
Operating income (loss) $ (0.02) $ (0.22) $ (0.68)
Gains on sales of real estate 0.09 0.17 0.02
--------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 0.07 (0.05) (0.66)
Extraordinary items 0.05 0.09 0.00
--------- -------- --------
NET INCOME (LOSS) PER SHARE $ 0.12 $ 0.04 $ (0.66)
========= ======== ========
Weighted average number of Shares of
Beneficial Interest outstanding 4,959 3,292 1,957
========= ======== ========
<FN>
See notes to financial statements.
</TABLE>
F-9
<PAGE> 33
<TABLE>
STATEMENT OF CASH FLOWS
CLEVETRUST REALTY INVESTORS
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 583 $ 117 $(1,289)
Non-cash revenues and expenses included in income:
Depreciation 1,972 2,149 2,197
(Decrease) in accrued interest on notes payable (33) (26) (44)
Increase (decrease) in accrued expenses and
other liabilities 351 (172) 264
(Increase) decrease in other assets (67) 392 (51)
Reconciliation to net cash flow from operating activities:
Gains on sales of real estate (445) (563) (51)
Extraordinary items (253) (286) 0
Amortization of purchase money mortgage discounts 0 (14) (16)
------- ------- -------
CASH FLOW FROM OPERATING ACTIVITIES 2,108 1,597 1,010
Cash flow from investing activities:
Equity investments:
Improvements to existing properties (853) (657) (517)
Purchase of property (3,918) (220) 0
Proceeds from properties sold 879 1,257 830
Net insurance proceeds 253 0 0
Real estate mortgage loans:
Repayments 204 2,000 0
------- ------- -------
NET CASH (USED IN) FROM INVESTING ACTIVITIES (3,435) 2,380 313
Cash flow from financing activities:
Mortgage notes payable:
Principal amortization payments (496) (454) (442)
Principal repayments (7,689) (941) (45)
Principal borrowings 2,170 0 0
Bank notes payable:
Principal amortization payments (147) (228) 0
Principal repayments (5,162) (6,598) (117)
Principal borrowings 7,689 0 0
Distributions to shareholders (735) (393) (117)
Shares issued pursuant to rights offerings 5,929 4,231 0
Shares repurchased and subsequently retired (296) 0 0
------- ------- -------
NET CASH FROM (USED IN) FINANCING ACTIVITIES 1,263 (4,383) (721)
------- ------- -------
(Decrease) increase in cash and cash equivalents (64) (406) 602
Balance at beginning of year 315 721 119
------- ------- -------
Balance at end of year $ 251 $ 315 $ 721
======= ======= =======
<FN>
See notes to financial statements.
</TABLE>
F-10
<PAGE> 34
<TABLE>
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CLEVETRUST REALTY INVESTORS
YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
<CAPTION>
SHARES OF
BENEFICIAL INTEREST ADDITIONAL TOTAL
------------------- PAID-IN ACCUMULATED SHAREHOLDERS'
NUMBER AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------- ------- ------
(IN THOUSANDS, EXCEPT ACTUAL SHARES)
<S> <C> <C> <C> <C> <C>
Balance October 1, 1991 1,956,772 $1,957 $33,444 $(20,281) $15,120
Net (loss) for the year ended
September 30, 1992 (1,289) (1,289)
Cash distributions declared
and paid -- $.06 per share (117) (117)
--------- ------ ------- -------- -------
Balance September 30, 1992 1,956,772 1,957 33,444 (21,687) 13,714
Net income for the year ended
September 30, 1993 117 117
Cash distributions declared
and paid -- $.12 per share (393) (393)
Shares issued pursuant to
rights offering -- NOTE H 1,759,165 1,759 2,472 4,231
--------- ------ ------- -------- -------
Balance September 30, 1993 3,715,937 3,716 35,916 (21,963) 17,669
Net income for the year ended
September 30, 1994 583 583
Cash distributions declared
and paid -- $.15 per share (735) (735)
Shares issued pursuant to
rights offering -- NOTE H 1,857,969 1,858 4,071 5,929
Shares repurchased and
subsequently retired -- NOTE H (103,210) (103) (193) (296)
--------- ------ ------- -------- -------
Balance September 30, 1994 5,470,696 $5,471 $39,794 $(22,115) $23,150
========= ====== ======= ======== =======
<FN>
See notes to financial statements.
</TABLE>
F-11
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
CLEVETRUST REALTY INVESTORS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
NOTE A - - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Recognition: Rental income from improved properties is generally
recorded as it accrues. Interest on mortgage loans is recognized as income as
it accrues during the period the loans are outstanding except where collection
of interest is considered doubtful. Contingent rents and interest are
recognized as income when determinable. Accrual of income is suspended on any
investment when the collection of rent, principal, or interest is doubtful.
Investments in Real Estate: Real estate acquired by the Trust for investment
purposes pursuant to normal real estate purchase transactions is recorded at
cost. Real estate acquired by foreclosure, deed in lieu of foreclosure, or
cancellation of land leases is recorded at estimated fair value at the date of
acquisition, but not in excess of the unpaid balance of the related loan or
land lease plus costs of securing title to and possession of the property.
Depreciation: Depreciation on equity investments is computed by the
straight-line method at rates based upon the expected economic lives of the
assets which range from 31 to 40 years for buildings, 5 to 40 years for other
property and the specific length of the tenant lease for tenant improvements.
Additionally, one building and its permanent improvements is depreciated over a
life of 55 years.
Repairs and Capital Improvements: Expenditures for repairs and maintenance
which do not add to the value or prolong the useful life of property owned are
charged to expense as incurred; those expenditures for improvements which do
add to the value or extend the useful life are capitalized.
Allowance for Possible Investment Losses: The Trust regularly evaluates the
recoverability of each investment in the portfolio. When appropriate, an
allowance for possible investment losses is provided for properties acquired
through foreclosure or deed in lieu of foreclosure.
Cash and Cash Equivalents: The Trust defines cash and cash equivalents as cash
in bank accounts and investments in marketable securities, primarily short-term
commercial paper with original maturities of three months or less.
Income Taxes: The Trust filed its federal income tax return for fiscal 1992 as
a real estate investment trust (a "REIT") as defined in the Internal Revenue
Code. For fiscal 1992 the Trust had no taxable income. Accordingly, no
provision for federal income taxes was made. Commencing with fiscal 1993 the
Trust no longer qualified as a REIT. Therefore, with the change in status to
a taxable entity for fiscal 1993, the Trust adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes".
F-12
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS - - CONTINUED
NOTE A - - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES - - CONTINUED
Net Income Per Share: Net income per Share of Beneficial Interest has been
computed using the weighted average number of Shares of Beneficial Interest
outstanding each year.
Reclassification: Certain items in previously issued financial statements have
been reclassified to conform to 1994 presentations.
NOTE B - - INCOME TAXES
Commencing with fiscal 1993 the Trust no longer qualifies as a REIT with the
change in status to a taxable entity retroactive to October 1, 1992. As of
October 1, 1992 the Trust adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109
had no effect on net income.
The Trust's deferred tax assets and liabilities under SFAS 109 at September 30,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Provision for possible investment losses $ 2,070 $ 2,070
Net Operating loss carryforwards 2,953 2,837
Other 503 656
Deferred tax liabilities:
Depreciation (1,460) (1,303)
------- -------
4,066 4,260
Valuation allowance (4,066) (4,260)
------- -------
Net deferred tax asset/(liability) $ -0- $ -0-
======= =======
</TABLE>
The Trust maintains a valuation reserve equal to its net deferred tax asset as
there is doubt as to whether the net deferred tax asset will be realized.
F-13
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE B -- INCOME TAXES -- CONTINUED
The Trust had no income tax expense for the fiscal years ended September 30,
1994 or 1993. A reconciliation between these results and the amount of income
tax expense that would result from applying Federal statutory rates to pretax
income is as follows:
<TABLE>
<CAPTION>
9/30/94 9/30/93
------- -------
(IN THOUSANDS)
<S> <C> <C>
Expected income tax expense at
Federal statutory tax rate $ 198 $ 39
Increase (decrease) in taxes resulting from:
Effect of temporary differences (310) (97)
Unrecognized net operating loss carryforward 107 58
Other 5 0
------ ------
Income Tax Expense $ -0- $ -0-
====== ======
</TABLE>
At September 30, 1994 the Trust had, for federal tax purposes, a net operating
loss carryforward of approximately $8.7 million. The use of net operating loss
carryforwards is limited by Section 382 of the Internal Revenue Code. In
future years, the Trust can use approximately $ 298,000 per year of net
operating loss carryforwards, plus any prior years' unused portion (limited by
carryforward periods). These carryforwards of approximately $5.3 million
expire through 2008. The remaining carryforwards of $3.4 million may be
recognized for a period through fiscal 1998 against gains on sales of
properties, if any, to the extent that fair market values of these properties
exceeded their tax bases as of December 28, 1992.
F-14
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE C - - INVESTMENTS IN REAL ESTATE
The following is a summary of the Trust's investments in real estate and
accumulated depreciation and related indebtedness at September 30, 1994:
<TABLE>
<CAPTION>
INCOME FROM
AMOUNT OF INITIAL COST OF TOTAL ACCUMULATED CARRYING REAL ESTATE
CLASSIFICATION INDEBTEDNESS COST(1) IMPROVEMENTS COST DEPRECIATION VALUE OPERATIONS
-------------- ------------ ------- ------------ ----- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Buildings $ 4,613 $31,054 $ 6,967 $38,021 $16,033 $21,988 $ 673
Commercial Properties 6,498 26,700 4,017 30,717 8,350 22,367 1,862
Apartments and
other rental units 0 1,202 775 1,977 1,265 712 165
Land held for sale
or development 0 313 0 313 0 313 (3)
------- ------- ------- ------- ------- ------- ------
$11,111 $59,269 $11,759 $71,028 $25,648 $45,380 $2,697
======= ======= ======= ======= ======= ======= ======
<FN>
(1) Included is the application of the allowance for possible investment losses. See NOTE E.
</TABLE>
F-15
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTES C -- INVESTMENTS IN REAL ESTATE -- CONTINUED
Following is a summary of activity in investments in real estate for the three
years ended September 30, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year $49,394 $51,510 $54,113
Capitalized improvements 853 657 517
Purchase of property 3,918 220 -0-
Sales of real estate - NOTE I (724) (844) (923)
Application of allowance for investment
losses - NOTE E (6,089) -0- -0-
Depreciation (1,972) (2,149) (2,197)
------- ------- -------
Balance, end of year $45,380 $49,394 $51,510
======= ======= =======
</TABLE>
On January 18, 1994 the Trust's Petroleum Club Building located in Tulsa,
Oklahoma sustained a major fire. In July, 1994 the Trust and its insurance
company agreed on a settlement. Of the total settlement, $525,000 is payable
to the Trust contingent upon the completion of certain repairs and additions to
the building within a set time frame. $5,500,000 has been remitted to the
Trust by the insurance company. Building repairs and other costs associated
with the fire are currently estimated to be adequately covered by the
settlement. At September 30, 1994 the Trust had $3,341,000 accrued for repairs
and other costs related to the fire. In addition $253,000 was the cost of
building improvements made as part of the building restoration. This $253,000
has been capitalized as building improvements and has also been recorded as an
extraordinary income item in fiscal 1994.
On August 26, 1994 the Trust purchased a 104,000 square foot office building
located in Dallas, Texas for $3,918,000. Of this amount $2,170,000 was
provided by a first mortgage loan on the property, which the Trust obtained at
the time of the purchase.
NOTE D -- REAL ESTATE MORTGAGE LOANS
At September 30, 1994 the Trust had one real estate mortgage loan. This loan
is a second mortgage the Trust received in the sale of a land parcel during
1994. At September 30, 1993 the Trust had one real estate mortgage loan. This
loan was a second mortgage the Trust received in the sale of a land parcel
during 1993. See Note I. On July 1, 1993 the Trust sold its first mortgage
loan on an apartment complex in Orlando, Florida for the total principal and
interest ($2,362,000) due on that date, to the second mortgage lender on this
property. The proceeds were used to repay bank debt. See Note G.
F-16
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS - - CONTINUED
NOTE E - - ALLOWANCE FOR POSSIBLE INVESTMENT LOSSES
In fiscal 1994 the Trust applied the allowance for possible investment losses
to the three previously foreclosed properties for which it had been provided.
In connection with the Trust's annual evaluation of its portfolio of
properties, the Trust concluded that it was unlikely that the value of these
properties would recover. Therefore, they have been written down to their net
realizable value through application of the allowance.
Activity in the allowance for possible investment losses for the three years
ended September 30, 1994 was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year $ 6,089 $6,089 $6,233
Applied to properties (6,089) -0- -0-
Amounts charged off -0- -0- (144)
------- ------- -------
Balance, end of year $ -0- $6,089 $6,089
======= ====== ======
</TABLE>
The $144,000 charged off in fiscal 1992 represents a loss incurred as a result
of an installment sale of vacant land in New York, New York which was completed
September 30, 1992.
The allowance for possible investment losses was determined through evaluation
of individual investments on the basis of the lower of (1) cost or (2)
estimated fair value or net realizable value, whichever was appropriate.
Estimated net realizable value was determined by estimating future fair market
value after adjustment, when appropriate, for direct selling expenses, costs of
improvements, direct holding costs during the projected holding period,
including taxes, maintenance and insurance, and the cost of money to the Trust
over the projected holding period. The Trust's cost of money was determined by
taking into consideration all sources of financing utilized by the Trust,
including shareholders' equity. In arriving at the allowance for possible
investment losses, numerous estimates and indicators of value were utilized.
Although Management believes appropriate assumptions were utilized, there can
be no assurance that the projected events will actually occur.
The components of the allowance for possible investment losses at September 30,
1993 were primarily attributable to principal loss ($4,430,000) and the
estimated cost of money during the expected holding period ($1,652,000).
F-17
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS - - CONTINUED
NOTE F - - MORTGAGE NOTES PAYABLE
At September 30, 1994 the mortgage notes payable of the Trust are non-recourse
mortgages except the $1,121,000 loan maturing February 1, 1999 which is a
recourse mortgage and the first $750,000 of the $2,168,000 loan maturing August
19, 2000 which is recourse to the Trust. The following data pertains to the
mortgage notes payable as of September 30, 1994.
<TABLE>
<CAPTION>
BOOK VALUE
OF THE
INVESTMENT
MORTGAGE SECURING BASE INTEREST
NOTES PAYABLE THE DEBT MATURITY RATE
------------- -------- -------- ----
<S> <C> <C> <C>
$ 1,121 $ 2,029 Feb. 1, 1999 10.500%
1,324 1,817 July 1, 2003 8.125
5,947 6,380 May 7, 1997 9.500
551 3,203 June 16, 1996 10.000
2,168 3,910 Aug. 19, 2000 9.500
-------- --------
$11,111 $17,339
======= =======
</TABLE>
Required payments on the Trust's mortgage notes payable for the succeeding five
years are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, PRINCIPAL INTEREST TOTAL
------------- --------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1995 $ 519 $1,028 $1,547
1996 847 975 1,822
1997 6,104 715 6,819
1998 394 316 710
1999 218 282 500
</TABLE>
On September 30, 1994 the Trust repaid a $7,689,000 first mortgage loan on its
two shopping centers located in Iowa. This loan had a maturity date of October
1, 1994. On January 28, 1993 the Trust settled a $240,000 second mortgage on
one of its properties at a discount. This settlement resulted in the
cancellation of the second mortgage and an extraordinary gain of $24,000. On
February 10, 1993 the Trust settled a $987,000 first mortgage on the same
property at a discount. This settlement resulted in the cancellation of the
first mortgage and an extraordinary gain of $262,000.
Total interest expense on mortgage notes payable did not differ materially from
interest expense paid.
F-18
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS - - CONTINUED
NOTE G - - BANK NOTES PAYABLE
At September 30, 1994 the bank notes payable included $7,689,000 of borrowings
under a demand note and $3,491,000 of borrowings under a 1986 bank loan. At
September 30, 1993 the bank notes payable included $4,548,000 of borrowings
under the 1990 Credit Agreement and $4,252,000 of borrowings under a 1986 bank
loan.
On September 30, 1994 the Trust borrowed $7,689,000 under the terms of a demand
note from a new lender. The funds were used to repay a mortgage loan. See
Note F. This demand note, which had an interest rate of prime, will be
converted to a revolving line of credit ("1994 Credit") which was signed
effective November 30, 1994. With the execution of the 1994 Credit the Trust
intends to cancel the 1990 Credit the Trust had with its previous lender (see
below). The 1994 Credit will be for up to $25,000,000 (but is limited by the
value of the collateral provided). Of this amount a maximum of $15,000,000
will be available immediately and $10,000,000 will be available at the Trust's
discretion upon payment of an activation fee of 3/4 of 1% on the $10,000,000.
The initial term of the 1994 Credit is three years. Interest only payments at
a rate of 1/4 of 1% over the prime lending rate are due monthly in arrears.
Additionally, a commitment fee of 3/8 of 1% is due on any funds available but
not borrowed. Each year the lender will review the 1994 Credit with the right
to extend it for one additional year. The 1994 Credit is secured by certain of
the Trust's real estate investments and contains certain covenants including a
covenant for a minimum shareholders' equity. At September 30, 1994 the amount
of shareholders' equity free from such restriction would be approximately
$3,150,000.
On October 27, 1992 the Trust and its lender executed a second amendment to the
December 31, 1990 Credit Agreement ("1990 Credit"). The second amendment
divided the loan into two segments: A and B. Segment A was for $2,350,000.
The $2,350,000 was repaid in full during December, 1992. Segment B was for
$8,000,000. This loan was for a period of five years and effective January 1,
1993 required a monthly amortizing payment based on an amortization period of
fifteen years at a fixed interest rate of 8.5% per annum. On January 5, 1993
the Trust made a principal payment of $1,000,000. On July 1, 1993 the Trust
made a principal payment of $2,300,000. Effective January 1, 1994 the Trust
and its lender executed a third amendment to the 1990 Credit. The third
amendment converted the Segment B portion of the loan to a revolving line of
credit. During January and February, 1994 the Trust paid down the $4,508,000
balance of the 1990 Credit. At September 30, 1994 there were no borrowings
outstanding under the 1990 Credit. The 1990 Credit is secured by certain of
the Trust's real estate investments and contains certain covenants including a
property operating cash flow to debt ratio.
The Trust also has a loan with another bank which was scheduled to mature
December 25, 1993 but, under the terms of a loan modification agreement
effective March 31, 1993, the maturity has been extended to December 25, 1997.
The interest rate was prime plus 1/2 of 1%; however, effective April 1, 1993
the interest rate was changed to prime plus 1% with a minimum rate of 7.5%.
The Trust is required to make monthly amortization payments based on a
twenty-year amortization schedule. On October 2, 1992 the Trust made a
principal payment of $226,000. On January 5, 1993 the Trust made a principal
payment of $722,000. This payment satisfies the required principal payment of
$341,000 due December 1, 1993 and $381,000 due December 1, 1994, in accordance
with the loan modification agreement. On March 8, 1994 the Trust made the
third required payment of $666,000 which was due by December 1, 1995. The
loan, which is prepayable at any time in whole or in part, is secured by
certain of the Trust's real estate investments.
F-19
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE G -- BANK NOTES PAYABLE -- CONTINUED
The scheduled amortization payments for the above referenced loans for the next
fiscal years are: 1995, $78,000; 1996, $85,000; 1997, $93,000; and 1998,
$25,000.
The Trust also had a $500,000 revolving line of credit with a bank which was
secured by a certificate of deposit and on which the Trust paid interest at the
rate of 4.75%. This revolving line of credit matured October 3, 1994 and was
not renewed by the Trust.
Total interest expense on bank notes payable did not differ materially from
interest expense paid.
NOTE H -- SHARES OF BENEFICIAL INTEREST
On November 23, 1993 the Trust mailed a prospectus and certificate of rights to
all shareholders of record as of November 12, 1993. The certificates entitled
the shareholder to the right to purchase one Share of Beneficial Interest of
the Trust for every two Shares that the shareholder owned at a price of $3.25
per Share. Additionally, this offering also provided for an oversubscription
privilege which entitled each holder of a right to subscribe for Shares not
purchased by other holders of rights. Oversubscriptions were allocated prorata
based on the number of Shares owned. The offering expired on January 28, 1994.
All 1,857,969 Shares available were sold. The net proceeds to the Trust
totaled $5,929,000.
On June 26, 1994 the Trust repurchased 103,210 of its Shares of Beneficial
Interest for $296,000. These shares were retired by the Trust.
On November 17, 1992 the Trust mailed a prospectus and certificate of rights to
all shareholders of record as of November 12, 1992. The certificates entitled
the shareholder to the right to purchase one Share of Beneficial Interest of
the Trust for each Share that the shareholder owned at a price of $ 2.50 per
Share. Additionally, the offering provided for an oversubscription privilege
which entitled each holder of a right to subscribe for Shares not purchased by
other holders of rights. The offering also provided that if any shares were
not purchased by shareholders, they could be sold to third-party investors. The
offering expired on December 28, 1992. The Trust sold 1,759,165 shares of the
1,956,772 shares available in the offering. The net proceeds of $4,231,000
were used to repay debt.
On February 21, 1992 the shareholders of the Trust approved the amended and
extended 1983 Incentive Stock Option Plan, now titled the 1992 Stock Option
Plan ("1992 Plan"). Under the 1992 Plan, an additional 200,000 Shares of
Beneficial Interest of the Trust are reserved and made available for issuance
of options to officers and employees of the Trust at the discretion of the
Board of Trustees. The original plan had reserved 100,000 Shares. The 1992
Plan is extended to October 21, 2011. The option price is the fair market
value on the date of the grant and no option shall be exercisable for less than
100% of this value. Under the 1992 Plan, the share appreciation rights granted
previously will be unaffected; however, no share appreciation rights will be
issued with grants of the 200,000 new Shares or the 17,500 Shares remaining
from the original 100,000 Shares. Share appreciation rights entitle the holder
to receive the difference between the market value on the date of exercise and
the option price in Shares, cash or a combination thereof, at the discretion of
the Board of Trustees.
F-20
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE H -- SHARES OF BENEFICIAL INTEREST -- CONTINUED
As of September 30, 1994 options and share appreciation rights granted and
remaining exercisable are as follows: January 20, 1986 - 21,750 Shares at
$17.88 per Share granted, 13,750 Shares exercisable; January 16, 1989 - 44,250
Shares at $5.13 per Share granted, 31,600 Shares exercisable; January 1, 1993 -
125,000 Shares at $2.625 per Share granted, 125,000 Shares exercisable; and
January 1, 1994 -37,500 Shares at $3.0625 per share granted, 37,500 Shares
exercisable.
NOTE I -- REAL ESTATE SALES
The fiscal 1994 gains on sales of real estate totaling $445,000 includes the
following: (i) $361,000 which represents the gain the Trust realized on its
March, 1994 $834,000 sale of 70 acres of vacant land located in Akron, Ohio.
The Trust received a purchase money mortgage for $290,000 of the purchase price
in connection with the sale; and (ii) $84,000 which represents the gain the
Trust realized on its August, 1994 $198,000 sale of 16.6 acres of vacant land
located in Akron, Ohio.
The fiscal 1993 gains on sales of real estate totaling $563,000 include the
following: (i) $337,000 which represents the gain the Trust realized on its
November, 1992 $950,000 sale of four single-story office-warehouse buildings
containing 42,162 square feet on 2.68 acres of land within the Walnut Stemmons
Office Park, Dallas, Texas; and (ii) $226,000 which represents the gain the
Trust realized on its April, 1993 $541,000 sale of 46.4 acres of vacant land
located in Akron, Ohio. The Trust received a purchase money mortgage note for
$150,000 of the purchase price in connection with the sale.
The fiscal 1992 gains on sales of real estate totaling $51,000 include the
following: (i) $43,000 which represents the gain the Trust realized on its
September, 1992 $240,000 sale of 43 acres of land in Brunswick, Ohio; and (ii)
$8,000 which represents the gain the Trust realized on the August, 1992,
$15,000 sale of one-fourth of an acre of land in Dubuque, Iowa. Also during
fiscal 1992, the Trust recorded the completion of an installment sale of a
parcel of land in New York, New York in which the Trust was a 25% participant
and which resulted in a loss as described in Note E above.
NOTE J -- REAL ESTATE OPERATING EXPENSES
In July, 1992 the Trust terminated the lease it had with the operator of the
Trust's hotel in St. Louis, Missouri and executed a new lease with a new
operator. The Trust held two notes from the former operator totaling $241,000.
The former operator was unable to repay these notes and as such, the Trust
wrote off the notes in the fiscal year ended September 30, 1992.
NOTE K -- LITIGATION
The Trust is involved in a number of legal proceedings arising in the usual
course of its business activities, none of which in the opinion of Management,
is expected to have a material adverse effect on the financial statements.
F-21
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE L -- PENSION PLAN
Effective October 1, 1985 the Trust established a defined contribution pension
plan covering all full-time employees of the Trust. Contributions are
determined as a set percentage of each covered employee's annual cash
compensation. Contributions by the Trust are to be accrued during the year and
paid prior to the filing of the Trust's federal income tax return for said
year. For fiscal 1993 the Trust accrued $31,000 for contributions to the
pension plan (for fiscal 1993 - $29,000 and fiscal 1992 - $29,000).
NOTE M -- OPERATING LEASES
Minimum future rentals due the Trust on noncancelable leases for the succeeding
five fiscal years and thereafter are as follows: 1995, $7,429,000; 1996,
$5,507,000; 1997, $4,046,000; 1998, $3,218,000; 1999, $2,737,000; and
$13,606,000 thereafter. Certain leases provide for contingent rentals and the
Trust received $131,000 of said contingent rentals for 1994 ($202,000 for 1993
and $163,000 for 1992). The Trust's carrying amount at September 30, 1994 of
these real estate investments is comprised of land of $7,535,000 and
improvements of $61,203,000, less accumulated depreciation of $24,383,000.
In addition, one apartment complex and certain other properties owned by the
Trust are rented to a large number of tenants under various operating lease
agreements having expiration dates ranging from one month to one year. The
Trust's carrying amount at September 30, 1994 of these real estate investments
is comprised of land of $100,000 and improvements of $1,877,000, less
accumulated depreciation of $1,265,000.
NOTE N -- SUBSEQUENT EVENTS
The Trustees, at their July 26, 1994 meeting, declared a quarterly cash
distribution of $.04 per Share of Beneficial Interest payable October 21, 1994
to shareholders of record as of October 7, 1994. At their October 25, 1994
meeting, the Trustees declared a quarterly cash distribution of $.04 per Share
payable January 20, 1995 to shareholders of record as of January 6, 1995.
F-22
<PAGE> 46
NOTES TO STATEMENTS -- CONTINUED
NOTE O -- QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended September 30, 1994 and
1993 is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED DEC. 31 MAR. 31 JUNE 30 SEPT. 30
------------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1994
----
<S> <C> <C> <C> <C>
Operating revenues $ 2,409 $ 2,440 $ 2,432 $ 2,474
Operating income (loss) before
extraordinary item (111) (106) 20 82
Extraordinary item 0 0 0 253
Net Income (loss) (111) 255 20 419
Operating income (loss) per share
before extraordinary item (1) (.03) (.02) .00 .01
Extraordinary item per share (1) .00 .00 .00 .05
Net Income (loss) per share (1) (.03) .05 .00 .08
1993
----
Operating revenues $ 2,471 $ 2,418 $ 2,441 $ 2,322
Operating income (loss) before
extraordinary item (236) (164) (134) (198)
Extraordinary item 0 286 0 0
Net income (loss) 101 122 92 (198)
Operating income (loss) per share before
extraordinary item (1) (.12) (.04) (.04) (.06)
Extraordinary item per share (1) .00 .07 .00 .00
Net income (loss) per share (1) .05 .03 .02 (.06)
<FN>
(1) Per Share calculations for each of the quarters is based on a
weighted average number of shares outstanding for each period and,
therefore, the sum of the quarters may not necessarily equal
full-year amounts.
</TABLE>
F-23
<PAGE> 47
SCHEDULE IX -- SHORT-TERM BORROWINGS
CLEVETRUST REALTY INVESTORS
September 30, 1994
<TABLE>
<CAPTION>
MAXIMUM
PRINCIPAL AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
AVERAGE OUTSTANDING OUTSTANDING RATE
INTEREST INTEREST DURING DURING DURING
CATEGORY OF AGGREGATE BALANCE AT RATE AT END THE THE THE
SHORT-TERM BORROWINGS END OF PERIOD OF PERIOD PERIOD(4) PERIOD(5) PERIOD(6)
--------------------- ------------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1994:
Notes payable to bank (1) (2) (3) $ 7,689 7.75% $7,689 $ 21 7.75%
Year ended September 30, 1993:
Notes payable to bank (2) (3) $ -0- 4.60% $2,350 $ 451 6.75%
Year ended September 30, 1992:
Notes payable to bank (2) (3) $2,350 6.75% $2,400 $2,387 7.90%
<FN>
(1) At September 30, 1994 the outstanding balance represents a $7,689,000
loan made to the Trust by National City Bank of Cleveland ("NCB")
under terms of a demand note. The interest rate on this loan was
NCB's prime rate, which was 7.75% at September 30, 1994.
(2) The Trust had a $500,000 revolving line of credit with a bank which
was secured by a certificate of deposit and on which the Trust paid
interest at the rate of 4.75%. This revolving line of credit matured
October 3, 1994 and was not renewed. There were no borrowings
outstanding at September 30, 1994, 1993, or 1992.
(3) At September 30, 1992 the outstanding balance represents $2,350,000
or Segment A of the $10,350,000 1990 Credit Agreement balance. Per
the second amendment to the 1990 Credit Agreement which was executed
October 27, 1992, the $2,350,000 was due as follows: $1,200,000 was
due on or before December 31, 1992 and the balance was due on or
before March 31, 1993. A $865,000 payment was made November 24,
1992. The balance of $1,485,000 was paid December 31, 1992 through
funds generated via the 1992 Right's Offering which expired
December 28, 1992. Interest on Segment A was the prime rate plus
3/4 of 1%. Segment B ($8,000,000) is to be paid based on a 15 year
amortization schedule at a rate of 8.5%, with the unpaid balance due
on December 31, 1997. This loan was converted to a revolving line
of credit effective January, 1994. During January and February, 1994
this loan was repaid in full. At September 30, 1994 there were
no borrowings outstanding.
(4) The maximum period amount outstanding during the period represents
the maximum principal amount outstanding at any month-end during the
said period.
(5) The average amount outstanding during the period represents the daily
weighted average borrowings outstanding which was determined by
first determining the average monthly balance (total of the daily
balances divided by the number of days in said month) and then
multiplying the average monthly balances by the number days in the
respective months; the total of these is then divided by the total
number of days in that year.
(6) The weighted average interest rate during the period was determined
by dividing the annual interest expense by the weighted average
daily borrowings.
</TABLE>
F-24
<PAGE> 48
SCHEDULE X --- SUPPLEMENTAL INCOME STATEMENT INFORMATION
CLEVETRUST REALTY INVESTORS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs $ 720 $ 681 $ 737
Taxes, other than payroll and
income taxes:
Real Estate $1,055 $1,097 $1,131
</TABLE>
Amounts for advertising, depreciation and amortization of intangibles assets,
preoperating costs and similar deferrals, personal property taxes, other taxes,
and royalties are not presented, as such amounts are less than 1% of total
sales and revenues.
F-25
<PAGE> 49
SCHEDULE XI -- REAL ESTATE AND ACCUMULATED DEPRECIATION
CLEVETRUST REALTY INVESTORS
As of September 30, 1994
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
CARRIED AT
INITIAL CLOSE OF
AMOUNT OF COST TO COST OF PERIOD ACCUMULATED CONSTRUCTION DEPRECIATION
CLASSIFICATION ENCUMBRANCES TRUST(1) IMPROVEMENTS (1)(3) DEPRECIATION(2) COMPLETED ACQUIRED LIVES(4)
-------------- ------------ -------- ------------ --------- --------------- ------------ -------- ------------
(IN THOUSANDS) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office Buildings:
Englewood, Colorado:
Building (5) $ 4,328 $ 489 $ 4,817 $ 2,788 Various, ranging
------- ------- ------- ------- from 5 to
$1,121 4,328 489 4,817 2,788 1970 1971 40 years.
Tulsa, Oklahoma:
Land 648 648
Building 3,306 2,841 6,147 3,943 Various, ranging
------- ------- ------- ------- from 5 to
-0- 3,954 2,841 6,795 3,943 1963 1972 40 years.
Denver, Colorado
Land 165 165
Building 2,834 1,370 4,204 2,629 Various, ranging
------- ------- ------- ------- from 5 to
-0- 2,999 1,370 4,369 2,629 1971 1972 40 years.
Dallas, Texas:
Land 1,500 1,500
Building 8,439 859 9,298 2,917 1981 1983 Various, ranging
------- ------- ------- ------- from 5 to
-0- 9,939 859 10,798 2,917 40 years.
Dallas, Texas:
Land 335 335
Building 3,583 -0- 3,583 7 1980 1994 40 years
------- ------- ------- -------
2,168 3,918 -0- 3,918 7
Commercial:
St. Louis, Missouri:
Land 287 287
Building 2,715 2,098 4,813 3,167 Various, ranging
------- ------- ------- ------- from 5 to
-0- 3,002 2,098 5,100 3,167 1971 1976 35 years.
Austin, Texas:
Land 874 874
Building 6,758 518 7,276 1,770 Various, ranging
------- ------- ------- ------- from 5 to
5,947 7,632 518 8,150 1,770 1981 1987 40 years.
Davenport, Iowa (5):
Land 1,013 1,013
Building 4,373 105 4,478 830 Various, ranging
------- ------- ------- ------- from 5 to
-0- 5,386 105 5,491 830 1980 1987 40 years.
Dubuque, Iowa (5):
Land 401 401
Building 4,800 133 4,933 905 Various, ranging
------- ------- ------- ------- from 5 to
-0- 5,201 133 5,334 905 1980 1987 40 years.
Ardmore, Oklahoma:
Land 684 684
Building 2,847 356 3,203 684 Various, ranging
------- ------- ------- ------- from 10 to
551 3,531 356 3,887 684 1975 1989 31 years.
Miscellaneous
Investments:
Land 2,040 2,040
Building 7,339 2,990 10,329 6,008
------- ------- ------- -------
1,324 9,379 2,990 12,369 6,008
------- ------- ------- ------- -------
TOTALS $11,111 $59,269 $11,759 $71,028 $25,648
======= ======= ======= ======= =======
Summary:
Land $ 7,947
Buildings 63,081
-------
$71,028
=======
</TABLE>
F-26
<PAGE> 50
SCHEDULE XI - - REAL ESTATE AND ACCUMULATED DEPRECIATION - - CONTINUED
CLEVETRUST REALTY INVESTORS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
(1) Reconciliation of real estate:
Balance of real estate at October 1, 1993,
1992 and 1991, respectively $73,296 $73,689 $74,095
Additions during period:
Other capital improvements 853 657 517
Purchase of Property 3,918 220 -0-
-------- -------- ---------
TOTAL ADDITIONS 4,771 877 517
-------- -------- --------
78,067 74,566 74,612
Application of allowance for investment
losses 6,089 -0- -0-
Less carrying amount of real estate sold
or disposed 950 1,270 923
-------- -------- --------
Balance of real estate at September 30,
1994, 1993 and 1992, respectively $71,028 $73,296 $73,689
======= ======= =======
(2) Reconciliation of allowances for depreciation:
Balance of allowance for depreciation at
October 1, 1993, 1992 and 1991,
respectively $23,902 $22,179 $19,982
Provisions for depreciation for
the period 1,972 2,149 2,197
-------- -------- --------
25,874 24,328 22,179
Less allowance for depreciation on
real estate sold or disposed 226 426 -0-
-------- -------- ---------
Balance of allowance for depreciation
at September 30, 1994, 1993, and
1992, respectively $25,648 $23,902 $22,179
======= ======= =======
<FN>
(3) The Trust aggregate cost for federal tax purposes as of September 30, 1994
was $78,840,000. The Trust's tax return for the year ended September 30,
1994 has not yet been filed.
(4) Depreciation lives exclude tenant improvements which are depreciated over
the specific lease term involved.
(5) The Trust owns the building improvements subject to a long term ground
lease.
</TABLE>
F-27
<PAGE> 51
SCHEDULE XII - - MORTGAGE LOANS ON REAL ESTATE
CLEVETRUST REALTY INVESTORS
September 30, 1994
<TABLE>
<CAPTION>
CARRYING
AMOUNT OF
MORTGAGES FINAL
AS OF MATURITY
SEPTEMBER DATE/RANGE
30, FINAL PERIODIC AMOUNT OF FACE
1994 RATE/RANGE MATURITY PAYMENT PRIOR AMOUNT OF
CLASSIFICATION (1)(2) OF RATES DATES TERMS LIENS MORTGAGES
-------------- ------ -------- ----- ----- ----- ---------
(IN (IN THOUSANDS)
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Second mortgage loan
on vacant land
in Akron, Ohio $236 10.00% August, 1996 (3) $1,180 $290
Accrued interest 0
-----
TOTAL $236
====
</TABLE>
F-28
<PAGE> 52
SCHEDULE XII -- MORTGAGE LOANS ON REAL ESTATE -- CONTINUED
CLEVETRUST REALTY INVESTORS
(1) Reconciliation of carrying amount of mortgage loans:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Balance as of October 1, 1993, 1992 and
1991, respectively $155 $2,291 $2,213
Additions during the year:
Mortgage received in connection
with sale of property 290 150 --
Amortization of purchase money
mortgage discounts -- 14 16
Increase in accrued interest -- 62 62
---- ------ ------
TOTAL ADDITIONS 290 78 78
---- ------ ------
445 2,517 2,291
Less Deductions during the year:
Mortgage loan principal repayments 204 2,000 --
Accrued Interest 5 362 --
---- ------ ------
TOTAL DEDUCTIONS 209 2,362 -0-
---- ------ ------
Balance as of September 30, 1994, 1993
and 1992, respectively $236 $ 155 $2,291
==== ====== ======
(2) The carrying amount at September 30, 1994 of the mortgage loans for federal income tax purposes was $236,000.
(3) Interest only payments are due quarterly in the arrears on the 1st day of each March, June, September and December for all
interest accrued to such date. Principal payments of $5,375.00 per lot are to be made from the proceeds of the sale of each
lot of the vacant land securing this loan until all principal is paid or August, 1996 at which time all unpaid principal is
due. Notwithstanding anything to the contrary, provided Borrower is not otherwise in default, this loan shall be interest
free for the first eighteen (18) months of the term of the loan.
</TABLE>
F-29
<PAGE> 53
Copies of the Letter of Transmittal may be delivered by facsimile
transmission from Eligible Institutions. The Letter of Transmittal and
certificates for shares and any other required documents should be sent or
delivered by each tendering shareholder or his broker, dealer, commercial bank,
trust company or other nominee to the Depositary at address set forth below
The Depositary is:
American Stock Transfer & Trust Company
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand or Overnight Courier:
(Eligible Institutions Only):
American Stock Transfer American Stock Transfer
& Trust Company (718) 234-5001 & Trust Company
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, NY 10005 Confirm by Telephone: New York, NY 10005
Attention: Reorganization Dept.
(718) 921-8200
For Information Call:
(718) 921-8200
</TABLE>
Any questions or requests for assistance or for additional copies of
the Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone numbers and
address set forth below. You may also contact your broker, dealer, commercial
bank or trust company for assistance concerning the offer. To confirm the
delivery of your shares, you are directed to contact the Depositary.
The Information Agent is:
Beacon Hill Partners, Inc.
90 Broad Street
New York, NY 10004
(212) 843-8500 or 1-800-755-5001
(212) 843-4384 (fax)
August 21, 1995
<PAGE> 1
EXHIBIT (a)(2)
FORM OF LETTER OF TRANSMITTAL.
<PAGE> 2
LETTER OF TRANSMITTAL
TO TENDER SHARES OF BENEFICIAL INTEREST
OF
CLEVETRUST REALTY INVESTORS
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 21, 1995
THIS OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M. EASTERN
DAYLIGHT SAVINGS TIME, ON SEPTEMBER 22, 1995, UNLESS THE OFFER IS EXTENDED.
To: AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight Courier:
(Eligible Institutions Only)
American Stock Transfer (718) 234-5001 American Stock Transfer
& Trust Company & Trust Company
40 Wall Street, 46th Floor Confirmation by Telephone: 40 Wall Street, 46th Floor
New York, NY 10005 (718) 921-8200 New York, NY 10005
Attention: Reorganization For Information Call: Attention: Reorganization
Department (718) 921-8200 Department
</TABLE>
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4)
-------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS CERTIFICATE(S) TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY)
-------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
TOTAL SHARES
TENDERED.....................................
<FN>
-------------------------------------------------------------------------------------------------------------------------------
Indicate above the order (by certificate number) in which Shares are to be purchased in event of proration. (Attach
additional signed list if necessary):*** See Instruction 9.
===============================================================================================================================
* Need not be completed if Shares are delivered by book-entry transfer.
** If you desire to tender fewer than all of the Shares evidenced by any certificates listed above, please indicate in this
column the number of Shares you wish to tender. Otherwise, all Shares evidenced by such certificates will be deemed to
have been tendered. See Instruction 4.
*** If you do not designate an order, in the event less than all Shares tendered are purchased due to proration, Shares will be
selected for purchase by the Depositary.
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN ONE AS SHOWN ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS LISTED ABOVE,
DOES NOT CONSTITUTE A VALID DELIVERY.
This Letter of Transmittal is to be used only if (a) certificates for
Shares (as defined below) are to be forwarded with it or (b) a tender of Shares
is to be made by book-entry transfer to the account maintained by the Depositary
at The Depository Trust Company, the Midwest Securities Trust Company, or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility")
pursuant to Section 3 of the Offer to Purchase.
<PAGE> 3
Shareholders who desire to tender Shares pursuant to the Offer and who
cannot deliver their certificates for their Shares (or who are unable to comply
with the procedures for book-entry transfer on a timely basis) and all other
documents required by this Letter of Transmittal to the Depositary at or before
the Expiration Date (as defined in the Offer to Purchase) may tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. See Instruction 2. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Depositary.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
Window Ticket Number (if available): _______________________________________
If Delivery is by Book-Entry Transfer:
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
ODD LOTS
(SEE INSTRUCTION 7)
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person owning beneficially as of the close of business on August 17,
1995, and continuing to own beneficially until the Expiration Date, an aggregate
of fewer than 100 Shares.
The undersigned either (check one box):
/ / was the beneficial owner as of the close of business on August
17, 1995 and will continue to be the beneficial owner until the
Expiration Date, of an aggregate of fewer than 100 Shares, all of
which are being tendered or
/ / is a broker, dealer, commercial bank, trust company or other
nominee that (i) is tendering, for the beneficial owners thereof,
Shares with respect to which it is the record owner, and (ii)
believes, based upon representations made to it by each such
beneficial owner, that such beneficial owner owned beneficially as of
the close of business on August 17, 1995 and will continue to own
beneficially until the Expiration Date, an aggregate of fewer than 100
Shares, and is tendering all of such Shares,
and, in either case, hereby represents that the above indicated
information is true and correct as to the undersigned.
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
CONDITIONAL TENDER
(SEE INSTRUCTION 8)
/ / CHECK HERE IF TENDER OF SHARES IS CONDITIONED ON THE COMPANY PURCHASING ALL
OR A MINIMUM NUMBER OF THE TENDERED SHARES, AND COMPLETE THE FOLLOWING:
Minimum Number of Shares to be sold: ______________________________________
<PAGE> 4
LADIES AND GENTLEMEN:
The undersigned hereby tenders to CleveTrust Realty Investors, a
Massachusetts business trust (the "Company"), the above-described shares of the
Company's Shares of Beneficial Interest, par value $1.00 per share ( the
"Shares"), at the price of $4.00 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Company's Offer to Purchase
dated August 21, 1995, receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to all Shares tendered
hereby or orders the registration of such Shares tendered by book-entry transfer
that are purchased pursuant to the Offer to or upon the order of the Company and
hereby irrevocably constitutes and appoints the Depositary as attorney-in-fact
of the undersigned with respect to such Shares, with full power of substitution
(such power of attorney being an irrevocable power coupled with an interest),
to:
(a) deliver certificates for Shares, or transfer ownership of such
Shares on the account books maintained by a Book-Entry Transfer Facility,
together in either such case with all accompanying evidences of transfer
and authenticity, to or upon the order of the Company, upon receipt of the
Depositary, as the undersigned's agent, of the Purchase Price (as defined
below) with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the Instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that (i) the undersigned has a net long
position in Shares or equivalent securities at least equal to the Shares
tendered within the meaning of Rule 14e-4 under the Securities Exchange Act
of 1934, as amended, and (ii) such tender of Shares complies with Rule
14e-4;
(b) when and to the extent the Company accepts the Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read, understands and agrees with all of the
terms of the Offer.
The names and addresses of the registered holders should be printed, if
they are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates, and the number of Shares that the
undersigned wishes to tender, should be set forth in the appropriate boxes
above.
The undersigned understands that, if he tenders all of his Shares, he may
condition his tender of Shares upon the acceptance by the Company of all or a
minimum number of Shares tendered hereby, as described in Section 3 of the Offer
to Purchase. SUCH A CONDITIONAL TENDER MAY BE MADE BY COMPLETING THE SECTION
UNDER THE HEADING "CONDITIONAL TENDER" ABOVE. IF SUCH SECTION IS NOT COMPLETED,
THE TENDER WILL BE DEEMED UNCONDITIONAL.
<PAGE> 5
The undersigned understands that the Company seeks to purchase 500,000 of
its Shares at the price of $4.00 per Share. The undersigned understands that
Shares properly tendered and not withdrawn will be purchased at the Purchase
Price, net to the seller in cash, upon the terms and subject to the conditions
of the Offer, including its proration provisions, NASDAQ Continued Listing
Condition and conditional tender provisions, and that the Company will return
all other Shares, including Shares not purchased because of proration or
conditional tenders.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may accept for payment fewer than all of the Shares tendered hereby. In either
event, the undersigned understands that certificates for any Shares not tendered
or not purchased will be returned to the undersigned at the address indicated
above unless otherwise indicated under the "Special Payment Instructions" or
"Special Delivery Instructions" below. The undersigned recognizes that the
Company has no obligation, pursuant to the Special Payment Instructions, to
transfer any certificate for Shares from the name of their registered holder, or
to order the registration or transfer of such Shares tendered by book-entry
transfer, if the Company purchases none of the Shares represented by such
certificate or tendered by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for such of the tendered Shares as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the Special Payment
Instructions or the Special Delivery Instructions below.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligations of the undersigned under this Letter of Transmittal shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
<PAGE> 6
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
--------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6, 8, AND 10)
To be completed ONLY if certificate(s) for Shares not tendered or not purchased
and/or any check for the Purchase Price of Shares purchased are to be issued in
the name of someone other than the undersigned, or if shares delivered by
book-entry transfer that are not purchased are to be returned by credit to an
account maintained by the Book-Entry Transfer Facility.
Issue: / / Check / / Certificate(s) to:
Name: ..........................................................................
(Please Print)
Address: .......................................................................
................................................................................
(Include Zip Code)
................................................................................
(Taxpayer Identification or Social Security Number)
Credit Shares tendered by book-entry transfer and not purchased to the account
set forth below:
Name of account party: .........................................................
Account number: ................................................................
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6, 8, AND 10)
To be completed ONLY if certificate(s) for Shares not tendered or not purchased
and/or any check for the Purchase Price of Shares purchased are to be sent to
someone other than the undersigned or to the undersigned at an address other
than that shown above.
Deliver: / / Check / / Certificate(s) to:
Name: ..........................................................................
(Please Print)
Address: .......................................................................
................................................................................
(Include Zip Code)
................................................................................
(Taxpayer Identification or Social Security Number)
--------------------------------------------------------------------------------
------------------------------------------------------
SHAREHOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE ENCLOSED FORM W-9)
Must be signed by the registered holder(s) exactly as
name(s) appear(s) on certificate(s) or on a security
position listing or by person(s) authorized to become
registered holder(s) by certificate(s) and documents
transmitted with this Letter of Transmittal. If
signature is by attorney-in-fact, executor,
administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or
representative capacity, please set forth the full
title. See Instruction 5.
SIGN ...................................................... SIGN
HERE HERE
ARROW ...................................................... ARROW
(SIGNATURE(S) OF OWNER(S))
Name(s): .............................................
......................................................
(PLEASE PRINT)
Capacity, if applicable (full title): ................
Address: .............................................
......................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ......................
Dated: ........................................., 1995
Tax ID No. or Social Security No.: ...................
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: ................................
Name(s): .............................................
(PLEASE PRINT)
Title: ...............................................
Name of Firm: ........................................
Address: .............................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ......................
Dated: ........................................., 1995
------------------------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of
the Shares exactly as the name of the registered holder appears on the
certificate (which term, for purposes of this document, shall include any
participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) tendered with this Letter
of Transmittal and payment and delivery are to be made directly to such
owner unless such owner has completed either the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a bank, broker,
dealer, credit union, savings association or other entity that is a member
in good standing of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (each such entity, an "Eligible
Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal. See Instructions 5 and 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates are
delivered with it to the Depositary (or such certificates are being delivered
pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary)
or if tenders are to be made pursuant to the procedure for tender by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered Shares or confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of Shares tendered
electronically, together in each case with a facsimile of the Letter of
Transmittal and any other documents required by this Letter of Transmittal,
should be mailed or delivered to the Depositary at the appropriate address set
forth herein and must be delivered to the Depositary on or before the Expiration
Date.
Shareholders whose certificates are not immediately available or who cannot
deliver Shares and all other required documents to the Depositary before the
Expiration Date, or whose Shares cannot be delivered on a timely basis pursuant
to the procedures for book-entry transfer, may tender their Shares by or through
any Eligible Institution by properly completing and duly executing and
delivering a Notice of Guaranteed Delivery (or facsimile of it) and by otherwise
complying with the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase. Pursuant to such procedure, the certificates for all
physically tendered Shares or book-entry confirmation, as the case may be, as
well as a properly completed and duly executed Letter of Transmittal and all
other documents required by this Letter of Transmittal, must be received by the
Depositary within five business days after receipt by the Depositary of such
Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to
Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by a telegram, facsimile transmission or mail to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery. For Shares to be tendered validly pursuant to the
guaranteed delivery procedure, the Depositary must receive the Notice of
Guaranteed Delivery on or before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
The Company will not accept any alternative or contingent tenders, nor will
it purchase any fractional Shares, except as expressly provided in the Offer to
Purchase. All tendering shareholders, by execution of this Letter of Transmittal
(or a photocopy of it), waive any right to receive any notice of the acceptance
of their tender.
<PAGE> 8
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered." In such case, if
any tendered Shares are purchased, a new certificate for the remainder of the
Shares evidenced by the old certificate(s) will be issued and sent to the
registered holder(s), unless otherwise specified in either the "Special Payment
Instructions" or "Special Delivery Instructions" box in this Letter of
Transmittal, as soon as practicable after the Expiration Date. Unless otherwise
indicated, all Shares represented by the certificates listed and delivered to
the depositary will be deemed to have been tendered.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the certificate(s)
without any change whatsoever.
(b) If the Shares are registered in the names of two or more joint
holders, each such holder must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or photocopies of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of
certificate(s) representing such Shares or separate stock powers are
required unless payment is to be made, or the certificate(s) for Shares not
tendered or not purchased are to be issued, to a person other than the
registered holder(s). Signatures on such certificates or powers must be
guaranteed by an Eligible Institution. If this Letter of Transmittal is
signed by any person other than the registered holder(s) of the
certificate(s) listed, the certificate(s) must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s)
of the registered holder(s) appears on the certificate(s), and the
signatures(s) on such certificate(s) or stock powers must be guaranteed by
an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such person should so indicate when signing and
must submit proper evidence satisfactory to the Company of their authority
so to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter of
Transmittal. The Company will pay or cause to be paid any stock transfer taxes
payable on the transfer to it of Shares purchased pursuant to the Offer. If,
however:
(a) payment of the Purchase Price is to be made to any person other
than the registered holder(s);
(b) Shares not tendered or not accepted for purchase are to be
registered in the name of any person other than the registered holder(s);
or
(c) tendered certificates are registered in the name of any person
other than the person(s) signing this Letter of Transmittal;
<PAGE> 9
then the Depositary will deduct from the Purchase Price the amount of any stock
transfer taxes (whether imposed on the registered holder, such other person or
otherwise) payable on account of the transfer to such person unless satisfactory
evidence of the payment of such taxes or an exemption from them is submitted.
7. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the
Company is to purchase fewer than all Shares tendered before the Expiration Date
and not withdrawn, the Shares purchased first will, under certain circumstances,
consist of all Shares tendered by any shareholder who owned of record or owned
beneficially, as of the close of business on August 17, 1995, an aggregate of
fewer than 100 Shares, and who tenders all of his Shares (an "Odd Lot Owner").
This preference will not be available unless the Section captioned "Odd Lots" in
this Letter of Transmittal is completed.
8. CONDITIONAL TENDERS. As described in Section 3 of the Offer to Purchase,
shareholders may condition their tenders on all or a minimum number of their
tendered Shares being purchased ("Conditional Tenders"). If the effect of
accepting tenders on a pro rata basis is to reduce the number of Shares to be
purchased from any shareholder below the minimum number specified, such tender
will automatically be deemed withdrawn, except as provided in the Offer to
Purchase. All tendered Shares shall be deemed unconditionally tendered unless
the Conditional Tender section is completed. Odd Lot Shares, in order to be
eligible for preferential treatment, cannot be conditionally tendered. It is the
tendering shareholder's responsibility to calculate the minimum number of Shares
he wishes to tender, and each shareholder is urged to consult his own tax
advisor in this regard.
9. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of
the Offer to Purchase, shareholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase may
have an effect on the amount and classification for federal income tax purposes
of any gain or loss on the Shares purchased. See Sections 1 and 14 of the Offer
to Purchase.
10. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares
not tendered or not purchased and/or check(s) are to be issued in the name of a
person other than the signer of the Letter of Transmittal or if such
certificate(s) and/or check(s) are to be sent to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" in this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1.
11. IRREGULARITIES. All questions as to the number of Shares to be accepted
and the validity, form, eligibility (including time of receipt) and acceptance
for payment of any tender of Shares will be determined by the Company in its
sole discretion, which determinations shall be final and binding on all parties.
The Company reserves the absolute right to reject any or all tenders of Shares
it determines not to be in proper form or the acceptance of which or payment for
which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any of the conditions of the Offer and
any defect or irregularity in the tender of any particular Shares, and the
Company's interpretation of the terms of the Offer (including these
instructions) will be final and binding on all parties. No tender of Shares will
be deemed to be properly made until all defects and irregularities have been
cured or waived. Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as the Company shall determine. None of
the Company, the Depositary, the Information Agent (as defined in the Offer to
Purchase) or any other person is or will be obligated to give notice of any
defects or irregularities in tenders and none of them will incur any liability
for failure to give any such notice.
12. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at its address and
telephone number set forth at the end of this Letter of Transmittal or from your
broker, dealer, commercial bank or trust company.
<PAGE> 10
13. FORM W-9 AND FORM W-8. Shareholders other than corporations and certain
foreign individuals may be subject to backup federal income tax withholding.
Each such tendering shareholder or other payee who does not otherwise establish
to the satisfaction of the Depositary an exemption from backup federal income
tax withholding is required to provide the Depositary with a correct taxpayer
identification number ("TIN") on Form W-9 which is provided with this Letter of
Transmittal, and to indicate that the shareholder or other payee is not subject
to backup withholding. For an individual, his TIN will generally be his social
security number. Failure to provide the information on the form may subject the
tendering shareholder or other payee to 31% backup federal income tax
withholding on the payments made to the shareholder or other payee with respect
to Shares purchased pursuant to the Offer and to a penalty imposed by the
Internal Revenue Service. Backup withholding is not an additional tax. Rather,
the tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained. You may submit the form if you have applied for, but
have not yet received a TIN. If the Depositary is not provided a TIN within
sixty (60) days, the Depositary will withhold 31% on all payments thereafter
until a TIN is provided to the Depositary. Shareholders who are foreign
individuals should submit Form W-8 to certify that they are exempt from backup
withholding, unless Instruction 14 applies. Form W-8 may be obtained from the
Depositary. For additional information concerning Form W-9, see the accompanying
instructions thereto.
14. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depositary will withhold
federal income tax equal to 30% of the gross proceeds payable to a foreign
shareholder or his agent unless the Depositary determines that a reduced rate of
withholding is available pursuant to a tax treaty or that an exemption from
withholding is applicable because such gross proceeds are effectively connected
with the conduct of a trade or business in the United States. For this purpose,
a foreign shareholder is any shareholder that is not (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof or (iii) an estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. In order
to apply for a reduced rate of withholding pursuant to a tax treaty, a foreign
shareholder must deliver to the Depositary a properly completed Form 1001. In
order to apply for exemption from withholding on the basis that the gross
proceeds are effectively connected with the conduct of a trade or business in
the United States, a foreign shareholder must deliver to the Depositary a
properly completed Form 4224 and furnish such other information as the
Depositary shall request. (Exemption from backup withholding does not exempt a
foreign shareholder from the 30% withholding.) These forms can be obtained from
the Depositary or the Information Agent. The Depositary will determine a
shareholder's status as a foreign shareholder and eligibility for a reduced rate
of, or an exemption from, withholding by reference to the shareholder's address
and to any submitted certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding, unless facts and circumstances
indicate that reliance is not warranted or applicable law requires some other
method for determining eligibility for determining whether a reduced rate of
withholding is applicable. A foreign shareholder with respect to whom tax has
been withheld may be eligible to obtain a refund of all or a portion of the
withheld tax if such shareholder meets one of the exceptions for capital gain or
loss treatment described in Section 14 of the Offer to Purchase or is otherwise
able to establish that no tax or a reduced amount of tax was due. Foreign
shareholders are urged to consult their tax advisors regarding the application
of federal income tax withholding, including eligibility for a withholding tax
reduction or exemption and the refund procedures.
<PAGE> 11
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<S> | <C> | <C>
SUBSTITUTE | | ______________________________________
| PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX | Social Security Number
| AT THE RIGHT AND CERTIFY |
FORM W-9 | BY SIGNING AND DATE BELOW | or_____________________________________
| | Employer Identification Number
| |
|-----------------------------------------------------------------------------------------------------
Department of the Treasury, | PART 2--Certification--Under penalties of perjury, I certify that:
Internal Revenue Service |
| (1) The number shown on this form is my correct Taxpayer Identification
PAYER'S REQUEST FOR | Number (or I am waiting for a number to be issued to me) and
TAXPAYER IDENTIFICATION |
NUMBER (TIN) | (2) I am not subject to backup withholding because: (a) I am exempt from
| backup withholding, or (b) I have not been notified by the Internal Revenue
| Service (the "IRS") that I am subject to backup withholding as a result of a
| failure to report all interest or dividends, or (c) the IRS has notified me that
| I am no longer subject to backup withholding.
|
| Certification Instructions--You must cross out item (2) above if you have
| been notified by the IRS that you are currently subject to backup withholding
| because of under-reporting interest or dividends on your tax return. However,
| if after being notified by the IRS that you were subject to backup withholding
| you received another notification from the IRS that you are no longer subject
| to backup withholding, do not cross out such Item (2).
|-----------------------------------------------------------------------------------------------------
| | PART 3 --
| |
SIGN HERE ARROW | Signature ________________________________ | Awaiting TIN / /
| Date________________________________, 1995 |
| |
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
--------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER.
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld.
Signature___________________________ Date____________________________, 1995
--------------------------------------------------------------------------------
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------- ---------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
--------------------------------------------------------- ---------------------------------------------------------
1. An individual's account The individual 7. Corporate The corporation
2. Two or more individuals The actual owner of 8. Association, club, religious, The organization
(joint account) the account or, if charitable, educational or
combined funds, any other tax-
one of the individu- exempt organization
als(1) 9. Partnership The partnership
3. Custodian account of a minor The minor(2) 10. A broker or registered The broker or
(Uniform Gift to Minors Act) nominee nominee
4. a. The usual revocable The grantor- 11. Account with the Department The public entity
savings trust account trustee(1) of Agriculture in the name of
(grantor is also trustee) a public entity (such as a
b. So-called trust account The actual owner(1) State or local government,
that is not a legal or school district, or prison)
valid trust under State law that receives agricultural
5. Sole proprietorship account The owner(3) program payments
6. A valid trust, estate, or Legal entity (Do not
pension trust furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
--------------------------------------------------------- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service (the "IRS") and
apply for a number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following lists payees that are exempt from backup withholding and
information reporting. For interest and dividends, all listed payees are exempt
except item (9). For broker transactions, payees listed in (1) through (13), and
a person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except that a corporation that provides
medical and health care services or bills and collects payments for such
services is not exempt from backup withholding or information reporting. Only
payees described in items (2) through (6) are exempt from backup withholding for
barter exchange transactions, patronage dividends, and payments by certain
fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan (IRA), or a custodial account under 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A state, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
(5) A foreign government or a political subdivision, agency or
instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664(c) or described in section
4947(a)(1).
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresidential partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interests on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Payments are not subject to information reporting and are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires you to furnish your correct taxpayer
identification number (TIN) to persons who must file information returns with
IRS to report interest, dividends, and certain other income paid to you,
mortgage interest you paid, the acquisition or abandonment of secured property,
or contributions you made to an individual retirement arrangement (IRA). IRS
uses the numbers for identification purposes and to help verify the accuracy of
your tax return. You must provide your TIN whether or not you are required to
file a tax return. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a TIN to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN ITEMS ON YOUR TAX RETURN -- If you fail to
properly include on your tax return certain items reported to IRS, such failure
will be treated as being due to negligence and will be subject to a penalty
equal to the sum of 20% on any portion of an underpayment of tax attributable to
that failure unless there is clear and convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 14
Copies of the Letter of Transmittal may be delivered by facsimile transmission
from Eligible Institutions. The Letter of Transmittal and certificates for share
and any other required documents should be sent or delivered by each tendering
shareholder or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at its address set forth below.
<TABLE>
The Depositary is:
American Stock Transfer & Trust Company
<S> <C> <C>
By Mail: Facsimile Transmission By Hand or Overnight Courier:
(Eligible Institutions Only):
American Stock Transfer (718) 234-5001 American Stock Transfer
& Trust Company & Trust Company
40 Wall Street, 46th Floor Confirm by Telephone: 40 Wall Street, 46th Floor
New York, NY 10005 (718) 921-8200 New York, NY 10005
Attention: Reorganization Attention: Reorganization
Department For Information Call: Department
(718) 921-8200
</TABLE>
Any questions or requests for assistance or for additional copies of the
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone numbers and
addresses set forth below. You may also contact your broker, dealer, commercial
bank or trust company for assistance concerning the Offer. To confirm the
delivery of your shares, you are directed to contact the Depositary.
The Information Agent is:
Beacon Hill Partners, Inc.
90 Broad Street
New York, NY 10004
(212) 843-8500 or 800-755-5001
(212) 843-4384 (fax)
August 21, 1995
<PAGE> 1
EXHIBIT (a)(3)
FORM OF NOTICE OF GUARANTEED DELIVERY.
<PAGE> 2
NOTICE OF GUARANTEED DELIVERY
OF
SHARES OF BENEFICIAL INTEREST
OF
CLEVETRUST REALTY INVESTORS
A form substantially equivalent to that set forth below must be used
to accept the Offer (as defined below) if certificates for shares of Shares of
Beneficial Interest, par value $1.00 per share (the "Shares"), of CleveTrust
Realty Investors, are not immediately available, or if the procedures for
book-entry transfer, as set forth in the Offer to Purchase, cannot be completed
on a timely basis, or time will not permit the Letter of Transmittal and other
required documents to reach the Depositary by the Expiration Date (as defined
in the Offer to Purchase). Such form may be delivered by hand, mail, telegram,
telex or facsimile transmission to the Depositary. See Section 3, "Procedure
for Tendering Shares", of the Offer to Purchase.
TO THE DEPOSITARY:
American Stock Transfer & Trust Company
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand or Overnight Courier:
(Eligible Institutions Only):
American Stock Transfer American Stock Transfer
& Trust Company (718) 234-5001 & Trust Company
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, NY 10005 Confirm by Telephone: New York, NY 10005
Attention: Reorganization Attention: Reorganization
Department (718) 921-8200 Department
For Information Call:
(718) 921-8200
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to CleveTrust Realty Investors, a
Massachusetts business trust, upon the terms and subject to the conditions set
forth in its Offer to Purchase dated August 21, 1995, and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is hereby
acknowledged, ________ Shares at the price of $4.00 per Share pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Share Certificate Nos. (if available) Signature(s):
_____________________________________ ___________________________
_____________________________________ Name(s): ___________________________
(Please Print)
___________________________
<PAGE> 3
Address: ______________________________
______________________________
If Shares will be delivered by book-entry
transfer, provide account number at The ______________________________
Depository Trust Company, The Midwest Area Code and Telephone Number
Securities Trust Company or the Philadelphia
Depository Trust Company
Account Number:______________________
GUARANTEE
The undersigned, bank, broker, dealer, credit union, savings
association, or other entity that is a member in good standing of a recognized
Medallion Program approved by The Securities Transfer Association Inc. (each,
an "Eligible Institution"), hereby (i) represents that the undersigned has a
net long position in Shares or equivalent securities within the meaning of Rule
14e-4 promulgated under the Securities Exchange Act of 1934, as amended, at
least equal to the Shares tendered, (ii) represents that such tender of Shares
complies with Rule 14e-4 and (iii) guarantees that either the certificates
representing the Shares tendered hereby are in proper form for transfer, or
timely confirmation of the book-entry of such Shares into the Depositary's
account at The Depository Trust Company, the Midwest Securities Trust Company
or the Philadelphia Depository Trust Company (pursuant to the procedures for
book-entry tender set forth in the Offer to Purchase), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantee and any other documents required by the Letter
of Transmittal, will be received by the Depositary at its address set forth
above within five business days after the date of receipt hereof by the
Depositary.
Firm: __________________________
Sign Here: __________________________
(Authorized Signature)
(Title): __________________________
Name: __________________________
(Please Print or Type)
Address:
___________________________________________
___________________________________________
Area Code and Telephone Number:
___________________________________________
Dated: _________________, 1995
<PAGE> 1
EXHIBIT (a)(4)
FORM OF LETTER TO BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES AND
OTHER NOMINEES DATED AUGUST 21, 1995.
<PAGE> 2
CLEVETRUST REALTY INVESTORS
2001 CROCKER ROAD,
SUITE 400
WESTLAKE, OHIO 44145
OFFER TO PURCHASE FOR CASH UP TO 500,000
OF ITS SHARES OF BENEFICIAL INTEREST, PAR VALUE $1.00 PER SHARE ( THE
"SHARES"),
AT A PURCHASE PRICE OF $4.00 PER SHARE
THE OFFER AND PRORATION PERIOD EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS
TIME, ON SEPTEMBER 22, 1995
UNLESS THE OFFER IS EXTENDED
DATE: AUGUST 21, 1995
To: Brokers, Dealers, Commercial Banks,
Trust Companies, and Other Nominees
CleveTrust Realty Investors, a Massachusetts business trust (the
"Company"), is offering to purchase up to 500,000 Shares at a price of $4.00
per share, net to the seller in cash, upon the terms and subject to the
conditions set forth in its Offer to Purchase dated August 21, 1995 and the
related Letter of Transmittal (which together constitute the "Offer").
All Shares properly tendered and not withdrawn will be purchased at
the Purchase Price, net to the seller in cash, upon the terms and subject to
the conditions of the Offer, including the proration terms thereof. See
Section 1 of the Offer to Purchase.
THE OFFER IS CONDITIONED UPON THERE BEING AT LEAST 400 BENEFICIAL
OWNERS OF THE COMPANY'S SHARES OF BENEFICIAL INTEREST FOLLOWING COMPLETION OF
THE OFFER, AND ON CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE OFFER TO
PURCHASE.
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee). Please bring the
Offer to their attention as promptly as possible. In connection with the
Offer, enclosed for your information and for forwarding to your clients for
whom you hold Shares registered in your name or in the name of your nominee are
copies of the following documents:
1. Offer to Purchase dated August 21, 1995;
2. Letter of Transmittal for your use and for the information of
your clients (together with instructions for IRS Form W-9);
3. Notice of Guaranteed Delivery to be used to accept the Offer
if certificates for Shares and all other required documents
cannot be delivered by the Expiration Date or if the procedure
for book-entry transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the
name of your nominee, with space provided for obtaining such
client's instructions with regard to the Offer; and
5. Letter dated August 21, 1995 from the Chairman and
President of the Company to the Company's shareholders.
<PAGE> 3
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE
OFFER AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT SAVINGS
TIME, ON FRIDAY, SEPTEMBER 22, 1995 UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or any
person for soliciting tenders of Shares pursuant to the Offer. The Company
will, however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to the
beneficial owners of Shares held by you as a nominee or in a fiduciary
capacity. The Company will pay your costs and will pay any stock transfer
taxes applicable to its purchase of Shares, except as otherwise provided in
Instruction 6 of the Letter of Transmittal. Fees will be paid to the
Depositary and the Information Agent as described in the Offer to Purchase for
their services in connection with the Offer.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be sent
to the Depositary with either the certificates representing the tendered
Shares, or confirmation of their book-entry transfer, all in accordance with
the instructions set forth in the Letter of Transmittal and the Offer to
Purchase.
As described in Section 3, "Procedure for Tendering Shares," of the
Offer to Purchase, tenders may be made without the concurrent deposit of stock
certificates or concurrent compliance with the procedure for book-entry
transfer if such tenders are made by or through a bank, broker, dealer, credit
union, savings association, or other entity that is a member in good standing
of a recognized Medallion Program approved by the The Securities Transfer
Association Inc. Certificates for Shares so tendered (or confirmation of a
book-entry transfer of such Shares to the Depositary or deposited to its
account at the book-entry transfer facility described in the Offer to
Purchase), together with a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal, must
be received by the Depositary within five (5) business days after timely
receipt by the Depositary of a properly completed and duly executed Notice of
Guaranteed Delivery. Any questions or requests for assistance or additional
copies of the Offer to Purchase and the Letter of Transmittal may be directed
to the Information Agent.
Very truly yours,
/s/John C. Kikol
Chairman and President
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES,
THE DEPOSITARY OR THE INFORMATION AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON
TO USE ANY DOCUMENTS OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH.
<PAGE> 1
EXHIBIT (a)(5)
FORM OF LETTER TO CLIENTS FOR USE BY BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
AND OTHER NOMINEES DATED AUGUST 21, 1995
<PAGE> 2
CLEVETRUST REALTY INVESTORS
OFFER TO PURCHASE FOR CASH UP TO 500,000 SHARES OF
BENEFICIAL INTEREST, PAR VALUE $1.00 PER SHARE (THE "SHARES"),
AT A PURCHASE PRICE OF $4.00 PER SHARE
DATE: AUGUST 21, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated August
21, 1995 and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by CleveTrust Realty Investors, a
Massachusetts business trust (the "Company"), to purchase for cash up to an
aggregate of 500,000 Shares at a price, net to the seller in cash, of $4.00 per
Share, upon the terms and subject to the conditions of the Offer.
The Offer is conditioned upon there being at least 400 beneficial
owners of each of the Shares following completion of the Offer, and on certain
other conditions.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH,
WE ARE THE ONLY ONES WHO CAN TENDER YOUR SHARES, AND THEN ONLY PURSUANT TO
INSTRUCTIONS. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR
INFORMATION ONLY; YOU CANNOT USE IT TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT.
Please instruct us whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. You may condition your tender of Shares on the Company
purchasing all or a minimum number of your Shares.
2. You may designate the priority in which your Shares shall be
purchased in the event of proration.
3. The Offer and proration period will expire at 5:00 P.M.
Eastern Daylight Savings time, on Friday, September 22, 1995, unless the
Company extends the Offer.
4. The Offer is for up to 500,000 Shares, constituting
approximately 9.16% of the Shares outstanding as of August 17, 1995.
5. Tendering Shareholders will not be obligated to pay any
brokerage commissions, solicitation fees or, subject to Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the Company's purchase of Shares
pursuant to the Offer.
6. If you beneficially held, as of the close of business on
August 17, 1995, an aggregate of fewer than 100 Shares, and you instruct us to
tender on your behalf all such Shares before the Expiration Date and check the
box captioned "Odd Lots" in the attached Instruction Form, the Company upon the
terms and subject to the conditions of the Offer, may accept all such Shares
for purchase before proration, if any, of the purchase of other Shares properly
tendered as described below.
7. If you wish to have us tender any or all of your Shares,
please so instruct us by completing, executing and returning to us the attached
Instruction Form. An envelope to return your instructions to us is enclosed.
If you authorize us to tender your Shares, we will tender all such Shares
unless you specify otherwise on the attached Instruction Form.
<PAGE> 3
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE
OFFER. THE OFFER AND PRORATION PERIOD EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT
SAVINGS TIME, ON FRIDAY, SEPTEMBER 22, 1995, UNLESS THE OFFER IS EXTENDED.
As described in Section 1 of the Offer to Purchase, the Company will
accept Shares for purchase at the Purchase Price in the following order of
priority:
(a) first, all Shares properly tendered prior to the
Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined
in the Offer to Purchase) who;
(1) tenders all Shares beneficially owned by such
Odd Lot Owner (partial tenders and conditional tenders will
not qualify for this preference); and
(2) completes the section entitled "Odd Lots" on the
Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery; and
(b) then, after purchase of all the foregoing Shares, all
other Shares properly and unconditionally tendered, and all other
Shares properly and conditionally tendered for which the condition is
satisfied on the basis of the number of Shares tendered and the
conditions thereto, in each case before the Expiration Date (and not
withdrawn), on a pro rata basis, if necessary (with adjustments to
avoid purchases of fractional Shares).
(c) If the effect of accepting tenders on a pro rata basis
is to reduce the number of Shares to be purchased from any shareholder
below the minimum number specified by such shareholder, such tender
will automatically be deemed withdrawn, except as provided below in
this paragraph, and Shares tendered by such shareholder will be
returned as soon as practicable after the Expiration Date. If any
conditional tenders would be deemed withdrawn, then to the extent
feasible, the Company will select enough of such conditional tenders,
which would otherwise have been deemed withdrawn, to purchase that
number of Shares remaining from the maximum number to be purchased.
In selecting among such conditional tenders, the Company will select
by random lot and will limit its purchase in each case to the
designated minimum number of Shares to be purchased. Conditional
tenders will be selected by lot only from shareholders who
tender all of their Shares.
Notwithstanding the foregoing, the Company reserves the right not to
accept Shares tendered by Odd Lot Owners on a preferential basis (and instead
to accept such Shares on a pro rata basis with Shares tendered by other owners)
if the Company, in its sole discretion, determines that accepting such Shares
on a preferential basis would cause the NASDAQ Continued Listing Condition
described in the Offer to Purchase not to be satisfied.
You may condition your tender on the Company purchasing a minimum
number of your tendered Shares. In such case, if as a result of the number of
Shares tendered, the Company would purchase less than the minimum number of
your Shares specified, then the Company will not purchase any of your Shares.
The Offer is not being made to, nor will the Company accept tenders
from, owners of Shares in any jurisdiction in which the Offer or its acceptance
would not comply with the securities or Blue Sky law of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares would not be in compliance with the laws of such
jurisdiction in which it is asserted that the Offer cannot lawfully be made.
So long as the Company makes a good faith effort to comply with any state law
deemed applicable to the Offer, the Company believes that the exclusion of
holders residing in such jurisdiction is permitted under the rules promulgated
under the Securities Exchange Act of 1934.
<PAGE> 4
CLEVETRUST REALTY INVESTORS
INSTRUCTION FORM WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH AN AGGREGATE OF 500,000 SHARES
OF BENEFICIAL INTEREST,
AT A PURCHASE PRICE OF $4.00 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated August 21, 1995, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by
CleveTrust Realty Investors, a Massachusetts business trust (the "Company"), to
purchase up to an aggregate of 500,000 Shares of Beneficial Interest, par value
$1.00 per share ( the "Shares"), at a price, net to the seller in cash, of
$4.00 per Share, upon the terms and subject to the conditions of the Offer.
The undersigned understands that shares properly tendered and not
withdrawn will be purchased at the Purchase Price of $4.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions of the Offer,
including the proration terms and the NASDAQ Continued Listing Condition
described in the Offer to Purchase. The Company will return all other Shares,
including Shares not purchased because of proration or conditional tenders.
See Section 1 of the Offer to Purchase.
The undersigned hereby instruct(s) you to tender to the Company the
number of Shares indicated below, or if no number is indicated, all Shares you
hold for the account of the undersigned, pursuant to the terms and subject to
the conditions of the Offer. The undersigned understands that the Company will
return Shares not purchased because of proration.
AGGREGATE NUMBER OF SHARES TO BE TENDERED
BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED;
_______________ SHARES
Unless otherwise indicated, all of the Shares held for the account of
the undersigned will be tendered.
ODD LOTS
[ ] By checking this box, the undersigned represents that the
undersigned owned beneficially as of the close of business on
August 17, 1995 an aggregate of fewer than 100 Shares and is
instructing the holder to tender all such Shares.
SHARES TENDERED PURSUANT TO THE FOREGOING
PROCEDURE CANNOT BE CONDITIONALLY TENDERED
CONDITIONAL TENDER
SEE INSTRUCTION 8 TO THE LETTER OF TRANSMITTAL
[ ] Check here if tender of Shares is conditioned on the Company
purchasing all or a minimum number of the tendered Shares, and
complete the following:
Minimum number of Shares to be sold: ________________
SIGNATURE BOX
Signature(s): _______________________________________
Dated: _______________________________________
Name(s) and Address(es): _______________________________________
_______________________________________
<PAGE> 5
Area Code and Telephone Number: _______________________________________________
Taxpayer Identification or Social Security Number: ____________________________
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE
OFFER. THE OFFER AND PRORATION PERIOD EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT
SAVINGS TIME, ON FRIDAY, SEPTEMBER 22, 1995, UNLESS THE OFFER IS EXTENDED.
As described in Section 1 of the Offer to Purchase, the Company will
accept Shares for purchase at the Purchase Price in the following order of
priority:
(a) first, all Shares properly tendered prior to the
Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined
in the Offer to Purchase) who;
(1) tenders all Shares beneficially owned by such Odd
Lot Owner (partial tenders and conditional tenders will not
qualify for this preference); and
(2) completes the section entitled "Odd Lots" on the
Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery; and
(b) then, after purchase of all the foregoing Shares, all
other Shares properly and unconditionally tendered, and all other
Shares properly and conditionally tendered for which the condition is
satisfied on the basis of the number of Shares tendered and the
conditions thereto, in each case before the Expiration Date (and not
withdrawn), on a pro rata basis, if necessary (with adjustments to
avoid purchases of fractional Shares).
(c) If the effect of accepting tenders on a pro rata basis is
to reduce the number of Shares to be purchased from any shareholder
below the minimum number specified by such shareholder, such tender
will automatically be deemed withdrawn, except as provided below in
this paragraph, and Shares tendered by such shareholder will be
returned as soon as practicable after the Expiration Date. If any
conditional tenders would be deemed withdrawn, then to the extent
feasible, the Company will select enough of such conditional tenders,
which would otherwise have been deemed withdrawn, to purchase that
number of Shares remaining from the maximum number to be purchased.
In selecting among such conditional tenders, the Company will select
by random lot and will limit its purchase in each case to the
designated minimum number of Shares to be purchased. Conditional
tenders will be selected by lot only from shareholders who tender all
of their Shares.
Notwithstanding the foregoing, the Company reserves the right not to
accept Shares tendered by Odd Lot Owners on a preferential basis (and instead
to accept such Shares on a pro rata basis with Shares tendered by other owners)
if the Company, in its sole discretion, determines that accepting such Shares
on a preferential basis would cause the NASDAQ Continued Listing Condition
described in the Offer to Purchase not to be satisfied.
You may condition your tender on the Company purchasing a minimum
number of your tendered Shares. In such case, if as a result of the number of
Shares tendered, the Company would purchase less than the minimum number of
your Shares specified, then the Company will not purchase any of your Shares.
The Offer is not being made to, nor will the Company accept tenders
from, owners of Shares in any jurisdiction in which the offer or its acceptance
would not comply with the securities or Blue Sky law of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the offer or
the tender of Shares would not be in compliance with the laws of such
jurisdiction in which it is asserted that the offer cannot lawfully be made.
So long as the Company makes a good faith effort to comply with any state law
deemed applicable to the Offer, the Company believes that the exclusion of
holders residing in such jurisdiction is permitted under the rules promulgated
under the Securities Exchange Act of 1934.
<PAGE> 1
EXHIBIT (a)(6)
FORM OF LETTER TO SHAREHOLDERS
FROM THE CHAIRMAN AND PRESIDENT
OF THE COMPANY DATED AUGUST 21, 1995.
<PAGE> 2
[Company Letterhead]
August 21, 1995
Dear CleveTrust Shareholder:
Enclosed you will find an Offer from CleveTrust Realty Investors (the
"Trust") to purchase up to 500,000 Shares of Beneficial Interest. Please read
the enclosed document very carefully to assist you in making your decision on
whether or not to participate in this Offer. Management neither encourages nor
discourages your participation in this Offer.
The Offer gives shareholders who are considering the sale of all or a
portion of their Shares an opportunity to sell such Shares for a higher price
than that available in the open market immediately prior to the announcement of
the Offer, without the usual transaction costs associated with market sales.
To the extent that the purchase of Shares in the Offer results in a reduction
in the number of Shareholders of record, the costs of the Trust for services to
shareholders may be reduced.
The Board of Trustees of the Trust has determined to make this Offer
because it believes that the Offer is an attractive investment, and because the
Trust believes that the current market price of the Shares does not adequately
reflect the value of the Trust's business, assets and prospects, and that the
purchase of the Shares at this time is an attractive investment that will
benefit the Trust and its continuing shareholders.
The Trust currently intends to propose at the next annual meeting of
shareholders, to be held in February, 1996, that its shareholders approve a
reverse stock split of up to one for five of the Trust's outstanding Shares.
Management of the Trust believes that such action will result in greater
marketability for the Trust's Shares as it should result in a reduced
percentage spread between the bid and asked prices sought by the market makers
in the Trust's Shares. This reverse stock split could have some effect on the
price of the Shares and on the number of Shares traded, but Management believes
such possible effect cannot be accurately predicted.
Let me again encourage you to read the enclosed offer document before
making any decision as to your shares. As always, we appreciate your continued
interest in CleveTrust Realty Investors and welcome your questions and
comments.
Sincerely,
-------------------------------------------
John C. Kikol
Chairman & President
<PAGE> 1
EXHIBIT (a)(7)
FORM OF PRESS RELEASE DATED AUGUST 21, 1995
<PAGE> 2
CLEVETRUST REALTY INVESTORS
OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 500,000 SHARES
OF BENEFICIAL INTEREST,
EACH AT A PURCHASE PRICE OF $4.00 PER SHARE
WESTLAKE, OHIO, AUGUST 18, 1995: John C. Kikol, Chairman and President of
CleveTrust Realty Investors (the "Trust") (CTRIS-NASDAQ), today announced that
the Trust will commence an Offer on Monday, August 21, 1995 to buy from its
shareholders approximately 9.16% of the Trust's outstanding Shares, or up to an
aggregate of 500,000 Shares of Beneficial Interest, par value $1.00 per share (
the "Shares"), at a price of $4.00 per Share. The funds necessary to purchase
the Shares pursuant to the Offer will come from borrowings under the Company's
Credit Agreement dated as of November 30, 1994 with National City Bank, and M&T
Bank of Buffalo.
The Offer is conditioned on there being at least 400 beneficial owners
of the Trust's Shares of Beneficial Interest after purchase of the Shares and
that the Shares will otherwise continue to be eligible for quotation on the
NASDAQ National Market System. The Offer will also be subject to certain other
conditions enumerated in the Offer to Purchase.
Neither the Trust nor its Board of Trustees is making any
recommendation to shareholders as to whether to tender or refrain from
tendering shares.
The Board of Trustees of the Trust has determined to make this Offer
because it believes that the Offer is an attractive investment, and because the
Trust believes that the current market price of the Shares does not adequately
reflect the value of the Trust's business, assets and prospects, and that the
purchase of the Shares at this time is an attractive opportunity that will
benefit the Trust and its continuing shareholders. The Offer gives
shareholders who are considering the sale of all or a portion of their Shares
an opportunity to sell such Shares for a higher price than that available in
the open market immediately prior to the announcement of the Offer, without the
usual transaction costs associated with market sales.
Shareholders of record will be receiving copies of the Offer to
Purchase and associated forms and instructions shortly. Those shareholders who
hold in street name will need to contact their broker or bank to instruct it
concerning the Offer.
American Stock Transfer & Trust Company will be the Depositary for the
Offer. Beacon Hill Partners, Inc. will serve as the Information Agent.
