<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
|X| Preliminary Information Statement
|_| Confidential, for use of the Commission only (as permitted by Rule
14c-5(d)(2))
|_| Definitive Information Statement
THE PEREGRINE REAL ESTATE TRUST
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Shares of Beneficial Interest
(2) Aggregate number of securities to which transaction applies: 2,319,915
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): $0.59
(4) Proposed maximum aggregate value of transaction: $1,368,750
(5) Total fee paid: $273.75
|X| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party: The Peregrine Real Estate Trust
(4) Date Filed: January 16, 2001
<PAGE>
THE PEREGRINE REAL ESTATE TRUST
INFORMATION STATEMENT
INTRODUCTION
This Information Statement is furnished by The Peregrine Real Estate Trust
(d.b.a. WinShip Properties) (f.k.a. Commonwealth Equity Trust), a California
real estate investment trust ("Peregrine"), to holders of the outstanding common
shares of beneficial interest, par value $0.01 per share, of Peregrine in
connection with an Agreement and Plan of Merger, dated as of September 26, 2000
(the "Merger Agreement"), by and between Peregrine and WinShip Properties, a
California real estate investment trust ("New WinShip"). The Merger Agreement
provides for the merger (the "Merger") of Peregrine with and into New WinShip,
with New WinShip as the trust surviving the Merger (the "Surviving Trust"). New
WinShip was formed by TCW Special Credits Fund IV, TCW Special Credits Plus
Fund, TCW Special Credits Trust IV, TCW Special Credits Trust IVA and TCW
Special Credits, as investment manager of the Weyerhaeuser Company Master
Retirement Trust Separate Account (collectively, "TCW"); and OCM Real Estate
Opportunities Fund A, L.P., OCM Real Estate Opportunities Fund B, L.P., and
Oaktree Capital Management, LLC ("Oaktree Capital") as investment manager of
Gryphon Domestic VII, LLC's separate account (collectively, "Oaktree") in
connection with the Merger.
Oaktree, TCW, and The Prudential Insurance Company of America and Gateway
Recovery Trust (collectively, "Prudential" and together with Oaktree and TCW,
the "Majority Shareholders") currently beneficially own approximately 89.7% of
the Peregrine common shares, representing approximately 89.7% of the voting
power of the shareholders of Peregrine. In addition, Oaktree, TCW and OCM Real
Estate Opportunities Fund II, L.P. are the holders of all of Peregrine's
$16,074,000 outstanding 8.5% Senior Secured Notes due October 1, 2000. Oaktree
and TCW have proposed, and Prudential has agreed to vote for, the Merger in
order to purchase all of the Peregrine common shares that are not held by New
WinShip or the Majority Shareholders (the "Nonaffiliated Shares"). At the time
of the consummation of the Merger, the Majority Shareholders will collectively
own 100% of WinShip Properties with Prudential owning 26.63%, TCW owning 42.74%
and Oaktree owning 30.63% of the issued and outstanding equity securities of New
WinShip. Following the effectiveness of the Merger, the Majority Shareholders
will own 100% of the common shares of the Surviving Trust in the same
proportions as they owned in New WinShip immediately prior to the consummation
of the Merger.
As a result of the Merger, each Nonaffiliated Share will be converted
into the right to receive $0.59 in cash, without interest (the "Merger
Consideration"). The Merger Consideration represents a 136% premium over the
$0.25 average closing price per share during the 30 trading days preceding
September 1, 2000, which was the last full trading day before the execution
and public announcement of the Merger Agreement and a 1.7% premium over the
$0.58 per share value of Peregrine's common shares under an orderly
liquidation analysis performed by Duff & Phelps, LLC, Peregrine's finanicial
advisor ("Duff & Phelps"). The Board of Trustees decided not to seek
alternative transactions with unaffiliated third parties because, based on
the advice of Duff & Phelps and their own knowledge of Peregrine's portfolio
and the real estate market, the Board of Trustees determined that the minority
shareholders would be better served by undertaking a going-private
transaction at a fair valuation and that the risks to the holders of
Nonaffiliated Shares of pursuing a third-party offer and turning down the
going-private offer were greatly outweighed by the benefits of getting an
immediate cash payout to the holders of Nonaffiliated Shares of $0.59 per
share. On , 2001, the last full trading day prior to the date of
the mailing of this Information Statement, the closing price of Peregrine's
common shares was $______ per share. A special committee of the Board of
Trustees of Peregrine consisting of Carson R. McKissick, Matthew L. Witte and
Michael C. Joseph (the "Special Committee") negotiated the Merger
Consideration with the Majority Shareholders and their representatives. The
total consideration payable to the holders of Nonaffiliated Shares in the
Merger is
<PAGE>
approximately $1,369,000. A copy of the Merger Agreement is attached to this
Information Statement as Exhibit A.
The Special Committee, the Majority Shareholders, Peregrine, New WinShip,
Roger Snell, the President and Chief Executive Officer of Peregrine and the
Board of Trustees of Peregrine, based on the recommendation of the Special
Committee, believe that the terms and provisions of the Merger Agreement and the
Merger are fair to and in the best interests of Peregrine and holders of
Nonaffiliated Shares.
This transaction has not been approved or disapproved by the Securities and
Exchange Commission (the "SEC") or by any state securities commission, nor has
the SEC or any state securities commission passed upon the fairness or merits of
such transaction nor upon the accuracy or adequacy of the information contained
in this document. Any representation to the contrary is unlawful.
On December 20, 2000, the Majority Shareholders executed and delivered
to Peregrine a written consent in lieu of a meeting of shareholders approving
the Merger Agreement and the Merger and adopting the Merger Agreement. The
Merger will become effective no earlier than 20 business days after this
Information Statement is first sent or given to shareholders of Peregrine.
The effective date of the Merger will be on __________, 2001, or such other
time as Peregrine and the Majority Shareholders shall determine. The Merger
Agreement does not require the approval of the holders of Nonaffiliated
Shares.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. PLEASE DO NOT SEND IN ANY OF YOUR SHARE CERTIFICATES AT THIS TIME.
This Information Statement is first being mailed to shareholders on or
about ___________, 2001.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Questions and Answers About The Merger...........................................................................1
Summary..........................................................................................................1
Market Data......................................................................................................8
Selected Financial Data.........................................................................................10
General.........................................................................................................11
Special Factors Regarding the Merger............................................................................11
Closing....................................................................................................11
Background of the Merger...................................................................................11
Special Committee..........................................................................................19
The Board of Trustees......................................................................................21
The Reporting Persons' Purpose and Reasons for the Merger..................................................23
Opinion of the Financial Advisor...........................................................................26
Interests of Certain Persons in the Merger.................................................................30
Certain Effects of the Merger..............................................................................31
Material Federal Income Tax Consequences of the Merger.....................................................32
Accounting Treatment.......................................................................................33
Financing of the Merger....................................................................................34
Regulatory Matters.........................................................................................35
Required Vote For Merger; Written Consent In Lieu Of Meeting...............................................35
The Merger Agreement............................................................................................35
Consideration to be Paid in the Merger.....................................................................35
The Exchange Fund; Payment for Common Shares...............................................................36
Transfers of Peregrine Common Shares.......................................................................37
Treatment of Options.......................................................................................37
Amendment..................................................................................................37
Applicable Law.............................................................................................37
Estimated Fees and Expenses.....................................................................................37
No Dissenters Rights............................................................................................38
Certain Information Regarding Peregrine.........................................................................38
Certain Information Regarding New Winship.......................................................................38
Certain Information Regarding the Majority Shareholders.........................................................39
Certain Information Regarding Management........................................................................41
Trustees and Executive Officers.................................................................................41
Security Ownership of Certain Beneficial Owners and Management..................................................43
Certain Relationships...........................................................................................46
Common Share Purchase Information...............................................................................47
Independent Accountants.........................................................................................48
Shareholder Proposals...........................................................................................48
Available Information...........................................................................................48
</TABLE>
-i-
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WITH WHOM IS PEREGRINE MERGING?
A: The Peregrine Real Estate Trust (d.b.a. WinShip Properties), is merging
with and into a newly formed California real estate trust called WinShip
Properties. WinShip Properties will be the surviving trust. WinShip
Properties was formed by TCW and Oaktree and at the time of consummation of
the merger will be owned by Oaktree, TCW and Prudential. Collectively,
Oaktree, TCW and Prudential own 89.7% of the common shares of Peregrine.
The Peregrine common shares owned by Oaktree, TCW and Prudential will be
contributed to WinShip prior to consummation of the merger. At the time of
the consummation of the merger, Oaktree, TCW and Prudential will
collectively own 100% of WinShip Properties, with Prudential owning 26.63%
of the issued and outstanding equity securities of WinShip Properties, TCW
owning 42.74% of the issued and outstanding equity securities of WinShip
Properties and Oaktree owning 30.63% of the issued and outstanding equity
securities of WinShip Properties. Following the effectiveness of the
merger, Oaktree, TCW and Prudential will own 100% of the common shares of
the trust surviving the merger in the same proportions as they owned in
WinShip Properties immediately prior to the consummation of the merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Holders of Peregrine common shares (other than the Peregrine common shares
owned by WinShip Properties immediately prior to consummation of the
merger) will receive $0.59 in cash for each share they own. A special
committee consisting of members of the board of trustees of Peregrine who
are neither affiliated nor associated with Oaktree, TCW or Prudential or
employed by Peregrine negotiated this price with the Majority Shareholders
and their representatives.
Q: WILL PEREGRINE BE A PUBLIC COMPANY AFTER THE MERGER?
A: No. As a result of the merger, Peregrine will cease to exist and WinShip
Properties, as the trust surviving the merger, will be privately held. Upon
consummation of the merger, there will be no public market for Peregrine
common shares. In addition, registration of Peregrine common shares will be
terminated and Peregrine will no longer be required to file periodic
reports with the Securities and Exchange Commission.
Q: WHY HAS THE BOARD OF TRUSTEES APPROVED THE MERGER AGREEMENT AND THE MERGER?
A: Your board of trustees determined that, based upon the recommendation of
the Special Committee, the terms and provisions of the Merger Agreement
between Peregrine and WinShip Properties, and the merger, are fair to and
in the best interests of Peregrine and its shareholders, not including the
Majority Shareholders. To review the background and reasons for the merger
in greater detail, see pages 10 to 18 of this Information Statement.
-1-
<PAGE>
Q: WHAT ARE THE RISKS AND DETRIMENTS ASSOCIATED WITH THE MERGER?
A: The detriments of the merger to the holders of Peregrine common shares
(other than WinShip Properties) are that such holders will receive cash
consideration as part of the merger and will not have the opportunity to
maintain their equity interests in, or participate in any future
appreciation of the equity interests of, the surviving trust. The minority
shareholders will not be afforded the opportunity to vote on the merger and
do not have appraisal rights. While the merger was approved by a special
committee of the board of trustees and the special committee obtained an
opinion as to the fairness of the Merger Consideration, the minority
shareholders did not have a representative appointed to negotiate on their
behalf, and Peregrine, upon assessing the value and nature of its assets,
did not seek any alternative transactions with unaffiliated parties. In
addition, certain members of management have potential conflicts of
interest because they will become employees of WinShip Properties following
consummation of the merger and their options to purchase Peregrine common
shares will convert into options to purchase common shares of WinShip
Properties.
Q: DID THE SPECIAL COMMITTEE CONSIDER ALTERNATIVE TRANSACTIONS WITH THIRD
PARTIES?
A: No. The special committee concluded that seeking alternative transactions
with third parties would not maximize value to shareholders because (i)
they believed that the disparate nature of Peregrine's real estate assets,
including the variety of office buildings, hotels, retail shopping centers
and industrial properties, would make it highly unlikely that a third party
could be found who would be willing to purchase Peregrine, or its portfolio
of assets, as a whole at a price that would likely be deemed reasonable by
the board of trustees, (ii) perceived demand from institutional buyers of
real estate (such as real estate investment trusts) and other buyers large
enough to purchase the entire portfolio was low, (iii) the prospect of a
protracted and unsuccessful selling effort would have had an adverse impact
on Peregrine because it would divert management's attention from
Peregrine's day-to-day operations, and (iv) Oaktree, TCW and Prudential
indicated that they desired to continue to hold their equity interests in
Peregrine because they felt they would not be able to sell their Peregrine
common shares at a satisfactory price and it was unlikely that a third
party would be willing to purchase the minority shareholders' interest with
Oaktree, TCW and Prudential continuing to hold 89.7% of the Peregrine
common shares.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. We will send you written instructions for exchanging your share
certificates promptly after the closing of the merger. We expect that the
merger will be consummated on or about _____________, 2001.
-2-
<PAGE>
Q WHAT ARE THE FEDERAL TAX CONSEQUENCES OF THE MERGER TO ME?
A: The merger generally will be taxable to you for U.S. federal income tax
purposes. To review the federal income tax consequences to shareholders in
greater detail, see pages 31 to 33 of this Information Statement.
Q WHO CAN HELP ANSWER MY QUESTIONS?
A If you have any questions about the merger or would like additional copies
of this Information Statement, please contact D.F. King & Co., Inc., 77
Water Street, New York, New York 10005, telephone number (212) 269-5550
(collect) or toll free at (800) 758-5880.
-3-
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS INFORMATION
STATEMENT. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT
TO YOU. TO UNDERSTAND THE MERGER FULLY, YOU SHOULD CAREFULLY READ THE ENTIRE
INFORMATION STATEMENT AND THE ATTACHED EXHIBITS.
SPECIAL FACTORS REGARDING THE MERGER
PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER
The proposed transaction contemplates a merger of Peregrine with and into
New WinShip, a newly formed company that will be owned by the Majority
Shareholders, and that holders of Nonaffiliated Shares will receive cash as
Merger Consideration. Oaktree and TCW have proposed, and Prudential has agreed
to vote for, the Merger in order for the Majority Shareholders to acquire all of
the remaining Peregrine common shares not already owned by them while affording
holders of Nonaffiliated Shares the ability to dispose of their shares at a
premium above recent market prices without incurring the transaction costs of
selling their Peregrine common shares.
The purpose of the Majority Shareholders, New WinShip, Peregrine and Roger
Snell, the current President and Chief Executive Officer of Peregrine and the
proposed President and Chief Executive Officer of New WinShip following
consummation of the Merger (collectively, the "Reporting Persons"), in
undertaking the Merger is to advance Peregrine's long-term strategy of enhancing
shareholder value by reducing administrative, legal, accounting and other costs
related to being a public company. The Reporting Persons believe that the annual
costs to Peregrine to remain a public reporting company, which includes
accounting fees, legal fees, transfer agent fees, printing costs, directors and
officers insurance and other similar costs, are approximately $500,000 per year,
which is a significant portion of Peregrine's overall administrative expenses.
The Reporting Persons believe that Peregrine does not receive any significant
benefit to being a public company as it has not accessed the public capital
markets for the past twelve years and does not anticipate doing so in the
foreseeable future. In addition, the Reporting Persons believe that Peregrine's
shareholders do not derive the benefits typically received by shareholders of
publicly traded companies because there is no established market for Peregrine
shares and the relatively small number of outstanding Peregrine shares held by
the minority shareholders has caused an illiquid market for Peregrine common
shares and has limited the minority shareholders' ability to realize the value
of their shares. The Reporting Persons believe that the Merger will benefit all
of Peregrine's shareholders because it will allow the minority shareholders to
realize a substantial increase in the value of their shares over the market
price of Peregrine common shares immediately prior to the announcement of the
Merger and may increase the value of the Surviving Trust's stock by allowing the
Surviving Trust to reduce costs and dedicate its resources to ownership and
management of real estate. In addition, the Merger may improve the incentive
value of the Surviving Trust's stock compensation and would be beneficial from
the standpoint of employee relations. The price of the Peregrine common shares,
an important element of stock compensation, has remained relatively constant for
the past five years and does not reflect Peregrine's performance, which has
reduced the
-1-
<PAGE>
incentive value of stock compensation. Additionally, once Peregrine common
shares cease to be publicly traded, employees may focus on the long-term goal of
increasing value in the Surviving Trust's equity interests rather than on the
day-to-day trading price of Peregrine's common shares.
Oaktree and TCW sought to structure the transaction as a Merger because it
would most efficiently accomplish their objectives to acquire the Nonaffiliated
Shares. Upon the consummation of the Merger, Peregrine common shares will cease
to be publicly traded and holders of Nonaffiliated Shares will receive $0.59 per
share in cash. Following the Merger, all of the equity interests of New WinShip
as the surviving trust will be owned by the Majority Shareholders.
Oaktree Capital is a registered investment adviser with the SEC under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), which
has approximately $17 billion of assets under, or committed for, management.
Oaktree Capital is (a) the general partner with an approximately 1% or less
equity interest in (i) OCM Real Estate Opportunities Fund A, L.P., (ii) OCM
Real Estate Opportunities Fund B, L.P. and (iii) OCM Real Estate
Opportunities Fund II, L.P. and (b) investment manager of Gryphon Domestic
VII, LLC, a separate account pursuant to which Oaktree Capital receives a
management and incentive fee. Oaktree Capital is a member managed limited
liability company in which D. Richard Masson, a director of Peregrine, is a
member who owns approximately 15% equity interest. The remaining membership
interests of Oaktree Capital are held, directly and indirectly, by
approximately 40 persons, with Howard S. Marks, Chairman of Oaktree Capital
and Bruce A. Karsh, President of Oaktree Capital, each owning approximately
28% of the membership interests.
TCW Special Credits is also a registered investment adviser with the SEC
under Advisers Act and an affiliate of The TCW Group, Inc., an investment
management company with approximately $50 billion of assets under, or committed
for, management ("TCW Special Credits"). TCW Special Credits is (a) the general
partner with an approximately 1% or less equity interest in (i) TCW Special
Credits Fund IV limited partnership and (ii) TCW Special Credits Plus Fund
limited partnership and (b) investment manager of (i) TCW Special Credits Trust
IV, a collective investment trust, (ii) TCW Special Credits Trust IVA, a
collective investment trust and (iii) Weyerhaeuser Company Master Retirement
Trust separate account, in which TCW Special Credits or its affiliates receive a
management and incentive fee. The foregoing limited partnerships, trusts and
separate accounts hereinafter the "TCW Funds." TCW Special Credits is a general
partnership in which Mr. Masson is a general partner with approximately 12%
equity interest and TCW Asset Management Company ("TAMCO"), a wholly-owned
subsidiary of The TCW Group, Inc, is the managing general partner with
approximately 51% general partner interest. Mr. Masson is not an officer or
equity owner of TAMCO or any of its affiliated companies, but he is an
authorized signatory of TAMCO, as managing general partner of TCW Special
Credits, with respect to investments of the TCW Funds. Mr. Masson and other
Oaktree employees negotiated the terms of the Merger and Merger Agreement on
behalf of the Majority Shareholders. See "SPECIAL FACTORS REGARDING THE
MERGER--Background Of The Merger" and "--The Majority Shareholders' Purpose And
Reasons For The Merger."
-2-
<PAGE>
The Prudential Insurance Company of America is a mutual insurance company
and does not have any significant shareholders. The principal beneficiary of
Gateway Recovery Trust is the Prudential Insurance Company of America.
APPROVAL BY THE TRUSTEES
In April 1998, Oaktree and TCW began discussions with Peregrine
regarding a variety of possible transactions designed to increase shareholder
value. To address actual and potential conflicts of interest resulting from
the status of D. Richard Masson, a principal of Oaktree Capital, the general
partner and investment manager of the Oaktree funds and accounts and a
general partner of TCW Special Credits, the general partner and investment
manager of the TCW Funds, and Roger Snell, Chief Executive Officer of
Peregrine, as members of the Board of Trustees, the Board of Trustees formed
a Special Committee, which consists of Carson R. McKissick, Matthew L. Witte
and Michael C. Joseph, to review the Oaktree and TCW proposals, make a
recommendation to the Board of Trustees, and, if necessary, negotiate the
terms of any such transactions with the Majority Shareholders. In considering
their appointment to the Special Committee, the Board of Trustees was aware
that Messrs. McKissick, Witte and Joseph were originally designated to the
Board of Trustees by the Majority Shareholders and that they each hold
options to purchase 20,000 Peregrine common shares. However, the Board did
not view these factors as creating a conflict of interest because Messrs.
McKissick, Witte and Joseph were selected as members of the Special Committee
based on their ability to provide guidance to Peregrine because of their
extensive experience and understanding of business and financial matters. In
addition, the Special Committee is independent because none of its memebers
is an employee or former employee of Peregrine nor an associate or affiliate
of any of the Majority Shareholders. The Special Committee retained Duff &
Phelps as its financial advisor for purposes of preparing a report concerning
the fairness of certain transactions, including the exchange of preferred
shares for Peregrine common shares.
In early 2000, when the pending maturity of Peregrine's 8.5% Senior
Secured Notes due October 1, 2000 caused renewed focus on the long-term
capitalization of Peregrine and the need to maximize shareholder value, the
Special Committee was reactivated to consider alternatives that were being
proposed by Oaktree and TCW to address these concerns.
Although the Special Committee retained their own independent counsel,
it did not retain any other unaffiliated representative to act solely on
behalf of the holders of Nonaffiliated Shares for purposes of negotiating the
terms of the Merger and Merger Agreement. To ensure that any negotiations be
conducted at arm's length, the independent Special Committee once again
retained its own independent counsel and Duff & Pheps as its financial
advisor to evaluate the fairness of any transaction being proposed by the
Majority Shareholders. In August 2000, based on the upper end of the range of
value indications from Duff & Phelps' draft fairness analysis of July 2000,
New WinShip offered to acquire all of the Nonaffiliated Shares at a purchase
price of $0.59 per share pursuant to a Merger of Peregrine with and into New
WinShip, which reflected a slightly higher price per share than the upper end
of the range of value indications contained in Duff & Phelps' final fairness
analysis in August 2000. After due consideration, the Special Committee and
the Majority Shareholders agreed on the final purchase price of $0.59 per
share and the other terms and conditions of the Merger.
The Board of Trustees, acting on the recommendation of the Special
Committee, has approved the Merger and the Merger Agreement. The Board of
Trustees believes that the Merger and the terms and provisions of the Merger
Agreement (including the $0.59 per share Merger Consideration) are fair to and
in the best interests of Peregrine and the holders of Nonaffiliated Shares. See
"SPECIAL FACTORS REGARDING THE MERGER--Background
-3-
<PAGE>
Of The Merger," "--The Majority Shareholders' Purpose And Reasons For The
Merger," and "--Opinion Of The Financial Advisor."
DUFF & PHELPS FAIRNESS OPINION
Prior to the August 3, 2000 meeting of the Special Committee, Duff &
Phelps, financial advisor to the Special Committee, delivered its draft fairness
analysis of July 2000, which indicated that based upon and subject to the
various considerations and assumptions, consideration in an amount equal to
$0.56 per share would be fair to the holders of Nonaffiliated Shares from a
financial point of view. Prior to the September 1, 2000 meeting of the Special
Committee, Duff & Phelps delivered an updated fairness analysis which indicated
that, based on revised management projections to reflect property sales and
financial statements that were more recent than the financial statements which
provided the basis for the previous fairness analysis delivered by Duff &
Phelps, $0.59 per share is fair to the holders of Nonaffiliated Shares from a
financial point of view. Duff & Phelps subsequently confirmed that $0.59 per
share would be fair to the holders of Nonaffiliated Shares from a financial
point of view in its final opinion delivered to the Special Committee and dated
September 1, 2000. The Duff & Phelps opinion is attached to the Information
Statement as Exhibit B. Please read this opinion carefully. See "SPECIAL FACTORS
REGARDING THE MERGER -- Opinion Of The Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
New WinShip was formed by Oaktree and TCW for the purpose of acquiring 100%
of Peregrine in the Merger. The Majority Shareholders beneficially own
approximately 89.7% of the Peregrine common shares. Immediately prior to the
consummation of the Merger each of the Majority Shareholders will contribute all
of its Peregrine common shares to New WinShip. Following the Merger, the
Majority Shareholders will own 100% of the common shares of the Surviving Trust.
Such ownership will result from the conversion, upon the consummation of the
Merger, of the outstanding Nonaffiliated Shares into the right to receive cash.
Several trustees and officers of Peregrine hold options to purchase
Peregrine common shares. Roger Snell holds options to purchase 1,700,000
Peregrine common shares at an exercise price of $0.25 per share, of which
1,275,000 were vested as of December 1, 2000, 212,500 will vest on September 30,
2001 and 212,500 will vest on September 30, 2002; Larry Knorr, Vice President
and Chief Accounting Officer, holds options to purchase 200,000 Peregrine common
shares at an exercise price of $0.25 per share, of which 133,334 shares were
vested as of December 1, 2000; and Carson R. McKissick, Matthew L. Witte and
Michael C. Joseph each holds options to purchase 20,000 Peregrine common shares
at an exercise price of $2.00 per share, all of which were vested as of December
1, 2000. The options to purchase Peregrine common shares held by officers of
Peregrine will become options to purchase common shares of New WinShip upon
consummation of the Merger. The options held by trustees will be cancelled upon
consummation of the Merger without any consideration being paid to the trustees
for such options. The rollover of options to purchase Peregrine common shares
held by officers of Peregrine in the Merger will result in a treatment of such
officers that is different from the interest of the holders of Nonaffiliated
Shares and may present actual or potential conflicts of interest. For a further
description of these interests, see page 30 of this Information Statement.
-4-
<PAGE>
The Special Committee and the Board of Trustees were aware of and considered
such interests in recommending and approving the Merger. See "SPECIAL FACTORS
REGARDING THE MERGER--Interests Of Certain Persons In The Merger."
FINANCING OF THE MERGER
At the closing of the Merger, New WinShip expects to pay an aggregate
purchase price of approximately $1,369,000 to the holders of Nonaffiliated
Shares. The parties anticipate that New WinShip will require approximately
$470,000 to pay expenses and costs relating to the Merger. New WinShip will not
have any assets prior to the consummation of the Merger, other than Peregrine
common shares, and will rely exclusively on borrowings under Peregrine's credit
facility with Fremont Investment & Loan, Peregrine's cash on hand, cash from
Peregrine's operations, and cash proceeds from sales of Peregrine's properties
to finance the payment of the Merger Consideration and the expenses associated
with the Merger. As of September 30, 2000, Peregrine had approximately
$2,099,000 in cash on hand that may be used for the Merger. Proceeds from the
sale of the Town Center Office Park, an office building located in Signal Hill,
California sold on November 21, 2000 for net proceeds of approximately
$2,930,000 may be used to finance the Merger. Pursuant to the terms of
Peregrine's credit facility with Fremont, Peregrine may incur up to $1,200,000
of borrowings under such credit facility to fund the payment of cash in lieu of
fractional interests or shares by Peregrine to its public shareholders in
connection with the reorganization of Peregrine. Peregrine intends to obtain
Fremont's consent to use the credit facility to finance the payment of the
Merger Consideration and the expenses associated with the Merger prior to the
consummation of the Merger. See "Special Factors Regarding the Merger--Financing
of the Merger."
REGULATORY MATTERS
Peregrine does not believe that any material federal or state regulatory
approvals, filings or notices are required by Peregrine in connection with the
Merger other than (i) such approvals, filings or notices required pursuant to
federal and state securities laws and (ii) the filing of the certificate of
Merger with the Secretary of State of California. See "SPECIAL FACTORS REGARDING
THE MERGER--Regulatory Matters."
ACCOUNTING TREATMENT
The Merger between Peregrine and New WinShip will be accounted for as an
exchange of shares between entities under common control. As a result, the
historical cost basis of Peregrine's assets and liabilities will be carried
forward to the Surviving Trust.
The cost of repurchasing the Peregrine common shares will be accounted for
as a treasury stock transaction within the context of generally accepted
accounting principles. Accordingly, the aggregate cost of such repurchase will
be accounted for as a deduction from shareholders' equity. See "SPECIAL FACTORS
REGARDING THE MERGER -- Accounting Treatment."
-5-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Shareholders will be taxed on their allocation of the Merger Consideration
to the extent that the amount they receive exceeds their tax basis in their
Peregrine common shares. Because determining the tax consequences of the Merger
can be complicated, shareholders should consult their tax advisors in order to
understand fully how the Merger will affect them. See "SPECIAL FACTORS REGARDING
THE MERGER--Material Federal Income Tax Consequences Of The Merger."
THE PARTIES
- PEREGRINE. Peregrine is a California real estate investment trust
headquartered in Sacramento, California. As of November 14, 2000, Peregrine's
investments included:
- seven commercial properties located primarily in the Sacramento area
- four hotel properties located in Northern California
- membership interests in two limited liability companies and
- one mortgage note secured by real property.
Peregrine was organized in California pursuant to a Declaration of Trust
dated July 31, 1973. Pursuant to a Plan of Reorganization under Chapter 11 of
the United States Bankruptcy Code Peregrine was reorganized under a Restated
Declaration of Trust in 1994. Its principal offices are located at 1300 Ethan
Way, Suite 200, Sacramento, California, 95825. Its telephone number is (916)
929-8244. See "CERTAIN INFORMATION REGARDING PEREGRINE" and "AVAILABLE
INFORMATION."
- NEW WINSHIP. New WinShip was organized by Oaktree and TCW to acquire
all of the Peregrine common shares pursuant to the Merger Agreement. New WinShip
has not conducted any unrelated activities since its organization. All of the
outstanding capital stock of New WinShip is currently owned by TCW and Oaktree,
and immediately prior to consummation of the Merger will be owned by the
Majority Shareholders, who collectively own 89.7% of the issued and outstanding
common shares of Peregrine. Immediately prior to the consummation of the Merger,
the Majority Shareholders will contribute all of the Peregrine common shares
owned by them to New WinShip in exchange for shares of capital stock of New
WinShip. See "CERTAIN INFORMATION REGARDING NEW WINSHIP."
New WinShip's principal offices are located at 1300 Ethan Way, Suite 200,
Sacramento, California, 95825. Its telephone number is (916) 929-8244. See
"CERTAIN INFORMATION REGARDING NEW WINSHIP."
REQUIRED VOTE FOR MERGER; WRITTEN CONSENT IN LIEU OF MEETING
Under Section 23006 of the California Corporations Code, as amended, any
two or more real estate investment trusts may be merged into one real estate
investment trust upon the approval of the holders of a majority of the shares of
beneficial interest of the real estate investment trust (or as otherwise
provided for in the declaration of trust), provided that the
-6-
<PAGE>
merger is specifically permitted by the declaration of trust, and that procedure
is detailed in those declarations. Under Section 4.7 of Peregrine's Restated
Declaration of Trust, a merger or sale or transfer of all or substantially all
of the assets of Peregrine must be approved by the affirmative vote or written
consent of at least 75% of the outstanding common shares of Peregrine entitled
to vote. On December 20, 2000, the Majority Shareholders, who then held, in the
aggregate, 20,232,525 shares of Peregrine common shares, representing more than
75% of the votes entitled to be cast at a meeting to consider the Merger
Agreement and the Merger, executed and delivered to Peregrine a written consent
in lieu of a meeting of shareholders approving the Merger Agreement and the
Merger and adopting the Merger Agreement. On December 1, 2000, there were
issued and outstanding 22,552,440 shares of Peregrine common shares. The Merger
will become effective no earlier than 20 business days after this Information
Statement is first sent or given to shareholders of Peregrine. The Merger
Agreement does not require the approval of the holders of Nonaffiliated Shares.
See "REQUIRED VOTE FOR MERGER; WRITTEN CONSENT IN LIEU OF MEETING."
NO DISSENTERS RIGHTS
California law and the provisions of Peregrine's Restated Declaration of
Trust do not provide dissenters' rights to shareholders of Peregrine.
-7-
<PAGE>
MARKET DATA
MARKET
Peregrine's common shares have traded on the Over-the-Counter Bulletin
Board market system under the symbol PGRNS since its emergence from bankruptcy
in October 1994, and its issuance of new Peregrine common shares was completed.
Peregrine's common shares were not actively traded during 1998, 1999 or 2000.
The following table sets forth the high and low closing quotations for the
shares during each of the four quarters of 1999 and 1998 and for the first,
second and third quarter of 2000 as reported by Nasdaq. The Over-the-Counter
market quotations reflect inter-dealer prices, without retail mark-up, markdown,
or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter $0.41 $0.22 $0.25 $0.25 $0.63 $0.19
Second Quarter $0.41 $0.19 $0.25 $0.25 $0.56 $0.38
Third Quarter $0.44 $0.19 $0.28 $0.28 $0.56 $0.13
Fourth Quarter $0.50 $0.31 $0.28 $0.28 $0.56 $0.13
(to December 1 in the
case of 2000)
</TABLE>
HOLDERS
As of December 31, 1999, there were 13,626 shareholders-of-record of
Peregrine's common shares. In addition, there were approximately 2,500
shareholders whose shares were held by depositories in street and nominee names.
CASH DIVIDENDS
Peregrine did not pay any cash dividends on its common shares in 2000, 1999
or 1998, and is substantially restricted under the terms of its credit facility
with Fremont and under the terms of Peregrine's 8.5% Senior Secured Notes due
October 1, 2000 (the "Notes") from making any cash distributions to shareholders
in the foreseeable future. Under the credit facility, so long as any amounts
under the credit facility remain outstanding Peregrine is prohibited from making
any distributions of its assets to its shareholders. As of November 14, 2000,
Peregrine has a balance of approximately $32,283,000 outstanding under its
credit facility. Under the terms of the Notes, Peregrine may not pay any cash
dividends to shareholders until (i) Peregrine has paid in full the amounts due
under the notes issued to the holders of the Notes in lieu of paying interest on
the Notes in cash (the "Interest Deferral Notes") and (ii) Peregrine has paid in
-8-
<PAGE>
full the amounts owing under the credit facility. As of October 30, 2000,
Peregrine has approximately $698,347 outstanding under the Interest Deferral
Notes.
-9-
<PAGE>
SELECTED FINANCIAL DATA
The following represents selected financial data for Peregrine for the
years ended December 31, 1999, 1998, 1997, 1996, and 1995 and the nine months
ended September 30, 2000 and 1999. The data should be read in conjunction with
other financial statements and related notes incorporated herein by reference.
Numbers below are shown in thousands except for per share data.
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Year Ended Year Ended Year Ended Year Ended Ended Ended
December 31 December 31, December 31 December 31 December 31, September 30, September 30,
1999 1998 1997 1996 1995 2000 1999
----------- ------------ ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenue (1).................. $28,523 $22,151 $24,828 $27,162 $26,893 $20,112 $17,948
Income/Loss before
extraordinary item...... $(3,482) $(4,671) $(2,008) $(7,892) $(15,331) $ (323) $ 879
Extraordinary item........... $ 126 $ 255 $ 440 $ 187 $ 598 -- $ 58
Net Income/Loss (2) $(3,356) $(4,416) $(1,568) $(7,705) $(14,733) $ (323) 937
Net Income/Loss attributable
to Common Shares of
Beneficial Interest (2),
(3), (5).................. $(3,356) $(8,950) $(4,818) $(10,576 $(17,264) $ (323) $ 937
Loss per Common Share of
Beneficial Interest before
extraordinary item, basic
and diluted (5)........... $ (0.15) $ (1.18) $ (1.08) $ (2.21) $ (3.66) -- --
Extraordinary item per Common
Shares of Beneficial
Interest, basic and diluted $ - $ 0.03 $ 0.09 $ 0.04 $ 0.12 -- --
Net Loss per share
attributable to Common
Shares of Beneficial
Interest, basic and diluted
(2), (3), (5)............. $ (0.15) $ (1.15) $ (0.99) $ (2.17) $ (3.54) $ (.01) $ .04
FINANCIAL POSITION:
Total Assets................. $74,139 $81,045 $69,883 $104,726 $121,793 $70,636 $81,621
Long-term Obligations (4).... $70,388 $74,504 $88,757 $111,578 $115,064 $67,536 $74,332
Book Value Per Common Share.. $ 0.02 $ 0.50 $ (4.34) $ (3.36) $ (1.19) $ 0.01 $ 0.21
Ratio of Earnings to Fixed
Charges (6).................. 0.54x -- 0.18x -- -- 0.93x 0.77x
</TABLE>
----------------------------------
(1) Includes net gains (losses) from sales or transfer of investment $4,474,
$374, $1,358, $1,580, and ($184), for the years ended December 31, 1999,
1998, 1997, 1996, and 1995. Includes net gains of $2,519,000 and $4,821,000
for the nine months ending September 30, 2000 and 1999, respectively.
(2) Includes valuation losses of ($1,830), ($0), ($459), ($4,278), and
($9,526), for the years ended December 31, 1999, 1998, 1997, 1996, and
1995.
(3) Includes net loss plus the effects of preferred stock dividends, discounts
on preferred stock dividends, and the accretion of discounts on preferred
stock dividends.
(4) Includes long-term notes payable collateralized by deeds of trust on rental
properties, the Notes, and the outstanding balance on Peregrine's line
of credit. Includes the outstanding redeemable convertible preferred stock
for years ending December 31, 1997, 1996, and 1995.
(5) For 1998 the weighted average number of common shares of beneficial
interest reflects the conversion of all preferred stock into common stock
as of November 1998.
(6) Earnings were inadequate to cover fixed charges by $3,356,000, $8,950,000,
$4,818,000, $10,576,000 and $17,264,000 for the years ended December 31,
1999, 1998, 1997, 1996 and 1995, respectively.
-10-
<PAGE>
GENERAL
This Information Statement is being delivered in connection with the Merger
of Peregrine with and into New WinShip pursuant to the Merger Agreement. As a
result of the Merger, New WinShip will be the Surviving Trust and each
Nonaffiliated Share will be converted into the right to receive the Merger
Consideration, and the equity interest and rights and obligations of all
Peregrine shareholders with respect to such shares will be terminated.
No person has been authorized to give any information or to make any
representations with respect to the Merger and related transactions described
herein, other than those contained in this Information Statement, and, if given
or made, such information or representations must not be relied upon as having
been authorized by Peregrine, New WinShip or the Majority Shareholders.
SPECIAL FACTORS REGARDING THE MERGER
CLOSING
The consummation of the Merger and the transactions contemplated thereby
shall constitute the "Closing." Unless otherwise mutually agreed to by Peregrine
and New WinShip, the Closing shall take place at the offices of Milbank, Tweed,
Hadley & McCloy LLP, 601 South Figueroa Street, 30th Floor, Los Angeles,
California 90017 on _____________, 2001, which shall constitute the "Closing
Date." The effective time of the Merger shall be the close of business on the
Closing Date (the "Effective Time").
BACKGROUND OF THE MERGER
For several years, the Board of Trustees and Roger Snell, the President and
Chief Executive Officer of Peregrine, have had concerns that the stock price of
Peregrine common shares did not adequately reflect the value of Peregrine's
assets and that the market for Peregrine common shares was not as active or
liquid as they desired, especially for the minority shareholders. Peregrine's
management and the Board of Trustees have also questioned whether Peregrine
derived any material benefit from being a public company, especially in light of
the costs incurred by Peregrine to satisfy its public reporting obligations.
From 1998 to 2000 management held discussions with financial advisors and other
professionals to consider steps that could be taken to address these concerns.
During these discussions various alternatives were discussed, including the
possibility of a "going private" transaction and various alternatives to a going
private transaction.
In April 1998, the Board of Trustees and representatives of TCW and Oaktree
began discussions with Peregrine regarding transactions designed to increase
shareholder value. The alternatives discussed included an exchange of
Peregrine's preferred shares for common shares, a reverse stock split that would
not result in a going private transaction, a rights offering and the
incorporation of Peregrine in Delaware.
-11-
<PAGE>
Since Roger Snell and D. Richard Masson, an affiliate of Oaktree and
TCW, are members of the Board of Trustees, the Board of Trustees selected a
Special Committee, which consisted of trustees Carson R. McKissick, Matthew
L. Witte and Michael C. Joseph, in April 1998 and authorized and empowered
the Special Committee to receive and review various proposals, including
those involving TCW and Oaktree, to make a recommendation to the full Board
of Trustees, and, if necessary, to negotiate the terms of any transaction
with the Majority Shareholders. In considering their appointment to the
Special Committee, the Board of Trustees was aware that Messrs. McKissick,
Witte and Joseph were originally designated to the Board of Trustees by the
Majority Shareholders and that they each held options to purchase 20,000
Peregrine common shares. However, The Board did not view these facts as
creating a conflict of interest because Messrs. McKissick, Witte and Joseph
were selected based on their ability to provide guidance to Peregrine because
of their extensive experience and understanding of business and financial
matters. The Special Committee is independent because none of its members is
an employee or former employee of Peregrine nor an associate or affiliate of
any of the Majority Shareholders. In April 1998, the Board of Trustees
further authorized the Special Committee to retain the services of legal
counsel and a financial advisor to assist the Special Committee in its
deliberations. The Special Committee retained the law firm of Troy & Gould,
P.C. ("Troy & Gould") as its legal counsel and Duff & Phelps as its financial
advisor in June 1998. The Majority Shareholders were not proposing a going
private transaction at the time they initially designated Messrs. McKissick
and Witte to the Board of Trustees on May 30, 1997 and Messr. Joseph to the
Board of Trustees on October 6, 1997.
In 1998, the entire Board of Trustees initially decided not to pursue a
going-private transaction at that time for a number of reasons, including:
(a) the Board of Trustees wanted to investigate all of the possible
alternatives to a going-private transaction;
(b) the Board of Trustees wanted to devote management resources to
leasing, refinancing and renovating Peregrine's properties, many of
which could not be sold or valued at prices that the Trustees and
management deemed to be adequate at that time;
(c) the Board of Trustees wanted to devote management resources to selling
selected properties where market conditions were favorable to their
sale;
(d) the Board of Trustees wanted to complete the conversion of preferred
shares to Peregrine common shares to enhance shareholder value;
(e) the Board of Trustees did not want to effect a change of ownership
that would limit Peregrine's use of its net operating losses. If
Peregrine had engaged in a going private transaction and Oaktree
acquired the Notes from Prudential and converted the outstanding
Notes into Peregrine equity securities in 1998, such transactions
would likely have resulted in an ownership change that would have
limited Peregrine's ability to utilize its net operating loss
carryforwards for Federal income tax purposes to less than $300,000
per year, assuming a market price of $0.25 per Peregrine common share.
Absent the occurrence of an ownership change for income tax purposes,
Peregrine will not be limited in its ability to utilize its net
operating loss carryforwards in the amount of approximately $89
million for Federal income tax purposes and $41 million for California
income tax purposes prior to their expiration pursuant to applicable
laws. Consummation of the Merger in 2001 and conversion of the Notes
following the consummation of the Merger will not effect an ownership
change; and
(f) Peregrine continued to struggle with the financial problems that
resulted in its bankruptcy in 1994 and needed to restructure its debt
or raise new capital and did not have sufficient financial resources
to pay consideration to holders of Nonaffiliated Shares in a
going-private transaction.
-12-
<PAGE>
As a result of such considerations, in 1998, the Board of Trustees and
management believed that they should fully explore certain other available
alternatives to enhance shareholder value before seriously considering a going
private transaction. While the Board of Trustees considered investigating
potential transactions with unaffiliated third parties to dispose of the
Peregrine assets as a whole or to engage in a merger or combination, the Board
of Trustees concluded that seeking alternative transactions with unaffiliated
third parties would not maximize shareholder value because (i) they believed
that the disparate nature of Peregrine's real estate assets, including the
variety of office buildings, hotels, retail shopping centers and industrial
properties would make it highly unlikely that a third party could be found who
would be willing to purchase Peregrine, or its portfolio of assets, as a whole
at a price that would likely be deemed reasonable by the Board of Trustees, (ii)
perceived demand from institutional buyers of real estate (such as real estate
investment trusts) and other buyers large enough to purchase the entire
portfolio was low, (iii) the prospect of a protracted and unsuccessful selling
effort would have had an adverse impact on Peregrine because it would divert
management's attention from Peregrine's day-to-day operations; and (iv) the
Majority Shareholders indicated that they desired to continue to hold their
equity interests in Peregrine because they felt they would not be able to sell
their Peregrine common shares at a satisfactory price, and the Board of Trustees
believed that it was unlikely that a third party would be willing to purchase
the minority shareholders' interest with the Majority Shareholders continuing to
hold 89.7% of the Peregrine common shares.
Also, at the time of the Board of Trustee's determination, none of
Peregrine's properties was in the first tier of properties in the relevant
market based on rents or valuation per square foot and other commonly used
criteria for valuation of real estate for financing or sale. In addition, most
of Peregrine's portfolio consists of so-called "transitional" or "undermanaged"
properties that the Board of Trustees believed required lease-up to improve cash
flows, capital expenditures to expand or rehabilitate the properties and/or
refinancing before they could be readily marketed. For these reasons, the
members of the Board of Trustees did not believe that any of the large real
estate investment trusts or other buyers of portfolios would have any interest
in acquiring Peregrine or all of Peregrine's assets without a substantial
discount to the values of the underlying properties. As a result, the Board of
Trustees believed that the most viable methods of achieving liquidity for
Peregrine shareholders would be either to sell the properties one-by-one over an
extended period of time as such properties' operations improved or to undertake
a going-private transaction. In part because Peregrine's properties were not
complementary, the Board of Trustees believed it would be necessary to focus the
portfolio on a particular property type to make a sale of the entire portfolio
feasible at satisfactory prices. While Peregrine began the process of developing
a focus on hotel properties in 1997, that process is still at an early stage and
is subject to market, financing, economic, management and other risks. Oaktree
and TCW had no interest in seeking alternative transactions with third parties
at this time for the same reasons.
Of the possible transactions considered in 1998, only the exchange of
preferred shares for Peregrine common shares was carried out. The exchange was
consummated following issuance of a fairness opinion by Duff & Phelps and
approval by the Special Committee. The exchange of preferred shares for
Peregrine common shares was completed in November 1998. The conversion of the
preferred shares to Peregrine common shares had the effect of strengthening the
balance sheet and reducing dilution to the remaining Peregrine common shares
-13-
<PAGE>
by eliminating the priority of the preferred shareholders in a liquidation or
sale of the properties and by eliminating the priority distributions of cash
flow to the holders of preferred shares. The conversion of the preferred shares
for Peregrine common shares also resulted in the increase in the Majority
Shareholders' aggregate percentage ownership of the Peregrine common shares to
approximately 89.7%. Although the accelerated conversion of the preferred shares
into Peregrine common shares in November 1998 had allowed the Majority
Shareholders to own in excess of the 75% of issued and outstanding Peregrine
common shares required to approve the Merger, such conversion had an
insignificant effect on the negotiations of the Merger. Even if Peregrine did
not undertake the exchange, the preferred shares would have automatically
converted pursuant to their terms into Peregrine common shares in April 1999.
Moreover, the fact that the Majority Shareholders held 89.7% of the Peregrine
common shares did not influence the manner in which the Special Committee and
its legal counsel negotiated the terms of the Merger or their conclusion, based
on Duff & Phelps' fairness opinion, that the price of $0.59 per share was fair
to the holders of Nonaffiliated Shares from a financial point of view.
Between late 1998 and the beginning of 2000, although the Board of Trustees
and Peregrine's management continued to believe the stock price of Peregrine
common shares did not adequately reflect the value of Peregrine's assets and
that the market for Peregrine common shares was not as active or liquid as they
desired, especially for minority shareholders, the Board of Trustees and
Peregrine's management did not actively explore going private transactions and
instead focused their attentions on increasing shareholder value by (i)
managing, leasing, redeveloping and stabilizing the assets in Peregrine's
portfolio, (ii) disposing of stabilized, fully valued properties and (iii)
selecting new acquisition opportunities.
In 1998 and 1999, Peregrine undertook a program of selling properties
one-by-one as the business plans for some of the properties were achieved.
Although most of the properties placed on the market were eventually sold, some
of the properties could not be sold at attractive prices. As a result of lack of
market interest and unfavorable valuations of certain of Peregrine's properties,
Peregrine's management realized that a program of property-by-property sale
would not result in favorable returns to Peregrine's shareholders in the short
term because such a strategy would take a long time to accomplish and would
entail significant market risk, cost and effort to improve the portfolio to make
the properties marketable.
In early 2000, Peregrine began discussions with the Majority
Shareholders regarding Peregrine's Notes, which were held entirely by the
Majority Shareholders and were scheduled to mature on October 1, 2000.
Because it was unlikely Peregrine would be able to repay the Notes upon
maturity and refinancing could not be obtained on terms that were
commercially reasonable because of Peregrine's high financial leverage,
Peregrine and the Majority Shareholders discussed converting the Notes into
Peregrine common shares as an alternative to a default upon the maturity of
the Notes. Prudential, however, was reluctant to convert the Notes into
Peregrine common shares because Prudential desired to retain its position as
a creditor of Peregrine because as such it enjoyed a preferred position in
the event of a liquidation of Peregrine and the debt securities have greater
value than equity securities of Peregrine. Prudential, however, was willing
to sell the Notes for cash consideration equal to the outstanding principal
amount of the Notes plus accrued and unpaid interest on the Notes. When it
became clear that Prudential would be unwilling to convert its Notes into
common shares, in order to avoid a potential default of the Notes and the
negative effects of such an event, Oaktree began discussions with Prudential
regarding the acquisition by Oaktree of the Notes held by Prudential for cash
consideration equal to the outstanding principal amount of the Notes plus
accrued and unpaid interest on the Notes and the conversion by Oaktree and
TCW of the Notes into Peregrine common shares.
-14-
<PAGE>
Realizing that the conversion of the Notes into Peregrine common shares by
Oaktree and TCW would further dilute the minority shareholders and exacerbate
the inability of minority shareholders to readily sell their Peregrine shares,
the Board of Trustees and Peregrine's management renewed their exploration of
transactions which would address this issue and also renewed their evaluation of
the costs and benefits of being a public company.
Concurrently with discussions regarding the sale of Prudential's Notes
to Oaktree and TCW, Oaktree and TCW discussed with Prudential the possibility
of taking Peregrine private. In connection with Oaktree's offer to purchase
Prudential's Notes for cash consideration equal to the outstanding principal
amount of Prudential's Notes plus accrued and unpaid interest on such Notes,
Prudential also agreed to vote in favor of a going-private transaction should
such a transaction be approved by the Board of Trustees. Prudential, which
held approximately 38.3% of the voting shares of Peregrine, agreed that it
would vote its Peregrine common shares in favor of a going private
transaction which Oaktree and TCW was considering proposing to Peregrine
because (i) a primary goal of such a transaction would be to provide
liquidity to the minority shareholders and considering the size of
Prudential's Peregrine common shares holdings, Prudential did not fit in the
category of a minority shareholder, (ii) Prudential desired to retain its
equity holdings in Peregrine and (iii) Prudential desired to sell its Notes
for cash consideration equal to the outstanding principal amount of the Notes
plus accrued and unpaid interest on the Notes. At this time, Oaktree and TCW
had no interest in seeking alternative transactions with third parties for
the same reasons as when such transactions were first being considered. On
May 26, 2000, TCW and OCM Real Estate Opportunities Fund II, L.P. purchased
at par all of the Notes held by Prudential and each of the Majority
Shareholders entered into a Shareholders' Agreement pursuant to which they
agreed to vote in favor of the proposed going private transaction. TCW and
Oaktree also agreed in the Shareholder's Agreement that they would not
convert the Notes at an exchange price of less than the greater of (i) $0.50
per share (which was based on the middle range of the 1998 fairness opinion
provided by Duff & Phelps) and (ii) $0.10 per share less than the highest
price paid by Peregrine to purchase any Peregrine common shares. In such
Shareholders' Agreement, the Majority Shareholders agreed to contribute the
Peregrine common shares held by each entity to a newly-formed entity that
would be wholly-owned by the Majority Shareholders and to vote in favor of a
merger between Peregrine and such newly-formed entity. Such agreement among
the Majority Shareholders expires on December 31, 2000, but will continue for
successive six month terms unless terminated not less than one month prior to
the expiration of the applicable term.
From the beginning of 2000 to July 2000, Oaktree, Prudential,
Peregrines's management and counsel to Peregrine further discussed the
possibility of a going private transaction and the various transaction
structures that could be utilized to effect a going private transaction. In
July 2000, the Special Committee was notified of the discussions regarding
the possibility of a going private transaction with the Majority Shareholders
designed to address the concerns of the Board of Trustees and Peregrine's
management about Peregrine's inability to repay the Notes and the illiquidity
of the market for the Peregrine common shares. The cash merger structure was
considered most desirable to all parties because it would facilitate the
acquisition of Peregrine common shares in a single step, with minimum
transaction costs and without material disruption to Peregrine's operations.
Oaktree and TCW indicated to the Special Committee in August 2000 that New
WinShip would use borrowings under Peregrine's credit facility with Fremont,
as well as Peregrine's cash on hand, cash from operations and cash proceeds
from sales of Peregrine's properties, to finance the payment of the Merger
Consideration and the expenses associated with the Merger. In August 2000,
the Board of Trustees decided that a merger with or sale to a third party was
not a feasible alternative to the Merger for the same reasons as when such
transactions were first being considered. In addition, given that Oaktree and
TCW had no interest in seeking an alternative transaction with third parties
because they felt they would not be able to sell their Peregrine common
shares at a satisfactory price and Oaktree and TCW had succeeded in obtaining
Prudential's support for the Merger, there was no likelihood that such an
alternative transaction could be consummated in light of the 89.7% stock
ownership and voting power of the Majority Shareholders. However,
-15-
<PAGE>
the Board of Trustees and Special Committee were not specifically restricted
from seeking alternative transactions with third parties.
In July 2000, the Special Committee again retained Duff & Phelps as its
financial advisor for purposes of preparing a report as to the fairness of the
Merger, from a financial point of view, to the holders of Nonaffiliated Shares.
In selecting Duff & Phelps, the Special Committee based its choice on the basis
of (i) the quality of Duff & Phelps's written material, (ii) Duff & Phelps's
reputation and prominence, (iii) Duff & Phelps's experience in advising the
Independent Committee on the exchange of preferred for common shares in 1998 and
in advising other board committees similar to the Special Committee, (iv) the
Special Committee's high level of comfort with the representatives of Duff &
Phelps who would be assigned to work with them, (v) the sensitivity of such
representatives to the need to obtain both a fair price and impartial and lawful
procedure, and (vi) Duff & Phelps's fee structure. Upon the Special Committee's
engagement of Duff & Phelps as its financial advisor, Duff & Phelps began its
due diligence review of Peregrine.
Before the August 3, 2000 meeting of the Special Committee, Duff & Phelps
delivered to the Special Committee, Board of Trustees and the Majority
Shareholders its draft fairness analysis of July 2000, which indicated that
based upon and subject to various considerations and assumptions, consideration
in an amount equal to $0.56 per share would be fair to the holders of
Nonaffiliated Shares from a financial point of view and that the value
indications considered in its analysis ranged from $0.00 to $0.59. Although the
draft fairness analysis was made available to the Majority Shareholders, the
Majority Shareholders did not influence Duff & Phelps' draft fairness analysis
or the final fairness analysis and opinion which Duff & Phelps subsequently
issued.
On August 3, 2000, after the Special Committee had again retained Troy &
Gould as its legal counsel, Oaktree and TCW delivered a letter to the Special
Committee setting forth its first written proposal to take Peregrine private. In
it, Oaktree and TCW proposed the Merger between Peregrine and New WinShip, a new
company they planned to form to facilitate the Merger. Under their proposal, the
Majority Shareholders would capitalize New WinShip with Peregrine common shares
owned by them. Peregrine would then merge with and into New WinShip, and New
WinShip would remain after the Merger as the Surviving Trust. Based on the upper
end of the range of Duff & Phelps' value indications from its draft fairness
analysis of July 2000, the Oaktree and TCW's proposal provided that the holders
of Nonaffiliated Shares would receive $0.59 per share in cash for each Peregrine
common share they owned. The proposal further provided that, in connection with
the Merger, the Peregrine common shares held by New WinShip would be cancelled.
As a result, the Majority Shareholders would own 100% of Peregrine after the
consummation of the Merger and the cancellation of the shares of Nonaffiliated
Shares.
On August 3, 2000, the Special Committee and its legal counsel met with
Roger Snell and Larry Knorr, the Chief Accounting Officer of Peregrine, as well
as representatives of Oaktree and counsel for Peregrine to discuss Oaktree and
TCW's proposal to purchase the Nonaffiliated Shares at $0.59 per share and Duff
& Phelps' draft fairness analysis of July 2000, as well as discuss the status of
the Peregrine properties with management. The draft fairness analysis of July
2000 was based on financial statements as of March 31, 2000, and indicated that
-16-
<PAGE>
consideration in the amount of $0.56 per share would be fair to the holders of
Nonaffiliated Shares. After concluding its discussions with the officers and
counsel of Peregrine and with the representatives of Oaktree, the Special
Committee excused them from the meeting and the Special Committee, with its
counsel, continued the meeting to further discuss Oaktree and TCW's proposal and
Duff & Phelps' draft fairness analysis of July 2000. During such meeting counsel
to the Special Committee advised the Special Committee of its fiduciary duties
and of the terms of the Merger Agreement.
During the same August 3, 2000 meeting, the Special Committee did not
immediately accept the $0.59 per share offer by Oaktree and TCW. Peregrine had
not received any other offer to acquire the Nonaffiliated Shares or the Company
as a whole. The Special Committee considered the possibility of making a
counteroffer but decided not to do so because it concluded, based on the advice
of Duff & Phelps, its own knowledge of the portfolio and market conditions and
Peregrine's recent financial performance, that it had no persuasive basis to
support a counteroffer, that $0.59 cents per share was more than Peregrine was
likely to get from a third party purchaser of Peregrine's assets and that the
minority shareholders would benefit from obtaining immediate liquidity for the
holders of Nonaffiliated Shares at a fair price that is substantially higher
than the current market price for the stock. The Special Committee noted that
during the first six months of 2000, the daily average trading volume for
Peregrine Common Shares was only 503 shares and the average trading price was
$0.23 per share with prices ranging from $0.16 to $0.41 per share, with an
average spread between bid and ask prices of $0.20 per share, indicating a low
level of trading and an unsatisfactory level of liquidity for the holders of
Nonaffiliated Shares. Thus, for the roughly 126 trading days of that six-month
period, the total value of the trading in Peregrine's stock was only
approximately $7,000. The Special Committee also noted that most of the minority
shareholders had a basis in their stock substantially above the current trading
prices. As a result of extreme illiquidity in the market for Peregrine stock,
the only practical way the minority shareholders as a group could dispose of
their Peregrine equity interests and realize a loss for tax purposes while
minimizing that loss would be through the Merger.
The Special Committee decided not to seek alternative transactions with
unaffiliated third parties for the same reasons that the Board of Trustees
decided not to pursue such alternative transactions in 1998 and determined that
the minority shareholders would be better served by undertaking a going-private
transaction at a fair valuation. Based on the advice of Duff & Phelps and their
own knowledge of Peregrine's portfolio and the real estate market, the Special
Committee reached the conclusion that the risks to the holders of Nonaffiliated
Shares of pursuing a third-party offer and turning down the going-private offer
were greatly outweighed by the benefits of getting an immediate cash payout to
the holders of Nonaffiliated Shares of $0.59 per share.
On September 1, 2000, the Special Committee and its legal counsel met with
representatives of Duff & Phelps to review Duff & Phelps' final fairness
analysis of August 2000 and their draft opinion, which were based on financial
statements as of June 30, 2000 and revised management projections to reflect
property sales, and which indicated that consideration in the amount of $0.59
per share would be fair to the holders of Nonaffiliated Shares from a financial
point of view and that value indications considered in its analysis ranged from
$0.00 to $0.58. A presentation was made by Duff & Phelps concerning the fairness
of the $0.59 offer given by
-17-
<PAGE>
Oaktree and TCW. Duff & Phelps described their due diligence review of
Peregrine, which included visits to selected properties and to Peregrine's
headquarters in Sacramento, and extensive meetings with Peregrine's executive
officers, particularly with the President and Chief Executive Officer of
Peregrine, Roger D. Snell, and with Larry Knorr, the Chief Accounting Officer
of Peregrine. Duff & Phelps' $0.58 per share value indication was based on an
orderly liquidation analysis whereby the fair market value of Peregrine's
liabilities and estimated liquidation costs were subtracted from the fair
market value of Peregrine's assets. The fair market value of Peregrine's
assets was determined to be $87.6 million, including $83.0 million for its
hotel and commercial properties. Duff & Phelps explained that they had
reviewed third-party appraisals of the hotel properties at a fair market
value of $43.6 million and management estimates of the commercial and hotel
properties at fair market values of $40.4 million and $41.6 million,
respectively. Subtracting Peregrine's liabilities of $69.6 million and
estimated liquidation costs of $4.1 million from the total asset value of
$87.6 million resulted in a total equity value of $13.9 million, or $0.58 per
fully diluted share. The net book value of Peregrine's equity securities
($837,000 or $0.04 per fully diluted share as of June 30, 2000) was not
considered to be a meaningful indication of its fair market value because, as
with most businesses, the accounting basis of the assets does not reflect
their fair market value. In addition, Duff & Phelps explained that they had
also reviewed the historical trading price and volume of the Peregrine common
shares, and publicly available information regarding Peregrine as well as
internally prepared financial information. Duff & Phelps had also considered
both current operating performance and management's projections of
Peregrine's future financial performance. Such projections included
management's expectation that Peregrine will dispose of all its commercial
properties by the end of 2001 and the effects of such sales on Peregrine's
future results of operations. Such projections influenced the Special
Committee's decision to go forward with the transaction because the projected
revenues did not increase enough to offset the burden of the expenses
associated with remaining a public company. Duff & Phelps also reviewed their
final fairness analysis of August 2000 and explained the types of analyses
that they had performed, which included five different methodologies:
liquidation value analysis; discounted cash flow analysis; public stock price
analysis; comparable public company analysis; and analysis of control
transactions. These valuation approaches, other than the liquidation value
analysis, are designed to determine the value of Peregrine as a going
concern. Duff & Phelps advised the Special Committee orally that, based on
their due diligence review and these analyses, the $0.59 offer was fair to
the holders of the Nonaffiliated Shares from a financial point of view and
that, based on their analysis of the properties and the market, it was
unlikely that the entire portfolio of assets could be sold to a third party
for an amount greater than $0.59 per fully diluted share.
At the same meeting of September 1, 2000, the Special Committee, based upon
the Duff & Phelps August 2000 final fairness analysis and upon oral
representations of Peregrine management and Oaktree and TCW and subject to the
issuance by Duff & Phelps of its final written opinion in substantially the form
of the draft presented to the Special Committee, that the Merger and related
transactions are fair to the holders of the Nonaffiliated Shares from a
financial point of view, unanimously took the following actions: (i) approved
the terms of the Merger Agreement and the transactions contemplated thereby as
they relate to the holders of Nonaffiliated Shares; (ii) determined that the
Merger Consideration of $0.59 per share and the terms of the Merger are fair to
and are in the best interest of the holders of Nonaffiliated Shares; and (iii)
recommended that the Board of Trustees approve and authorize the Merger
Agreement and the transactions contemplated thereby.
On September 1, 2000, Peregrine issued a press release disclosing that the
Special Committee had approved the Merger and authorized Peregrine to sign a
definitive Merger Agreement pursuant to which holders of Nonaffiliated Shares
would receive a per share price of $0.59 in cash upon consummation of the Merger
of Peregrine with New WinShip.
-18-
<PAGE>
On September 26, 2000, the Special Committee advised the Board of Trustees
in writing that the Special Committee recommended that the Board of Trustees
approve and authorize the Merger Agreement and the transactions contemplated
thereby. The Board of Trustees also received the final, written opinion of Duff
& Phelps dated September 1, 2000, a copy of which is attached hereto as Exhibit
B. See "SPECIAL FACTORS REGARDING THE MERGER."
On September 26, 2000, the Board of Trustees unanimously approved the
Merger Agreement pursuant to a written consent and directed that the Merger
Agreement be submitted to a vote of the shareholders of Peregrine entitled to
vote thereon. The Board of Trustees decided to obtain shareholder approval by
written consent in lieu of a shareholders meeting because the Majority
Shareholders own in excess of the 75% of issued and outstanding Peregrine common
shares required to approve the Merger.
SPECIAL COMMITTEE
In reaching its determination that the terms and conditions of the Merger
Agreement are fair from a financial point of view to and in the best interest of
the holders of Nonaffiliated Shares and to approve and recommend that the Board
of Trustees approve the Merger Agreement, the Special Committee did not perform
any independent financial analysis, but reviewed and adopted the analyses
performed by Duff & Phelps, as described above. The Special Committee also
considered the factors listed below:
(1) COMPARISON OF MARKET PRICES. A comparison of the historical market
prices of Peregrine common shares with the per share price offered by the
Majority Shareholders. The $0.59 per share price represents a 136% premium
over the $0.25 average closing price per share for the 30 trading days
before Peregrine first publicly announced the Merger. The fact that the
Merger Consideration represents a meaningful premium over recent trading
prices of the Peregrine common shares in the view of the Special Committee
supported its determination to approve the Merger.
(2) FAIRNESS OPINION. The opinion of Duff & Phelps addressed to the
Special Committee and dated September 1, 2000, that the $0.59 per share to
be received by the holders of Nonaffiliated Shares in connection with the
Merger is fair to such shareholders from a financial point of view, as of
that date. In addition, the $0.59 per share offer exceeds $0.58 per share,
which was the upper end of the range of value indications in Duff & Phelps'
final fairness analysis in August 2000. The rendering of Duff & Phelps'
opinion was, in the view of the Special Committee, a critical factor in
support of its determination to approve the Merger.
(3) SMALL, ILLIQUID PUBLIC FLOAT. The Special Committee also
considered the fact that the public float for the Peregrine common shares
consists of only approximately 10% of the outstanding shares of Peregrine
common shares. Because of the limited float, relatively low trading volume
in the Peregrine common shares and typical transaction costs, the Special
Committee believed that attempts to sell significant portions of the
Peregrine common shares could cause substantial downward pressure on market
prices and that sales by shareholders with smaller holdings were not
practical because of the
-19-
<PAGE>
related transaction costs. The Special Committee therefore believes that
the Merger represents an opportunity for holders of Nonaffiliated Shares to
realize a higher price for such stock than might be realized in market
transactions. This factor was viewed as supporting the fairness
determination to approve the Merger.
(4) MAJORITY SHAREHOLDERS' CONTROL OF PEREGRINE. The Special Committee
also considered the fact that the Majority Shareholders beneficially own
approximately 89.7% of the Peregrine common shares, representing
approximately 89.7% of the voting power of Peregrine. The Special
Committee therefore considered the fact that the Majority Shareholders
have sufficient stock ownership and voting power to control a
disposition of Peregrine. Although the Special Committee was not
specifically restricted from seeking alternative transactions with third
parties, the Special Committee and Duff & Phelps were not authorized to,
and did not, solicit third party indications of interest for the auction
of Peregrine or its assets for the reasons discussed in paragraph (6)
below. The fact that Oaktree and TCW control Peregrine was understood by
the Special Committee to give rise to a conflict of interest in
connection with the Merger, and accordingly required the appointment of
the Special Committee to make a fairness determination. The Special
Committee also considered the statement made by Oaktree and TCW that, at
such time, they had no present plan or intention to sell their Peregrine
common shares or to liquidate the assets of Peregrine in the immediate
future.
(5) TREND OF REVENUES AND NET LOSS. The Special Committee considered
all meaningful changes in the financial condition of Peregrine, including
the fact that revenues increased from $22,151,000 in 1998 to $28,523,000 in
1999, and net losses decreased from $4,416,000 in 1998 to $3,356,000 in
1999. The Special Committee discussed these improvements with Duff & Phelps
to ensure that they and all other important changes or developments were
taken into consideration by Duff & Phelps in rendering their fairness
opinion. As a result, these improvements, together with other changes in
the financial condition of Peregrine and its properties, were considered by
Duff & Phelps in rendering their fairness opinion, but they were not
sufficient to increase the value of Peregrine's common shares to a level in
excess of the $0.59 per share contemplated in the Merger.
(6) ALTERNATIVE TRANSACTIONS. The Special Committee considered the
fact that although they were not prohibited by the Majority Shareholders
from seeking alternative transactions with unaffiliated third parties,
for practical purposes they were restricted from seeking such
alternative transactions given that Oaktree and TCW had no interest in
seeking alternative transactions because they felt the minority
shareholders would not be able to sell their Peregrine common shares at
a satisfactory price and in light of the 89.7% stock ownership and
voting power of the Majority Shareholders. The Special Committee
believed that the disparate nature of Peregrine's real estate assets
made it unlikely that a single buyer or merger partner could be found
for all of the properties without providing the buyer with a substantial
discount to the aggregate value of the underlying assets. Based on their
knowledge of Peregrine's portfolio and the real estate market, the
Special Committee concluded that the risks to the holders of
Nonaffiliated Shares of pursuing a third-party offer were greatly
outweighed by the benefits of attaining immediate liquidity for the
holders of Nonaffiliated Shares at $0.59 per share.
-20-
<PAGE>
The foregoing factors constitute all material factors considered by the
Special Committee in reaching its determination that the terms and conditions of
the Merger Agreement are fair from a financial point of view to and in the best
interests of the holders of Nonaffiliated Shares. The Special Committee did not
assign relative weights to the factors described above.
THE BOARD OF TRUSTEES
The Board of Trustees believes that the terms and conditions of the Merger
Agreement are fair to and in the best interest of the holders of Nonaffiliated
Shares from a financial point of view. In reaching the determinations referred
to above, the Board of Trustees considered and relied upon the conclusions and
recommendations of the Special Committee, the unanimous approval of the Merger
Agreement and the Merger by the three trustees of Peregrine (Carson R.
McKissick, Matthew L. Witte and Michael C. Joseph) who are not (i) officers or
employees of Peregrine, (ii) officers or employees of New WinShip or (iii)
associates or affiliates of the Majority Shareholders, and the following
additional factors, each of which, in the view of the Board of Trustees,
supported such determinations: (x) the considerations referred to above as
having been taken into account by the Special Committee, whose conclusions and
recommendation the Board of Trustees adopted as their own, (y) the receipt by
the Special Committee of the opinion of Duff & Phelps addressed to the Special
Committee that, as of the date of such opinion, based upon and subject to
various considerations and assumptions stated therein, the $0.59 per share to be
received by the holders of Nonaffiliated Shares in the Merger is fair to such
holders from a financial point of view, and the related analysis orally
presented to the Board of Trustees by Duff & Phelps, and (z) the fact that the
price per share to be paid in the Merger and the terms and conditions of the
Merger Agreement were the result of arm's-length negotiations between the
Special Committee and Oaktree and TCW and their respective advisors and counsel.
The members of the Board of Trustees, including the members of the Special
Committee, evaluated the Merger in the light of their knowledge of the business,
financial condition and prospects of Peregrine, and the advice of their
financial and legal advisors. In view of the number and variety of factors that
the Special Committee and the Board of Trustees considered in connection with
their evaluation of the Merger, neither the Special Committee nor the Board of
Trustees found it practicable to assign relative weights to the foregoing
factors, and, accordingly, neither the Special Committee nor the Board of
Trustees did so.
The Board of Trustees believes that the Merger is procedurally and
substantively fair based on several factors, including:
(1) UNANIMOUS APPROVAL BY INDEPENDENT SPECIAL COMMITTEE. The Merger and the
Merger Agreement were unanimously approved and recommended by the Special
Committee, which consists solely of independent, non-employee trustees of
Peregrine who are not associates or affiliates of any of the Majority
Shareholders. The independence of the Special Committee and its unanimous
approval of the Merger are critical factors supporting the Board of Trustees'
view that the Merger is procedurally fair to the holders of the Nonaffiliated
Shares.
(2) ARM'S-LENGTH NEGOTIATION PROCESS. The negotiation of the terms of the
Merger Agreement and the Merger Consideration was conducted in good faith and on
an arm's
-21-
<PAGE>
length basis. The fact that the Special Committee members were originally
designated to the Board of Trustees by the Majority Shareholders did not prevent
the negotiations from being conducted at arm's-length because the Special
Committee is comprised of independent members who are not employed by Peregrine
nor associated or affiliated with the Majority Shareholders. The appointment of
Messrs. McKissick, Witte and Joseph to the Board of Trustees was based on their
ability to provide guidance to Peregrine because of their extensive experience
and understanding of business and financial matters and not on prior existing
relationships with the Majority Shareholders. In addition, the Special Committee
retained Duff & Phelps as its financial advisor for purposes of preparing a
report concerning the fairness of the transaction, from a financial point of
view, to the holders of Nonaffiliated Shares.
(3) FAIRNESS OPINION. The Opinion of Duff & Phelps addressed to the Special
Committee and dated September 1, 2000 indicated that the $0.59 per share to be
received by the holders of Nonaffiliated Shares in connection with the Merger is
fair to such shareholders from a financial point of view, as of that date. In
addition, the $0.59 per share offer exceeds $0.58 per share, which was the upper
end of the range of value indications in Duff & Phelps' final fairness analysis
in August 2000. The rendering of that opinion was an important factor in support
of the Board of Trustees' determination that the Merger is procedurally and
substantively fair to the holders of Nonaffiliated Shares.
(4) COMPARISON OF MARKET PRICES. A comparison of the historical market
prices of Peregrine common shares with the per share price offered by the
Majority Shareholders reflects that the $0.59 per share to be received by the
holders of Nonaffiliated Shares in connection with the Merger represents a 136%
premium over the $0.25 average closing price per share during the 30 trading
days before Peregrine first publicly announced the Merger. The fact that the
Merger Consideration represents a meaningful premium over recent trading prices
of the Peregrine common shares supported the view that the Merger is
substantively fair to the holders of Nonaffiliated Shares.
(5) EXIT STRATEGY. Sales by shareholders with smaller holdings are not
practical because the transaction costs that would be incurred from selling a
small number of shares would exceed the dollar value derived from selling
such shares. As a result, a shareholder who currently wants to sell his or
her Peregrine common shares may find it difficult or costly to do so.
Approximately 70% of the holders of Nonaffiliated Shares holds less than 100
Peregrine common shares, and about 98% of the holders of Nonaffiliated Shares
holds less than 500 Peregrine common shares. The Merger represents an
opportunity for holders of Nonaffiliated Shares to receive cash for his or
her shares of stock and realize a higher price for such stock than could be
expected to be realized in market transactions. This factor supports the
belief that the Merger is substantively fair to the holders of Nonaffiliated
Shares.
(6) SMALL, ILLIQUID PUBLIC FLOAT. There is no established market for
Peregrine common shares, in part because the number of Peregrine common shares
held by shareholders other than the Majority Shareholders consists of only
approximately 10% of the outstanding shares of Peregrine common shares. Because
of the limited float, relatively low trading volume in the Peregrine common
shares and typical transaction costs, attempts to sell significant portions of
the Peregrine common shares may cause substantial downward pressure on market
prices.
-22-
<PAGE>
The Merger offers shareholders an opportunity to dispose of all of their
Peregrine common shares at a substantial premium. This factor supports the view
that the Merger is fair to the holders of Nonaffiliated Shares.
(8) LACK OF A FEASIBLE ALTERNATIVE TRANSACTION. For the reasons stated
above, none of the alternatives to a going private transaction, including a sale
of all of the properties to a third party, or a property-by-property sale, were
feasible at prices that could be reasonably expected to yield proceeds to the
minority shareholders equal to or in excess of $0.59 per share.
The foregoing factors constitute all material factors considered by the
Board of Trustees in reaching its determination that the terms and conditions of
the Merger Agreement are fair to and in the best interests of the holders of
Nonaffiliated Shares from both a financial and procedural point of view.
THE REPORTING PERSONS' PURPOSE AND REASONS FOR THE MERGER
Oaktree and TCW's purpose for engaging in the transactions contemplated by
the Merger Agreement is to acquire, together with Prudential, 100% ownership of
Peregrine and to afford the holders of the Nonaffiliated Shares an opportunity
to dispose of their shares at a premium over recent market prices.
The purpose of the Reporting Persons for undertaking the Merger is to
enhance Peregrine's shareholder value by reducing administrative, legal,
accounting and other costs. The Reporting Persons believe that Peregrine does
not receive any significant benefit from its status as a public company as it
has not accessed the public capital markets for the past twelve years and does
not anticipate doing so in the foreseeable future. In addition, the Reporting
Persons believe that Peregrine's shareholders do not derive the benefits
typically received by shareholders of publicly traded companies because there is
no established market for Peregrine shares and the relatively small number of
outstanding Peregrine shares held by the Nonaffiliated Holders has caused an
illiquid market for Peregrine common shares and has resulted in the minority
shareholders' limited ability to realize the value of their shares.
Peregrine has not raised capital through the public markets in the last
twelve years and does not anticipate doing so in the foreseeable future. The
costs of complying with the reporting requirements of a public company
constitute a significant portion of Peregrine's administrative expense. In
addition, the Reporting Persons believe that the management resources of
Peregrine are diverted by Peregrine's compliance obligations as a public company
and that privately held status will enhance Peregrine's ability to dedicate
itself to ownership and management of commercial real estate.
The Reporting Persons estimate that Peregrine will be able to
achieve savings of approximately $500,000 per year in legal, printing,
accounting and public relations costs by being freed of public reporting
obligations. On a long-term basis, such savings will outweigh the estimated
costs of the transaction as described under "Estimated Fees and Expenses." In
addition, the Reporting Persons believe that the Merger will benefit all of
Peregrine's shareholders because it may increase the value of the Surviving
Trust's stock by allowing the Surviving Trust to reduce costs and dedicate its
resources to ownership and
-23-
<PAGE>
management of real estate and creating a liquidity event allowing the
minority shareholders to realize the value of their shares.
Finally, the Reporting Persons believe that the Merger is beneficial from
the standpoint of employee relations. Public ownership has created difficulties
for Peregrine with regard to employee compensation. The price of the Peregrine
common shares, an important element of stock compensation, has remained
relatively constant for the past five years and does not reflect adequately
Peregrine's performance, which has reduced the incentive value of stock
compensation and has hurt employee morale. The Merger may increase the value of
the Surviving Trust's equity interests by allowing the Surviving Trust to reduce
costs and dedicate its resources to ownership and management of real estate. As
a result, the Merger may improve the incentive value of the Surviving Trust's
stock compensation. Additionally, once Peregrine's common shares cease to be
publicly traded, employees may focus on the long-term goal of increasing value
in the Surviving Trust's equity interests rather than on the day-to-day trading
price of Peregrine's common shares. For these reasons, the Reporting Persons
believe that the motivation and rewarding of Peregrine's employees can be better
accomplished by means not involving publicly traded Peregrine common shares.
Oaktree and TCW have not pursued a liquidation of Peregrine or a sale of
Peregrine to a third party because the Majority Shareholders want Peregrine to
continue to operate on an on-going basis rather than sell Peregrine as a whole
or on a property-by-property basis at a price less than its fair market value.
Oaktree and TCW want to acquire, together with Prudential, the entire equity
interest in Peregrine and do not currently desire to sell the Peregrine common
shares that they own to a third party at a price which does not reflect the fair
value of the assets.
The acquisition of all of the outstanding equity interests in Peregrine was
structured as a cash merger in order to accomplish the acquisition of all the
remaining Peregrine common shares in a single step, with a minimum transaction
costs and without the necessity of financing separate purchases of Peregrine
common shares in a tender offer or in open market purchases while, at the same
time, not materially disrupting Peregrine's operations.
The Reporting Persons have concluded that the Merger, the Merger
Consideration and the terms and conditions of the Merger Agreement are fair to
Peregrine and the holders of the Nonaffiliated Shares. Material factors
considered by the Reporting Persons in determining that the Merger is
substantively and procedurally fair to the holders of Nonaffiliated Shares are
as follows:
(1) UNANIMOUS APPROVAL BY INDEPENDENT SPECIAL COMMITTEE. The Merger and the
Merger Agreement were unanimously approved and recommended by the Special
Committee, which consists solely of independent, non-employee trustees of
Peregrine who are not associates or affiliates of any of the Majority
Shareholders. The independence of the Special Committee and its unanimous
approval of the Merger are critical factors supporting the view that the Merger
is procedurally fair to the holders of the Nonaffiliated Shares.
(2) ARM'S-LENGTH NEGOTIATION PROCESS. The negotiation of the terms of the
Merger Agreement and the Merger Consideration was conducted in good faith and on
an arm's
-24-
<PAGE>
length basis. The Special Committee retained Duff & Phelps as its
financial advisor for purposes of preparing a report concerning the fairness of
the transaction.
(3) FAIRNESS OPINION. The Opinion of Duff & Phelps addressed to the
Special Committee and dated September 1, 2000 indicated that the $0.59 per
share to be received by the holders of Nonaffiliated Shares in connection
with the Merger is fair to such shareholders from a financial point of view,
as of that date. In addition, the $0.59 per share offer exceeds $0.58 per
share, which was the upper end of the range of value indications in Duff &
Phelps' final fairness analysis in August 2000. The rendering of that opinion
was an important factor in support of the determination that the Merger is
procedurally and substantively fair to the holders of Nonaffiliated Shares.
(4) COMPARISON OF MARKET PRICES. A comparison of the historical market
prices of Peregrine common shares with the per share price offered by the
Majority Shareholders reflects that the $0.59 per share to be received by the
holders of Nonaffiliated Shares in connection with the Merger represents a 136%
premium over the $0.25 average closing price per share during the 30 trading
days before Peregrine first publicly announced the Merger. The fact that the
Merger Consideration represents a meaningful premium over recent trading prices
of the Peregrine common shares supported the view that the Merger is
substantively fair to the holders of Nonaffiliated Shares.
(5) EXIT STRATEGY. Sales by shareholders with smaller holdings are not
practical because the transaction costs that would be incurred from selling a
small number of shares would exceed the dollar value derived from selling
such shares. As a result, a shareholder who currently wants to sell his or
her Peregrine common shares may find it difficult or costly to do so.
Approximately 70% of the holders of Nonaffiliated Shares holds less than 100
Peregrine common shares, and about 98% of the holders of Nonaffiliated Shares
holds less than 500 Peregrine common shares. The Merger represents an
opportunity for holders of Nonaffiliated Shares to receive cash for his or
her shares of stock and realize a higher price for such stock than could be
expected to be realized in market transactions. This factor supports the
belief that the Merger is substantively fair to the holders of Nonaffiliated
Shares.
(6) SMALL, ILLIQUID PUBLIC FLOAT. There is no established market for
Peregrine common shares, in part because the number of Peregrine common shares
held by shareholders other than the Majority Shareholders consists of only
approximately 10% of the outstanding shares of Peregrine common shares. Because
of the limited float, relatively low trading volume in the Peregrine common
shares and typical transaction costs, attempts to sell significant portions of
the Peregrine common shares may cause substantial downward pressure on market
prices. The Merger offers shareholders an opportunity to dispose of all of their
Peregrine common shares at a substantial premium. This factor supports the view
that the Merger is fair to the holders of Nonaffiliated Shares.
(7) LACK OF A FEASIBLE ALTERNATIVE TRANSACTION. For the reasons stated
above, none of the alternatives to a going private transaction, including a sale
of all of the properties to a third party, or a property-by-property sale, were
feasible at prices that could be reasonably expected to yield proceeds to the
minority shareholders equal to or in excess of $0.59 per share.
-25-
<PAGE>
In addition, the Reporting Persons considered the other factors referred to
above as having been taken into account by the Special Committee and the Board
of Trustees. Although the Reporting Persons are not experts with respect to the
matters addressed by the financial advisor to the Special Committee, the
Reporting Persons adopted the analysis presented by the financial advisor to the
Special Committee as appearing reasonable.
In reaching their conclusion that the Merger, the Merger Consideration and
the terms and conditions of the Merger Agreement are fair to Peregrine and the
holders of Nonaffiliated Shares from a procedural and financial point of view,
the Reporting Persons did not consider it necessary to retain an unaffiliated
representative to act solely on behalf of the holders of the Nonaffiliated
Shares for purposes of negotiating the terms of the Merger and Merger Agreement.
They reached this conclusion because they believed that the appointment of an
independent Special Committee and the retention by the Special Committee of an
unaffiliated legal counsel to ensure an arm's-length bargaining process and
financial advisor for purposes of preparing a report concerning the fairness of
the transaction sufficed to assure procedural fairness. The Reporting Persons
also did not consider it necessary to require the approval of a majority of the
Nonaffiliated Shares for the same reasons stated above.
OPINION OF THE FINANCIAL ADVISOR
Duff & Phelps has acted as financial advisor to the Special Committee of
the Board of Trustees of Peregrine in connection with the Merger. As part of its
services, Duff & Phelps rendered an opinion dated September 1, 2000 (the "Duff &
Phelps Opinion") as to whether the Merger is fair to Peregrine's common
shareholders from a financial point of view.
On September 1, 2000, Duff & Phelps presented its analysis and opinion to
the Special Committee that, as of such date, the Merger Consideration was fair,
from a financial point of view, to the holders of Nonaffiliated Shares. Duff &
Phelps has no obligation to update the Duff & Phelps Opinion to any date
subsequent to September 1, 2000.
The full text of the Duff & Phelps Opinion, which sets forth the
assumptions made, procedures followed, matters considered and limitations on the
review undertaken, is attached as Exhibit B to this Information Statement.
Shareholders are urged to read the Duff & Phelps Opinion carefully and in its
entirety.
The Duff & Phelps Opinion was prepared at the request of and for the
information of the Special Committee. No limitations were imposed by Peregrine
on the scope of the investigation or the procedures to be followed by Duff &
Phelps in rendering the Duff & Phelps Opinion. In connection with its
engagement, the Duff & Phelps Opinion is directed only to the fairness, from a
financial point of view, of the Merger Consideration to be paid to the holders
of Nonaffiliated Shares. The Duff & Phelps Opinion does not address the relative
merits of the Merger or any other transactions or business strategies discussed
by the Board of Trustees as alternatives to the Merger or the decision of the
Board of Trustees to proceed with, or the effects of, the Merger. Duff & Phelps
was not authorized to, and did not solicit, third party indications of interest
in acquiring all or part of Peregrine, and Duff & Phelps was not asked to
consider, and the Duff & Phelps Opinion does not address, the consideration
Peregrine or its shareholders might receive from another third-party purchaser,
the relative merits of the Merger as compared
-26-
<PAGE>
to any alternative business strategies that might exist for Peregrine or the
effects of any other transaction in which Peregrine might engage.
In conducting its analysis, Duff & Phelps reviewed and considered such
information as it deemed necessary or appropriate for the purposes of stating
its opinion, including (i) drafts, in the forms furnished to Duff & Phelps by
representatives of Peregrine, of the Merger Agreement and Declaration of Trust
of New WinShip; (ii) certain business and financial information relating to
Peregrine, as provided by Peregrine, including the financial condition and
results of operations of Peregrine, its historical financial performance and
certain financial projections prepared by the management of Peregrine; (iii)
certain public filings made by Peregrine with the Securities and Exchange
Commission; and (iv) to the extent publicly available, certain market trading
data and historical trading performance for securities of Peregrine. In
addition, Duff & Phelps conducted such other analyses and examinations and
reviewed and considered such other financial, economic and market data as it
deemed appropriate in arriving at the Duff & Phelps Opinion. Duff & Phelps also
met with members of senior management of Peregrine to discuss, among other
things, the historical and prospective industry and Company environment,
financial conditions and operating results for Peregrine and reasons for the
Merger and visited selected Peregrine properties.
In connection with its opinion, with Peregrine's permission and without any
independent verification, Duff & Phelps relied on the accuracy and completeness
of all the financial and other information reviewed by Duff & Phelps, furnished,
or otherwise communicated to Duff & Phelps by Peregrine or obtained by Duff &
Phelps from publicly available sources. Duff & Phelps was not requested to and
did not analyze or give any effect to the impact of any federal, state or local
income taxes to Peregrine's shareholders arising out of the Merger. Duff &
Phelps did not make an independent valuation or appraisal of the assets or
liabilities of Peregrine. Any inaccuracies in the information on which Duff &
Phelps relied could materially affect its opinion.
In developing its opinion, Duff & Phelps calculated a range of values
for Peregrine using five separate valuation approaches: (i) a liquidation
value analysis based upon an assumed orderly liquidation of Peregrine; (ii) a
discounted cash flow analysis based upon projected cash flows of Peregrine;
(iii) a public market price analysis based upon historical performance of
Peregrine's stock; (iv) a public market multiples analysis based upon
comparable publicly traded companies; and (v) an acquisition multiples
analysis based upon acquisitions of comparable companies. These valuation
approaches, other than the liquidation value analysis, are designed to
determine the value of Peregrine as a going concern. Set forth is a brief
summary of the analyses performed by Duff & Phelps in reaching its opinion as
of September 1, 2000.
LIQUIDATION VALUE ANALYSIS. Duff & Phelps considered the value of
Peregrine's equity under an orderly liquidation analysis. An orderly
liquidation analysis provides an indication of the equity value of a company
by subtracting the fair market value of a company's liabilities and estimated
liquidation costs from the fair market value of a company's assets. Duff &
Phelps used Peregrine's balance sheet as of June 30, 2000, as a basis for the
analysis. Duff & Phelps made certain adjustments to Peregrine's assets and
liabilities to arrive at the fair market value of these assets and
liabilities. In making these adjustments, Duff & Phelps considered
management's estimates of certain asset values, third-party appraisals of
certain Peregrine properties and industry valuation measures for individual
hotel properties, among other factors.
-27-
<PAGE>
According to management, the fair market value of Peregrine's commercial and
hotel properties was $40.4 million and $41.6 million, respectively. Based on
the third-party appraisals, the fair market value of Peregrine's hotel
properties was $43.6 million. Duff & Phelps concluded that the fair market
value of Peregrine's real estate assets was $83.0 million, of which $42.6
million was the value of the hotel properties and $40.4 million was the value
of the commercial properties. Peregrine's total liabilities as of June 30,
2000 were $69.6 million. Duff & Phelps also adjusted for the liquidation
expenses associated with the sale of Peregrine's properties and dissolution
of Peregrine. The liquidation expenses were conservatively estimated at 5% of
the fair market value of Peregrine's real property assets. Subtracting
Peregrine's liabilities of $69.6 million and estimated liquidation costs of
$4.1 million from the total asset value of $87.6 million resulted in a total
equity value of $13.9 million, or $0.58 per fully diluted share.
DISCOUNTED CASH FLOW ANALYSIS. The discounted cash flow analysis ("DCF
Analysis") derives value indications based on the present value of a
company's debt-free net cash flows. A company's debt-free net cash flow
provides a measure of how much cash it produces, irrespective of how it
finances its operations (i.e., before debt service). Duff & Phelps performed
a DCF Analysis based on the forecasted financial information provided by
Peregrine's management, including management's projections that Peregrine
will dispose of all of its commercial properties by the end of 2001. The
terminal value of Peregrine was estimated by capitalizing projected year 2004
operating cash flows. The projected debt-free net cash flows and terminal
value were discounted to present value using discount rates ranging from 9%
to 13%, which reflect different assumptions regarding the required rates of
return of holders and prospective investors of Peregrine's common shares. The
range of equity values of Peregrine's common shares resulting from this
analysis was $0.06 to $0.28 per share, or $1.5 million to $6.7 million for
the total equity.
PUBLIC MARKET PRICE ANALYSIS. Duff & Phelps reviewed the performance of
Peregrine's common shares which are traded on the Over-the-Counter Bulletin
Board. Peregrine's common shares have not been actively traded for many years,
with the monthly volume for the period from September 1999 to August 2000
representing approximately 0.02% of the total shares outstanding. Over the same
period, the price of Peregrine's common shares ranged from $0.16 to $0.47 per
share. As of August 18, 2000, the price of Peregrine's common shares was $0.25
per share. The Merger Consideration to be received by the holders of Peregrine's
Nonaffiliated Shares as a result of Merger represents a premium of approximately
136% to the price of Peregrine's common shares as of August 18, 2000.
PUBLIC MARKET MULTIPLES ANALYSIS. The public market multiples analysis
derives value indications by evaluating the public valuations of comparable
companies competing in similar industries using available public information.
Duff & Phelps selected certain shopping center, office, lodging, hotel and mixed
office/industrial REITs and C-corporations based on a variety of factors. These
comparable companies were as follows: Alexandria Real Estate Equities, Arden
Realty, Boston Properties, Boykin Lodging Co., Burnham Pacific Properties,
Center Trust, Equity Inns, Extended Stay America, Felcor Lodging Trust, Great
Lakes, Hospitality Properties Trust, Host Marriott, Innkeepers USA Trust, John
Q. Hammons Hotels, Kilroy Realty Corp., Lodgian, Meristar Hospitality Corp.,
Prime Hospitality Corp., PS Business Parks, RFS Hotel Investments, Starwood
Hotels & Resorts, Sunburst Hospitality Corp. and Winston Hotels. The valuation
multiples for the comparable public companies ranged as follows: enterprise
value as a multiple of sales ranged from 1.6x to 9.7x, enterprise value as a
multiple of operating cash flow ranged from 5.1x to 13.9x, and enterprise value
as a multiple of
-28-
<PAGE>
operating income ranged from 6.8x to 20.6x. Enterprise value was defined as the
market value of common equity, plus the book value of interest-bearing debt,
preferred stock and minority interests, less cash and cash equivalents. Other
commonly used valuation multiples, such as equity value as a multiple of net
income and equity value as a multiple of funds from operations, were not
applicable due to Peregrine's negative earnings and funds from operations. Duff
& Phelps analyzed the historical financial performance, size, capital structure
and other characteristics of Peregrine and the group of comparable companies to
select the enterprise value multiples used in calculation of the implied public
market value of Peregrine's equity. The selected multiples of sales, operating
cash flow and operating income were 1.7x, 5.5x and 7.0x, respectively. Based on
the selected multiples of sales, operating cash flow and operating income, the
public market multiples analysis indicated an equity value of $0.00 per fully
diluted share, implying only a speculative value for Peregrine's equity.
ACQUISITION MULTIPLES ANALYSIS. The acquisition multiples analysis applies
a similar methodology as the public market multiples analysis, but relies upon
multiples derived from merger and acquisition transactions involving target
involved in the real estate industry with some operational similarity to
Peregrine. The valuation multiples for the selected transactions ranged as
follows: enterprise value as a multiple of latest twelve months' revenue ranged
from 0.5x to 12.7x, enterprise value as a multiple of latest twelve months'
operating cash flow ranged from 7.0x to 30.5x, and enterprise value as a
multiple of latest twelve months' operating income ranged from 9.6x to 45.2x.
Based on the analysis of the acquisition multiples observed for the selected
transactions and the size of the identified transactions, Duff & Phelps selected
the sales, operating cash flow and operating income multiples of 2.5x, 12.1x and
15.9x, respectively, to determine the implied range of Peregrine's equity. The
range of equity values of Peregrine's common shares resulting from this analysis
was $0.00 to $0.25 per fully diluted share, or $0.0 million to $5.9 million for
the total equity.
The material analyses performed by Duff & Phelps have been summarized
above. Nonetheless, the summary set forth does not purport to be a complete
description of the analyses performed by Duff & Phelps. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. Furthermore, in arriving
at its opinion, Duff & Phelps did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgements as
to the significance and relevancy of each analysis and factor. Accordingly, Duff
& Phelps believes that its analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying the Duff & Phelps Opinion.
In performing its analyses, Duff & Phelps made numerous assumptions with
respect to Peregrine and industry performance, general business, economic and
market conditions and other matters, based on, among other things, information
provided to it by Peregrine, many of which matters are beyond the control of
Peregrine. Any estimates and/or projections contained in its analyses are not
necessarily indicative of actual values or actual results, as applicable, which
may be significantly more or less favorable than as set forth therein. The
actual future performance of Peregrine may vary substantially from such
projections.
-29-
<PAGE>
The Duff & Phelps Opinion to the Special Committee was one of many factors
taken into consideration by the Special Committee of the Board of Trustees in
recommending and approving the Merger. The Special Committee selected Duff &
Phelps as its financial advisor because Duff & Phelps is an established
investment banking firm with experience in transactions similar to the Merger.
Duff & Phelps, as part of its investment banking services, is regularly engaged
in the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate or other
purposes. Duff & Phelps has been retained by the Special Committee and the Board
of Trustees to render financial advisory services to the Special Committee and
the Board of Trustees in connection with the Merger and received a fee for such
services upon delivery of the Duff & Phelps Opinion. As compensation for Duff &
Phelps's services in rendering the Duff & Phelps Opinion, Peregrine paid Duff &
Phelps a total of $60,000, plus reimbursement of out-of-pocket expenses of
approximately $2,500, prior to receipt of the Duff & Phelps Opinion and $20,000,
plus expenses, following receipt of the Duff & Phelps Opinion. Duff & Phelps
will also receive indemnification against certain liabilities for the services
rendered pursuant to the engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Special Committee and the approval
of the Board of Trustees with respect to the Merger, shareholders should be
aware that certain members of the Board of Trustees and Peregrine's management
have interests in connection with the Merger (including those described below)
that differ from those of the holders of Nonaffiliated Shares. The Special
Committee and the Board of Trustees, based on the recommendation of the Special
Committee, were aware of these potential or actual conflicts of interest and
considered them along with other matters described in this section under
"--Background Of The Merger." The Special Committee and the Board of Trustees
recognized that the existence of these actual or potential conflicts might
result in increased scrutiny of the Merger and therefore viewed such factors
negatively. As discussed elsewhere in this section, the Special Committee and
the Board of Trustees, based on the recommendation of Special Committee, believe
that the terms of the Merger Agreement and Merger are fair to and in the best
interests of the holders of Nonaffiliated Shares from both a financial and a
procedural point of view. See "--Background of the Merger--Special Committee"
and "--Board of Trustees."
New WinShip was formed by Oaktree and TCW for the purpose of acquiring
Peregrine in the Merger. At the time of the consummation of the Merger, the
Majority Shareholders will collectively own 100% of WinShip Properties, with
Prudential owning 26.63%, TCW owning 42.74% and Oaktree owning 30.63% of the
issued and outstanding equity securities of New WinShip. Following the
effectiveness of the Merger, the Majority Shareholders will own 100% of the
common shares of the Surviving Trust in the same proportions as they owned in
New WinShip immediately prior to the consummation of the Merger.
Messrs. McKissick, Witte and Joseph, members of the Special Committee, were
initially proposed for election to the Board of Trustees by the Majority
Shareholders, although such persons are not affiliated or associated with the
Majority Shareholders.
-30-
<PAGE>
Each member of Peregrine's management, including Roger Snell, currently
the President and Chief Executive Officer of Peregrine, will be employed in
substantially the same capacity by New Winship after the consummation of the
Merger.
Several officers of Peregrine hold options to purchase Peregrine common
shares, as follows: Roger Snell holds options to purchase 1,700,000 Peregrine
common shares at an exercise price of $0.25 per share, of which 1,275,000 were
vested as of December 1, 2000, 212,500 will vest on September 30, 2001 and
212,500 will vest on September 30, 2002. Larry Knorr, Vice President and Chief
Accounting Officer, holds options to purchase 200,000 Peregrine common shares at
an exercise price of $0.25 per share, of which 133,334 shares were vested as of
December 1, 2000. Mr. Snell's and Mr. Knorr's options will terminate if not
exercised prior to ten years from the grant date. The options to purchase
Peregrine common shares held by these officers will become options to purchase
common shares of New WinShip upon consummation of the Merger. The rollover of
options to purchase Peregrine common shares held by officers of Peregrine in the
Merger will result in a treatment of such officers that is different from the
interest of the holders of Nonaffiliated Shares and may present actual or
potential conflicts of interest. In addition, all of the outstanding options to
purchase Peregrine common shares held by employees which were issued under the
1998 Long Term Incentive Plan will also be converted into options to purchase
New WinShip common shares and all obligations of Peregrine under such option
plans will be assumed by New WinShip upon consummation of the Merger: These
options to purchase Peregrine common shares were issued to employees of
Peregrine on substantially similar terms as the options issued to officers of
Peregrine. See "THE MERGER AGREEMENT--Treatment Of Options."
Options to purchase Peregrine common shares which are held by trustees of
Peregrine and were issued under Peregrine's Trustee Option Plan will not be
converted into options to purchase New WinShip common shares and will be
cancelled.
CERTAIN EFFECTS OF THE MERGER
Following the Merger, the Majority Shareholders will own 100% of the common
shares of New WinShip as the Surviving Trust and will have a 100% interest in
the net book value and net earnings of New WinShip as the Surviving Trust. The
Majority Shareholders will be the sole beneficiaries of any future earnings and
growth of the Surviving Trust (until shares of beneficial interest, if any, are
issued to other persons) and will have the ability to benefit from any
divestitures, strategic acquisitions or other corporate opportunities that may
be pursued by the Surviving Trust in the future. New WinShip will have net
operating loss carryforwards in the amount of approximately $89 million for
Federal income tax purposes and $41 million for California income tax purposes.
New WinShip may, subject to certain limitations, use these carryforwards to
offset future taxable income, if any. The Merger will not limit the use of these
net operating loss carryforwards. Upon the consummation of the Merger, the
holders of Nonaffiliated Shares will cease to have any ownership interests in
Peregrine or rights as shareholders. The holders of Nonaffiliated Shares will no
longer benefit from any increases in the value of Peregrine or any payment of
dividends on the Peregrine common shares and will no longer bear the risk of any
decreases in value of Peregrine. As of June 30, 2000, the Majority Shareholders
had a 89.7% interest in the net book value and net earnings of Peregrine which
amounted to approximately $751,000 and $60,000 respectively. Assuming the Merger
was consummated on June 30, 2000, the Majority Shareholders would have had a
100% interest in the net book value and net earnings of Peregrine as of June 30,
2000 which would have amounted to approximately $837,000 and $67,000,
respectively. As a result of the Merger, New WinShip, as the Surviving Trust,
will be privately held and there will be no public market for its
-31-
<PAGE>
equity interests. In addition, registration of the Peregrine common shares under
Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), will terminate following consummation of the Merger and,
accordingly, Peregrine will no longer be required to file periodic reports with
the SEC under Section 12(g). Under Rule 12g-4(a), registration of Peregrine's
common shares under Section 12(g)(4) will terminate 90 days (or such shorter
period as the SEC may determine) after Peregrine files a Form 15 certifying that
Peregrine's common shares are held by less than 300 shareholders. Under Rule
12g-4(b), Peregrine's duty under Section 12(g) to file reports required by
Section 13(a) will be suspended immediately upon the filing of a Form 15. In
particular, Peregrine will not file an Annual Report on Form 10-K for the fiscal
year ended December 31, 2000. The reporting obligations under Section 15 do not
apply to Peregrine because Peregrine has not filed a registration statement with
the SEC under the Securities Act of 1933. Furthermore, as a consequence of the
Merger, Peregrine will not be subject to the going private provisions of
Exchange Act Rule 13e-3 in future transactions.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of material federal income tax consequences of
the Merger to shareholders who receive the Merger Consideration for their shares
of Peregrine common shares pursuant to the Merger. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
(including Proposed Regulations and Temporary Regulations) promulgated
thereunder, official pronouncements and judicial decisions, all as in effect on
the date hereof and all of which are subject to change, possibly with
retroactive effect. This summary does not purport to discuss all tax
consequences of the Merger to all shareholders. In particular, the summary does
not discuss the tax consequences of the Merger to any shareholder that is an
insurance company, tax-exempt organization or financial institution or who has
acquired his, her or its shares upon the exercise of options or otherwise as
compensation.
The receipt of cash by a shareholder of Peregrine in exchange for Peregrine
common shares pursuant to the Merger will be a taxable transaction for federal
income tax purposes and may also be a taxable transaction under applicable
state, local, foreign or other tax laws. In general, a shareholder will
recognize a gain or loss equal to the difference, if any, between the amount of
cash received for his, her or its stock in the Merger and the shareholder's
adjusted tax basis in such stock. A shareholder's adjusted basis in the
Peregrine common shares generally will equal the shareholder's purchase price
for such Peregrine common shares. For federal income tax purposes, such gain or
loss will be a capital gain or loss if the shares are a capital asset in the
hands of the shareholder, and will be treated as long-term capital gain or loss
if the shares have been held for a twelve month period. A shareholder will
recognize such gain or loss as of the Effective Time.
Because most of Peregrine's value is attributable to its holdings of United
States real estate, Peregrine is a real property holding corporation for
purposes of the Foreign Investment in Real Property Tax Act ("FIRPTA"). Thus,
Peregrine common shares are treated as real property interests for United States
tax purposes and gain realized by a foreign person on the sale of Peregrine
common shares is treated as effectively connected with a United States trade or
business. As indicated above, the receipt of cash by a shareholder of Peregrine
in exchange for Peregrine common shares is treated as a sale or exchange of the
Peregrine common
-32-
<PAGE>
shares. Thus, foreign holders of Peregrine common shares are required to file
United States tax returns with respect to their sale of the Peregrine common
shares and are liable for United States tax on that sale in the same manner as a
United States person. In addition, Peregrine is required to withhold and remit
to the Internal Revenue Service 10% of the consideration payable to the foreign
person. This withholding is not a substantive tax, but an enforcement mechanism.
The foreign person may credit the withholding tax against its substantive tax
liability and will be entitled to a refund if the amount withheld exceeds its
substantive tax liability. Withholding at the 10% rate is not required if the
foreign person obtains a withholding certificate from the Internal Revenue
Service indicating that no withholding or a lower amount of withholding is
applicable. In addition, if a foreign person receives a withholding certificate
and a greater amount than indicated on the certificate was withheld, the foreign
person may apply for an early refund.
Peregrine or the Exchange Agent (as defined below) will be required to
withhold 31% of the gross proceeds payable to a shareholder or other payee in
the Merger unless the shareholder or payee provides, in a properly completed
substitute Form W-9 included with the letter of transmittal which will be mailed
to the holders of Nonaffiliated Shares promptly after the Effective Time (the
"Letter of Transmittal") (see "THE MERGER AGREEMENT--The Exchange Fund; Payment
for Common Shares"), his, her or its taxpayer identification number and
certifies under penalties of perjury that such number is correct and that the
shareholder is not subject to backup withholding, unless an exemption applies
under applicable law and regulations. Therefore, unless such an exemption exists
and is demonstrated in a manner satisfactory to Peregrine or the Exchange Agent,
in accordance with the instructions that will accompany the substitute Form W-9,
each shareholder should complete and sign the substitute Form W-9 that will be
made available to the shareholder with the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding.
Each shareholder should consult his, her or its own tax advisor with
respect to the federal income tax consequences of the Merger in his, her or its
individual circumstances and with respect to the state, local or other income
tax consequences of the Merger. Further, any shareholder who is a citizen of a
country other than the United States should consult his, her or its own tax
advisor with respect to the tax treatment in such country of the Merger and with
respect to the question of whether the tax consequences described above may be
altered by reason of the provisions of the internal revenue code applicable to
foreign persons or the provisions of any tax treaty applicable to such
shareholder.
ACCOUNTING TREATMENT
The Merger between Peregrine and New WinShip will be accounted for as an
exchange of shares between entities under common control. As a result, the
historical cost basis of Peregrine's assets and liabilities will be carried
forward to the Surviving Trust.
The cost of repurchasing the Peregrine common shares will be accounted for
as a treasury stock transaction within the context of generally accepted
accounting principles. Accordingly, the aggregate cost of such repurchase will
be accounted for as a deduction from shareholders' equity.
-33-
<PAGE>
FINANCING OF THE MERGER
At the closing of the Merger, New WinShip expects to pay an aggregate
purchase price of approximately $1,369,000 to the holders of Nonaffiliated
Shares. The parties anticipate that New WinShip will require approximately
$470,000 to pay expenses and costs relating to the Merger. New WinShip will not
have any assets prior to the consummation of the Merger, other than Peregrine
common shares, and will rely exclusively on borrowings under Peregrine's credit
facility with Fremont Investment & Loan ("Fremont"), Peregrine's cash on hand,
cash from Peregrine's operations, and cash proceeds from sales of Peregrine's
properties to finance the payment of the Merger Consideration and the expenses
associated with the Merger. As of September 30, 2000, Peregrine had
approximately $2,099,000 in cash on hand that may be used for the Merger.
Proceeds from the sale of the Town Center Office Park, an office building
located in Signal Hill, California sold on November 21, 2000 for net proceeds of
approximately $2,930,000 may be used to finance the Merger. See "Special Factors
Regarding the Merger--Financing of the Merger."
On March 10, 1999, Peregrine entered into a credit facility with Fremont to
provide for up to $44,000,000 in borrowing capacity under a revolving line of
credit. The maximum amount that may be borrowed under the credit facility is
based upon the appraised value of certain parcels of real estate owned by
Peregrine. The commitments made under the credit facility expire on April 1,
2001, but may be extended until April 2, 2003 with Fremont's consent. The credit
facility is secured by a first lien on three commercial properties and four
hotel properties located in California.
Principal amounts borrowed under the credit facility bear interest at 8.6%
for the first six months, then at a range from the six-month LIBOR plus 350
basis points to LIBOR plus 400 basis points. The average interest rate charged
during the six months ended June 30, 2000 was 9.9%. The current interest rate
charged as of September 26, 2000 was 10.205%.
Peregrine's credit facility with Fremont contemplated that one of the
uses of borrowings under the facility would be to finance a going private
transaction. Pursuant to the terms of the facility with Fremont, Peregrine
may incur up to $1,200,000 to fund the payment of cash in lieu of fractional
interests or shares paid by Peregrine to its public common shareholders in
connection with the reorganization of Peregrine. Since a Merger was not
contemplated as the structure of the going private transaction at the time
the Fremont facility was entered into, the Fremont facility does not
expressly permit Peregrine to use borrowings to finance the Merger
Consideration. Peregrine has engaged in discussions with Fremont to obtain
Fremont's consent to use the credit facility to finance payment of the Merger
Consideration and the expenses associated with the Merger prior to the
consummation of the Merger. New WinShip intends to assume Peregrine's loan
obligations under the credit facility pursuant to an assumption agreement
between New WinShip and Fremont to be executed immediately prior to the
Merger. Borrowings under the credit facility may not be used for general
corporate or working capital purposes. The credit facility also prohibits
Peregrine from incurring debt other than specified mortgage indebtedness and
permitted refinancing indebtedness and restricts the ability of Peregrine to
incur liens, distribute assets and make payments on senior debt. As of
November 14, 2000, Peregrine has a balance of approximately $32,283,000
outstanding under its credit facility. Peregrine expects that it will
refinance amounts outstanding under the credit facility when the credit
facility matures on April 1, 2001 or that it will extend the maturity of the
credit facility to April 1, 2003. Peregrine has not yet begun to explore
financing alternatives for refinancing the credit facility. After each sale
of property secured under the credit facility, Peregrine intends to repay
under the credit facility an amount based upon amounts agreed upon by
Peregrine and Fremont.
-34-
<PAGE>
REGULATORY MATTERS
Peregrine does not believe that any material federal or state regulatory
approvals, filings or notices are required by Peregrine in connection with the
Merger other than such approvals, filings or notices required pursuant to
federal and state securities laws.
REQUIRED VOTE FOR MERGER; WRITTEN CONSENT IN LIEU OF MEETING
Under Section 23006 of the California Corporations Code , as amended, any
two or more real estate investment trusts may be merged into one real estate
investment trust upon the approval of the holders of a majority of the shares of
beneficial interest of the real estate investment trust (or as otherwise
provided for in the declaration of trust), provided that the merger is
specifically permitted by the declaration of trust, and that procedure is
detailed in those declarations. Under Section 4.7 of Peregrine's Restated
Declaration of Trust, a merger or sale or transfer of all or substantially all
of the assets of Peregrine must be approved by the affirmative vote or written
consent of at least 75% of the outstanding common shares of Peregrine entitled
to vote. Pursuant to Section 8.3 of Peregrine's Restated Declaration of Trust,
any action required or permitted to be taken at any meeting of shareholders of
Peregrine may be taken without a meeting, upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting. On December 20,
2000, the Majority Shareholders, which then held of record, in the aggregate,
20,232,525 Peregrine common shares, representing more than 75% of the votes
entitled to be cast at a meeting to consider the Merger Agreement and the
Merger, executed and delivered to Peregrine a written consent in lieu of a
meeting of shareholders approving the Merger Agreement and the Merger and
adopting the Merger Agreement. On December 20, 2000, there were issued and
outstanding 22,552,440 Peregrine common shares. The Merger will become effective
no earlier than 20 business days after this Information Statement is first sent
or given to shareholders of Peregrine. The Merger Agreement does not require the
holders of Nonaffiliated Shares to approve the Merger.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof,
and shareholders are urged to read the Merger Agreement which is attached hereto
as Exhibit A.
CONSIDERATION TO BE PAID IN THE MERGER
At the Effective Time, by virtue of the Merger and without any action on
the part of New WinShip, Peregrine, or the holders of any Peregrine common
shares, each Nonaffiliated Share which is issued and outstanding prior to the
Effective Time shall be converted into and become a right to receive the Merger
Consideration, and, when so converted, shall automatically be cancelled and
retired and shall cease to exist. Any certificate representing Nonaffiliated
Shares that has been so converted shall, after the effective time of the Merger,
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration allocable to the shares represented by such certificate
upon the surrender of such certificate.
-35-
<PAGE>
California law and the provisions of Peregrine's Restated Declaration of
Trust do not provide dissenters' rights to shareholders of Peregrine. See "NO
DISSENTERS RIGHTS."
THE EXCHANGE FUND; PAYMENT FOR COMMON SHARES
On or before the Closing Date, Peregrine shall appoint a bank or trust
company to act as exchange agent (the "Exchange Agent"). As of the Effective
Time, Peregrine will deposit or cause to be deposited with or for the account of
the Exchange Agent, in trust for the benefit of the holders of Nonaffiliated
Shares, an amount in cash equal to the aggregate Merger Consideration (such
amount being hereinafter referred to as the "Exchange Fund").
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each record holder of Nonaffiliated Shares immediately prior
to the Effective Time the Letter of Transmittal containing instructions for
surrendering certificates formerly representing Peregrine common shares (the
"Certificates") in exchange for the Merger Consideration. No shareholder should
surrender any Certificates until the shareholder receives the Letter of
Transmittal and other materials for such surrender. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with a Letter of
Transmittal, duly executed, and such other customary documents as may be
required pursuant to the instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each
Peregrine common share formerly represented by such Certificate, less any
required withholding of taxes, and the Certificate so surrendered will be
cancelled. The Merger Consideration will be delivered by the Exchange Agent as
promptly as practicable following the surrender of the Certificate and delivery
of the Letter of Transmittal and any other related transmittal documents. Cash
payments may be made by check unless otherwise required by a depository
institution in connection with the book-entry delivery of securities.
If payment of the Merger Consideration is to be made to a person other than
the person in whose name the Certificate surrendered is registered, it will be a
condition of payment that the Certificate so surrendered will be properly
endorsed or otherwise be in proper form for transfer and that the Exchange Agent
receives evidence that any applicable transfer or other taxes have been paid.
SHAREHOLDERS SHOULD NOT SEND THEIR CERTIFICATES NOW AND SHOULD SEND THEM
ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN THE LETTER OF TRANSMITTAL TO BE
MAILED TO SHAREHOLDERS AS SOON AS PRACTICABLE AFTER THE EFFECTIVE TIME. IN ALL
CASES, THE MERGER CONSIDERATION WILL BE PROVIDED ONLY IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN THIS INFORMATION STATEMENT AND SUCH LETTER OF
TRANSMITTAL.
Six months after the Effective Time, the Exchange Agent will return to New
WinShip any portion of the Exchange Fund which remains undistributed to the
holders of Nonaffiliated Shares (including the proceeds of any investments
thereof), and any holders of Nonaffiliated Shares who have not theretofore
complied with the above-described procedures to receive payment of the Merger
Consideration may look only to New WinShip and only as general creditors thereof
for payment of their claim for Merger Consideration. California law provides
that Merger Consideration that is owed to shareholders with addresses in
California will escheat to the State of California if such shareholders do not
claim such Merger Consideration
-36-
<PAGE>
within three years following the consummation of the Merger. The escheat laws of
other jurisdictions in which Peregrine shareholders reside may differ from
California law.
TRANSFERS OF PEREGRINE COMMON SHARES
At the Effective Time, the stock transfer books of Peregrine will be
closed, and there will be no further registration of transfers of Peregrine
common shares thereafter on the records of Peregrine. If, after the Effective
Time, Certificates are presented to the Exchange Agent or the Surviving Trust,
they will be cancelled and exchanged for the Merger Consideration as provided
above and pursuant to the terms of the Merger Agreement.
TREATMENT OF OPTIONS
Pursuant to the Merger Agreement, at the Effective Time, all of the
outstanding options to purchase Peregrine common shares held by the employees
under the 1998 Long Term Incentive Plan, will be automatically be converted into
options to purchase New WinShip common shares and all obligations of Peregrine
under such option plans will be assumed by New WinShip.
Options to purchase Peregrine common shares which are held by trustees of
Peregrine and were issued under Peregrine's Trustee Option Plan will not be
converted into options to purchase New WinShip common shares and will be
cancelled.
AMENDMENT
The Merger Agreement provides that it may not be amended except by written
agreement of each of the parties thereto.
APPLICABLE LAW
The Merger Agreement is governed by the laws of the State of California.
ESTIMATED FEES AND EXPENSES
Whether or not the Merger is not consummated, and except as otherwise
provided herein, all fees and expenses incurred by Peregrine and the Majority
Shareholders in connection with the Merger will be paid by Peregrine.
Estimated fees and expenses to be incurred by Peregrine or New WinShip in
connection with the Merger are as follows:
<TABLE>
<S> <C>
Financial Advisors Fees and Expenses................$84,365
SEC Filing Fees.........................................275
Legal Fees and Expenses.............................170,000
Accounting Fees.......................................5,000
Printing and Mailing Expenses........................85,000
Exchange Agent Fees.................................102,000
Information Agent Fees...............................25,000
</TABLE>
-37-
<PAGE>
<TABLE>
<S> <C>
Total ..........................................$471,640
</TABLE>
The Majority Shareholders believe Peregrine will be able to achieve savings
of approximately $500,000 per year in legal, printing, accounting and public
relations costs by being freed of public reporting obligations. On a long-term
basis, such savings will outweigh the estimated costs of the transaction
described above.
NO DISSENTERS RIGHTS
California law and the provisions of Peregrine's Restated Declaration of
Trust do not provide dissenters' rights to shareholders of Peregrine. However,
Section 7.2 of Peregrine's Restated Declaration of Trust provides that any
holder of the Nonaffiliated Shares may inspect Peregrine's share register, books
of account and minutes of shareholder proceedings at any reasonable time upon
the written demand of such shareholder in connection with the Merger or for a
purpose reasonably related to his or her interests as a shareholder. The
provisions of Peregrine's Restated Declaration of Trust do not provide the
shareholders of Peregrine a right to obtain counsel at the expense of Peregrine.
CERTAIN INFORMATION REGARDING PEREGRINE
Peregrine is a California real estate investment trust headquartered in
Sacramento, California. As of June 30, 2000, Peregrine's investments included
eight commercial properties located primarily in the Sacramento area, four hotel
properties located in Northern California, partnership interests in two general
partnerships, and one mortgage note secured by real property.
Peregrine was organized in California pursuant to a Declaration of Trust
dated July 31, 1973. Pursuant to a Plan of Reorganization under Chapter 11 of
the United States Bankruptcy Code Peregrine was reorganized under a Restated
Declaration of Trust dated October 7, 1994. Peregrine's Restated Declaration of
Trust gives the Board of Trustees the power to borrow money on behalf of
Peregrine; to make loans to other persons; to invest in the securities of other
issuers under certain circumstances; to make investments in property; to
purchase outstanding shares of Peregrine for such consideration as they deem
advisable; to issue an annual report to shareholders; to issue debt securities;
to allocate investments between direct and indirect ownership; and to exercise
other powers in connection with Peregrine's operations. The Trustees can also
make decisions regarding investment and sales activities without the prior
approval of shareholders.
Peregrine's principal offices are located at 1300 Ethan Way, Suite 200,
Sacramento, California, 95825. Its telephone number is (916) 929-8244.
CERTAIN INFORMATION REGARDING NEW WINSHIP
New WinShip was organized by Oaktree and TCW to acquire all the outstanding
shares of Peregrine common shares pursuant to the Merger Agreement.
New WinShip has not conducted any unrelated activities since its
organization. All of the outstanding equity interests of New WinShip are
currently owned by TCW and
-38-
<PAGE>
Oaktree. Immediately prior to the consummation of the Merger, the Majority
Shareholders who collectively own 89.7% of the common shares of Peregrine will
contribute 20,232,525 Peregrine common shares in exchange for all of the equity
interests of New WinShip. As a result, at the time of the consummation of the
Merger, the Majority Shareholders will collectively own 100% of New WinShip,
with Prudential owning 26.63%, TCW owning 42.74% and Oaktree owning 30.63% of
the issued and outstanding equity securities of New WinShip. Following the
effectiveness of the Merger, the Majority Shareholders will own 100% of the
common shares of the Surviving Trust in the same proportions as they owned in
New WinShip immediately prior to the consummation of the Merger.
Kenneth Liang, Phil Hofmann and Russel S. Bernard are the sole officers and
trustees of New WinShip and will become the sole trustees of New WinShip, as the
Surviving Trust, as a result of the Merger. Richard Masson is the President
of New WinShip. However, after the consummation of the Merger, Roger Snell,
currently the President and Chief Executive Officer of Peregrine, will become
the President of New WinShip.
The principal offices of New WinShip are located at 1300 Ethan Way, Suite
200, Sacramento, California 95825 and its telephone number is (916) 929-8244.
CERTAIN INFORMATION REGARDING THE MAJORITY SHAREHOLDERS
TCW. TCW owns 8,647,723 Peregrine common shares, which represents 38.3% of
the Peregrine common shares and approximately 38.3% of the voting power of the
shareholders of Peregrine. TCW is comprised of TCW Special Credits Fund IV, a
California limited partnership; TCW Special Credit Plus Fund, a California
limited partnership; TCW Special Credits Trust IV, a trust organized under the
laws of the United States; TCW Special Credits Trust IVA, a trust under the laws
of the United States; and TCW Special Credits, as investment manager of the
Weyerhaeuser Company Master Retirement Trust Separate Account. TCW's principal
business is to provide investment advice and management services to
institutional and individual investors. TCW has not been convicted in any
criminal proceedings during the past five years. TCW has not been a party to any
judicial or administrative proceeding during the past five years that resulted
in a judgment or final order enjoining TCW from future violations of federal or
state securities laws or in a finding of any violation of federal or state
securities laws. The principal offices of TCW are located at 865 South Figueroa
Street, Suite 1800, Los Angeles, California 90017 and its telephone number is
(213) 244-0000.
OAKTREE. Oaktree owns 6,196,188 Peregrine common shares, which represents
27.5 % of the Peregrine common shares and approximately 27.5% of the voting
power of the shareholders of Peregrine. Oaktree is comprised of OCM Real Estate
Opportunities Fund A, L.P., a Delaware limited partnership; OCM Real Estate
Opportunities Fund B, L.P., a Delaware limited partnership; and Oaktree Capital,
as investment manager of Gryphon Domestic VII, LLC's separate account. Oaktree's
principal business is to provide investment advice and management services to
institutional and individual investors. Oaktree has not been convicted in any
criminal proceedings during the past five years. Oaktree has not been a party to
any judicial or administrative proceeding during the past five years that
resulted in a judgment or final order enjoining Oaktree from future violations
of federal or state securities laws or in a finding of any violation of federal
or state securities laws. The principal offices of Oaktree are located at 333
South Grand Avenue, 28th Floor, Los Angeles, California 90071 and its telephone
number is (213) 830-6300.
-39-
<PAGE>
PRUDENTIAL. Prudential owns 5,387,989 Peregrine common shares, which
represents 23.9% of the Peregrine common shares and approximately 23.9% of the
voting power of the shareholders of Peregrine. Prudential is comprised of The
Prudential Insurance Company of America, a corporation organized in New Jersey
and Gateway Recovery Trust, a business trust organized in Delaware. Prudential's
principal business is insurance and financial services. Prudential has not been
convicted in any criminal proceedings during the past five years. Prudential has
not been a party to any judicial or administrative proceeding during the past
five years that resulted in a judgment or final order enjoining Prudential from
future violations of federal or state securities laws or in a finding of any
violation of federal or state securities laws. The principal offices of The
Prudential Insurance Company of America are located at Prudential Plaza, 751
Broad Street, Newark, New Jersey 07102-3777 and its telephone number is (973)
802-8787. The principal offices of The Gateway Recovery Trust are located at
Four Gateway Center, 9th Floor, Newark, New Jersey 07102 and its telephone
number is (973) 802-7500.
Oaktree Capital is a registered investment adviser with the
SEC under the Advisers Act, which has approximately $17 billion of assets
under, or committed for, management. Oaktree Capital is (a) the general
partner with an approximately 1% or less equity interest in (i) OCM Real
Estate Opportunities Fund A, L.P., (ii) OCM Real Estate Opportunities Fund B,
L.P. and (iii) OCM Real Estate Opportunities Fund II, L.P. and (b) investment
manager of Gryphon Domestic VII, LLC, a separate account pursuant to which
Oaktree Capital receives a management and incentive fee. Oaktree Capital is a
member managed limited liability company in which D. Richard Masson, a
director of Peregrine, is a member who owns approximately 15% equity
interest. The remaining membership interests of Oaktree Capital are held,
directly and indirectly, by approximately 40 persons, with Howard S. Marks,
Chairman of Oaktree Capital and Bruce A. Karsh, President of Oaktree Capital,
each owning approximately 28% of the membership interests.
TCW Special Credits is also a registered investment adviser
with the SEC under Advisers Act and an affiliate of The TCW Group, Inc., an
investment management company with an approximately $50 billion of assets under,
or committed for, management. TCW Special Credits is (a) the general partner
with approximately 1% or less equity interest in (i) TCW Special Credits Fund IV
limited partnership and (ii) TCW Special Credits Plus Fund limited partnership
and (b) investment manager of (i) TCW Special Credits Trust IV, a collective
investment trust, (ii) TCW Special Credits Trust IVA, a collective investment
trust and (iii) Weyerhaeuser Company Master Retirement Trust separate account,
in which TCW Special Credits or its affiliates receive a management and
incentive fee. The foregoing limited partnerships, trusts and separate accounts
hereinafter the "TCW Funds." TCW Special Credits is a general partnership in
which Mr. Masson is a general partner with approximately 12% equity interest and
TAMCO, a wholly-owned subsidiary of The TCW Group, Inc, is the managing general
partner with approximately 51% general partner interest. Mr. Masson is not an
officer or equity owner of TAMCO or any of its affiliated companies, but he is
an authorized signatory of TAMCO, as managing general partner of TCW Special
Credits, with respect to investments of the TCW Funds. Mr. Masson and other
Oaktree employees negotiated the terms of the Merger and Merger Agreement on
behalf of the Majority Shareholders.
-40-
<PAGE>
CERTAIN INFORMATION REGARDING MANAGEMENT
Roger D. Snell is the President, Chief Executive Officer and Chairman of
the Board of Trustees of Peregrine. For information about Mr. Snell's
professional background, see "TRUSTEES AND EXECUTIVE OFFICERS--Executive
Officers." Mr. Snell is a U.S. citizen. Mr. Snell has not been convicted in any
criminal proceedings during the past five years. He has not been a party to any
judicial or administrative proceeding during the past five years that resulted
in a judgment or final order enjoining him from future violations of federal or
state securities laws or in a finding of any violation of federal or state
securities laws. Mr. Snell's address is 225 Bush Street, Suite 790, San
Francisco, California 94104 and his telephone number is (415) 288-6833.
TRUSTEES AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS.
The name and ages of all executive officers of Peregrine as of December 1,
2000 and principal occupation and business experience during at least the last
five years for each are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roger D. Snell............................... 45 President, Chief Executive Officer, Chairman of the
Board of Trustees
Ken Leone.................................... 45 Vice President of Hotel Operations
David Topping................................ 37 Vice President of Commercial Real Estate
Larry Knorr.................................. 48 Vice President, Chief Accounting Officer and Secretary
</TABLE>
ROGER D. SNELL, PRESIDENT, CHIEF EXECUTIVE OFFICER, CHAIRMAN OF THE BOARD
OF TRUSTEES, AND ACTING SECRETARY. On May 30, 1997, immediately following the
Annual Shareholders Meeting, Mr. Snell was appointed to serve as the Chairman of
the Board of Trustees, Acting Secretary, President and Chief Executive Officer
of Peregrine. Mr. Snell is the founder of Snell&Co, a firm focused on real
estate investments, advisory, and development. Prior to founding Snell&Co in
1996, he was President and Chief Executive Officer of Pacific Gateway
Properties, from 1992 to 1995, and also served as a member of the Board of
Directors and acting Chairman. Between 1985 and 1992, Mr. Snell was a Partner
with Paragon Group, a national development company. Mr. Snell has a BS degree
from the University of California, at Berkeley and an MBA from Harvard
University.
KEN LEONE, VICE PRESIDENT OF HOTEL OPERATIONS. Mr. Leone is the
Vice-President of Hotel Operations for Peregrine and is responsible for
overseeing the operations of the company's hotel properties. From December 1993
to February 2000 Mr. Leone was Regional Director of Operations for Meristar
Hotels in San Jose, California. Prior to Meristar Hotels, Mr. Leone served as
Vice President and General Manager for J.G. Enterprises Inc. in Monterey,
-41-
<PAGE>
California from August 1988 to December 1993. Mr. Leone attended California
State University, Chico, California.
LARRY KNORR, VICE PRESIDENT, CHIEF ACCOUNTING OFFICER. Mr. Knorr was hired
by Peregrine in June 1998 as the Vice President, Chief Accounting Officer and
Secretary. He is responsible for overseeing all aspect of accounting and
financial controls of the Trust. From 1996 until he joined Peregrine, he served
as Controller for Classic Development Corporation in Irvine, California, a
single-family homebuilder and owner of apartments and commercial projects.
Before joining Classic Development Corporation, Mr. Knorr was Vice President and
Controller for Paragon Group Property Services from 1983 to 1995. Mr. Knorr
holds a BA from Ohio University and MBA from Boston University.
DAVID TOPPING, VICE PRESIDENT OF COMMERCIAL REAL ESTATE. Mr. Topping has
been the Vice President of Commercial Real Estate for Peregrine since June 2000.
Prior to joining Peregrine, Mr. Topping was Vice President and Director of
Operations for CarrAmerica from September 1997 through June 2000. Prior to that,
Mr. Topping was a Senior Property Manager for Heitman Properties from January
1992 to August 1997. Mr. Topping received a B.A. from Humboldt State University
in Physical Education. In addition, he holds a California Real Estate License as
well as numerous professional certifications.
TRUSTEES.
The following sets forth certain information with respect to the trustees
of Peregrine as of December 1, 2000 based on information furnished to Peregrine
by each trustee. There are no arrangements or understandings between any trustee
and any other person pursuant to which the trustee was selected as a trustee.
There are no family relationships among any of the trustees.
<TABLE>
<CAPTION>
DATE FIRST BECAME A
NAME, AGE TRUSTEE POSITION WITHIN THE TRUST
--------- ------- -------------------------
<S> <C> <C>
Roger D. Snell.......................... February 1997 President, Chief Executive Officer, Chairman of
Age 45 the Board of Trustees
Michael C. Joseph....................... October 1997 Trustee
Age 44
D. Richard Masson....................... May 1997 Trustee
Age 42
Carson R. McKissick..................... May 1997 Trustee
Age 68
Matthew L. Witte........................ May 1997 Trustee
Age 43
</TABLE>
-42-
<PAGE>
ROGER D. SNELL, PRESIDENT, CHIEF EXECUTIVE OFFICER, CHAIRMAN OF THE BOARD
OF TRUSTEES, AND ACTING SECRETARY. For information about Mr. Snell's
professional background, see "Executive Officers."
MICHAEL C. JOSEPH, TRUSTEE. Mr. Joseph is currently a Director with Cohn
Financial a national real estate finance company, Cohn Financial acquired
Merriman Mortgage Partners in March 1999, in which Mr. Joseph was a principal
from June 1994 until March 1999. He is a graduate of Lafayette College with an
MBA from the Wharton School.
D. RICHARD MASSON, TRUSTEE. Mr. Masson currently serves as a Principal
of Oaktree Capital, an investment advisory firm of which he is one of the
founding Principals. Prior to co-founding Oaktree Capital in May 1995, he
served as a Managing Director of Trust Company of the West and TAMCO, wholly
owned subsidiaries of The TCW Group, Inc., where he served from 1988 to
present in various other capacities for TCW Special Credits. TCW Special
Credits serves as a general partner and investment advisor to certain limited
partnerships, trusts, and accounts invested in securities and debt
obligations of financially distressed companies. TAMCO is the managing
general partner of TCW Special Credits, and Mr. Masson is a general partner
of TCW Special Credits. Mr. Masson also serves as a member of the Board of
Directors of Aureal, Inc.
CARSON R. MCKISSICK, TRUSTEE. Mr. McKissick was a Senior Advisor of
Trust Company of the West, from 1992 to 1997. Mr. McKissick currently serves
as a member of the Board of Directors of Alexander & Baldwin, Inc.
MATTHEW L. WITTE, TRUSTEE. Mr. Witte has been a Director and Officer of
Marwit Capital ("Marwit"), a private investment firm with diversified holdings
in approximately 20 middle-market companies primarily based in Western United
States. He was appointed President and Chief Executive Officer of Marwit in
April 1994 and is responsible for managing the day-to-day operations. He also
serves as a member of Marwit's Investment Committee. He is a graduate of Cornell
University, and is a member of the Southland Venture Alliance, and is a Director
of Infotec Commercial Systems, New West Communications, Inc., H&W Foods,
Protrave Services, Inc., and Signature Theatres, LLC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 1, 2000
with respect to the beneficial ownership of the outstanding Peregrine common
shares by (i) all persons known by Peregrine to own more than five percent of
either class of shares, or to be a member of a group that owns more than five
percent of either class of shares, based on information furnished by such
persons or contained in filings made with the Securities and Exchange
Commission, (ii) by the Chief Executive Officer of Peregrine and each of the
four most highly compensated executive officers of Peregrine (the "Named
Executive Officers"), and (iii) by the trustees of Peregrine and Named Executive
Officers as a group:
-43-
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owners (1) Beneficial Ownership (2) Class
----------------------------------------- ------------------------ -----
<S> <C> <C>
TCW Group, Inc. (3)............................................... 8,647,723 38.3%
865 South Figueroa Street
Los Angeles, California 90017
Oaktree Capital Management, LLC (4)............................... 6,196,188 27.5%
333 South Grand Avenue, 28th Floor
Los Angeles, California 90017
The Prudential Insurance Company of America (5)................... 5,388,614 23.9%
9th Floor, Four Gate Center
100 Mulberry Center
Newark, NY 07102-4069
Roger D. Snell.................................................... 1,275,000 5.35%
President, Chief Executive Officer, Chairman of the
Board of Trustees, and Acting Secretary (6)
D. Richard Masson, Trustee (7).................................... 14,843,910 65.82%
Michael C. Joseph, Trustee (8).................................... 20,000 *
Carson R. McKissick, Trustee (8).................................. 20,000 *
Matthew L. Witte, Trustee (8)..................................... 20,000 *
Larry Knorr Vice President Chief Accounting 133,334 *
Officer (6) ..................................................
Named Executive Officers and Trustees as a Group 16,312,224 67.91%
(8 Persons) (8)...............................................
</TABLE>
-------------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the security holders
listed in the table above is: c/o The Peregrine Real Estate Trust, d.b.a.
WinShip Properties, 1300 Ethan Way, Suite 200, Sacramento, California
95825.
(2) As used in the table above, a beneficial owner includes any person who
directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (i) the power to vote, or direct
the voting, of such security or (ii) investment power which includes the
power to dispose, or to direct the disposition of, such security. In
-44-
<PAGE>
addition, a person is deemed to be the beneficial owner of a security if
that person has the right to acquire beneficial ownership of such security
within 60 days.
(3) TCW Group, Inc., is a holding company of entities involved in the
principal business of providing investment advice and management
services to various entities, including among others, TAMCO and TCW. TCW
Special Credits, a general partnership, is the general partner of each
of the TCW entities that are limited partnerships. While D. Richard
Masson is a general partner of and has an approximately 15% equity
interest in TCW Special Credits, TAMCO is managing general partner of
TCW Special Credits and therefore may be deemed to be a beneficial owner
of 8,647,722 or 38.3% of the Peregrine common shares. Mr. Masson does
not have an equity interest in TAMCO, but is an authorized signatory for
TAMCO. Trust Company of the West is an investment advisor and provides
investment advice and management services to institutional and
individual investors, and is the trustee of TCW Special Credits Trust IV
which directly owns 2,161,931 or 9.6% of Peregrine common shares and TCW
Special Credits Trust IVA which directly owns 518,865 or 2.3% of
Peregrine common shares and therefore Trust Company of the West may be
deemed to be a beneficial owner of 2,680,797 or 11.9% of the Peregrine
common shares. TCW Special Credits provides investment advice and
management services to, and is the general partner of, several limited
partnerships including TCW Special Credits Fund IV which directly owns
2,507,837 or 11.1% of the Peregrine common shares, TCW Special Credits
Plus Fund which directly owns 2,680,795 or 11.9% of the Peregrine common
shares, TCW Special Credits Trust IV which directly owns 2,161,931 or 9.6%
of the Peregrine common shares, TCW Special Credits Trust IVA which
directly owns 518,865 or 2.3% of the Peregrine common shares and a third
party account which directly owns 778,294 or 3.5% of the Peregrine
common shares. Therefore, TCW Special Credits may be deemed to be a
beneficial owner of 8,647,722 or 38.3% of Peregrine common shares (all
the foregoing entities comprise the "TCW Related Entities"). The TCW
Related Entities may be deemed to be beneficially owned by TCW Group,
Inc., for purposes of the reporting requirements of the Securities
Exchange Act of 1934. Robert Day is Chairman of the Board and Chief
Executive Officer of the TCW Group, Inc., and may be deemed to control
the TCW Group, Inc., although Mr. Day expressly disclaims such control
and disclaims beneficial ownership of any securities beneficially owned
by TCW Group, Inc.
(4) Oaktree Capital is the general partner of each of the Oaktree entities.
Oaktree Capital is the investment manager and general partner for OCM
Real Estate Opportunities Fund A, LP, which directly owns 2,044,744 or
9.1% of the Peregrine common shares, and OCM Real Estate Opportunities
Fund B, LP, which directly owns 3,531,825 or 15.7% of the Peregrine
common shares. Oaktree Capital is also the investment manager of a third
party account, which directly owns 619,619 or 2.7% of the Peregrine
common shares. The funds and accounts which Oaktree Capital manages may
be deemed to be beneficially owned by Oaktree Capital for purposes of
the reporting requirements of the Exchange Act, although Oaktree Capital
disclaims such beneficial ownership. Mr. Masson is a principal and owns
approximately 15% of the equity interests of Oaktree Capital. The
remaining membership interests of Oaktree Capital are directly and
indirectly held by approximately 40 persons, with Howard S. Marks,
Chairman of Oaktree Capital and Bruce A. Karsh, President of Oaktree
Capital, each owning approximately 28% of the membership interests.
(5) The Prudential Insurance Company of America directly owns 1,643,962 of 7.3%
of the Peregrine common shares and is the asset manager and principal
beneficiary of the
-45-
<PAGE>
Gateway Recovery Trust which directly owns 3,744,652 or 16.6% of the
Peregrine common shares, and, therefore, The Prudential Insurance Company
of America may be deemed to be a beneficial owners of such securities for
purposes of the reporting requirements of the Securities Exchange Act of
1934.
(6) Reflects options to purchase Peregrine common shares, all of which are
immediately exercisable.
(7) D. Richard Masson, as a general partner of TCW Special Credits and a
principal of Oaktree Capital, may be deemed to control 8,647,722 of the
Peregrine common shares of TCW Special Credits, or 38.3% of the
outstanding Peregrine common shares, and 6,196,188 of the Peregrine
common shares of Oaktree, or 27.5% of the outstanding Peregrine common
shares. Mr. Masson expressly disclaims such control and disclaims
beneficial ownership of any securities beneficially owned by TCW Special
Credits or Oaktree Capital.
(8) Represents options to purchase Peregrine common shares held by the
respective trustee, all of which are immediately exercisable.
CERTAIN RELATIONSHIPS
During 1999, Peregrine paid $275,000 to E.S. Merriman in
connection with the services provided in the negotiations of the terms of
Peregrine's credit facility with Fremont. During the negotiations for the line
of credit, one of Peregrine's trustees, Michael Joseph, was an agent for E.S.
Merriman and assisted in the negotiations of the terms of Peregrine's credit
facility.
On November 2, 1998, Peregrine entered into an exchange
agreement (the "Exchange Agreement") with Oaktree, TCW and Prudential wherein
such holders agreed to exchange all of their redeemable convertible preferred
stock (the "Preferred Shares"), in the original face amount of $22,500,000,
for Peregrine common shares (the "Exchange"). Cumulative dividends at a rate
of 10% per annum were payable on the Preferred Shares. The Exchange Agreement
effectively accelerated the mandatory conversion of the Preferred Shares for
Peregrine common shares, which was to occur in April 1999. The Exchange was
consummated on November 18, 1998. As a result of the Exchange, all of the
issued and outstanding Preferred Shares were converted into Peregrine common
shares and each holder of Preferred Shares received 1.0541145 Peregrine
common shares for each outstanding Preferred Share, which reflected the
number of common shares each such Preferred Share would have converted into
upon mandatory conversion in April 1999. Oaktree, TCW and Prudential received
an aggregate of 17,672,000 Peregrine common shares, in exchange for their
Preferred Shares, increasing their aggregate percentage ownership of
Peregrine common shares to approximately 89.7%.
On May 26, 2000, Prudential sold to OCM Real Estate
Opportunities Fund II, L.P. $4,281,162.80 in aggregate principal amount of 8.5%
Senior Secured Notes due October 1, 2000 issued by Peregrine. In connection with
such sale, and following discussions with Peregrine, each of Oaktree, TCW and
Prudential executed a Shareholders' Agreement (the "Shareholders' Agreement")
pursuant to which each such party agreed to contribute the Peregrine common
shares held by such entity to New WinShip, a newly-formed entity that will
-46-
<PAGE>
be wholly-owned by Oaktree, TCW and Prudential, and to vote in favor of the
Merger. The initial term of such agreement to contribute Peregrine common shares
to New WinShip and vote in favor of the Merger continues until December 31,
2000, and such agreement will continue for successive six month terms unless
terminated not less than one month prior to the expiration of the initial term
or the applicable successive term.
In addition, Oaktree and TCW have agreed pursuant to the Merger Agreement,
to exchange all of the total amount of Notes held by Oaktree and TCW,
respectively, for common shares of New WinShip. Oaktree and TCW agreed in the
Shareholders' Agreement that they will not (1) exchange such Notes for common
shares at an exchange price of less than the greater of (a) $0.50 per share or
(b) $0.10 per share less than the highest price paid by Peregrine to purchase
any Peregrine common shares following the date of the Shareholders' Agreement
and prior to the date of such exchange of Notes or (2) effect any subsequent
exchange of Notes into common shares at an exchange price that is less than the
exchange price of the first exchange of Notes into common shares by Oaktree and
TCW. Such agreement relating to the conversion of Notes into common shares will
terminate at such time, if any, that Prudential terminates the agreement
contained in the Shareholders' Agreement relating to the contribution of
Peregrine common shares to New WinShip and voting in favor of the Merger.
In April 2000, Peregrine and an entity managed by Oaktree Capital formed
Sacramento Renaissance Tower, L.L.C., ("SRT") a Delaware limited liability
company. In April 2000, SRT purchased a 28-story office building in
Sacramento, California. Pursuant to the Operating Agreement of SRT, the
entity managed by Oaktree Capital contributed 100% of the acquisition price.
Peregrine did not make any capital contribution to SRT. Peregrine is
responsible for the management of the building. Pursuant to the Operating
Agreement of SRT, Peregrine receives an asset management fee of a percentage
of the gross revenues of the office building and has a profit participation
right after the entity managed by Oaktree Capital achieves a certain rate of
return.
In December 1999, Peregrine and an entity managed by Oaktree Capital
formed Airport Boulevard Hotel, L.L.C., ("ABH") a Delaware limited liability
company. In December 1999, ABH purchased a 301-room hotel in Burlingame,
California. Pursuant to the Operating Agreement of ABH, the entity managed by
Oaktree Capital contributed 100% of the acquisition price. Peregrine did not
make any capital contribution to ABH. Peregrine is responsible for the
management of the hotel. Pursuant to the Operating Agreement of ABH,
Peregrine receives an asset management fee of a percentage of the gross
revenues of the hotel and has a profit participation right after the entity
managed by Oaktree Capital achieves a certain rate of return.
COMMON SHARE PURCHASE INFORMATION
On November 2, 1998, Peregrine entered into the Exchange Agreement with
Oaktree, TCW and Prudential wherein such holders agreed to exchange all of
their Preferred Stock in the original face amount of $22,500,000, for
Peregrine common shares. The Exchange Agreement effectively accelerated the
mandatory conversion of the Preferred Shares for Peregrine common shares,
which was to occur in April 1999. The Exchange was consummated on November
18, 1998. As a result of the Exchange, all of the issued and outstanding
Preferred Shares were converted into Peregrine common shares and each holder
of Preferred Shares received 1.0541145 Peregrine common shares for each
outstanding Preferred Shares. Oaktree,
-47-
<PAGE>
TCW and Prudential received an aggregate of 17,672,000 Peregrine common shares,
in exchange for their Preferred Shares, increasing their aggregate percentage
ownership of Peregrine common shares to approximately 89.7%. From November 1998
through September 1, 2000, none of Peregrine, the Majority Shareholders or any
trustee, executive officer or controlling person of Peregrine or New WinShip has
effected any purchases or sales of Peregrine common shares. Since September 1,
2000, none of the Majority Shareholders or New WinShip has purchased any
Peregrine common shares.
INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche LLP has served as Peregrine's independent
accountants since 1997. The consolidated financial statements of Peregrine as of
December 31, 1998, and December 31, 1999, and for each of the three fiscal years
in the period ended December 31, 1999, have been audited by Deloitte & Touche
LLP, independent accountants, as stated in their report appearing therein.
SHAREHOLDER PROPOSALS
If the Merger is consummated, there will be no public shareholders of
Peregrine and no public participation in any future meetings of shareholders of
Peregrine. However, if the Merger is not consummated, Peregrine's public
shareholders will continue to be entitled to attend and participate in
Peregrine's shareholder meetings. Pursuant to Rule 14a-8 promulgated by the SEC,
any shareholder of Peregrine who wishes to present a proposal at the next Annual
Meeting of shareholders of Peregrine (in the event the Merger is not
consummated), and who wishes to have such proposal included in Peregrine's proxy
statement for that meeting must deliver a copy of such proposal to The Peregrine
Real Estate Trust, 1300 Ethan Way, Suite 200, Sacramento, California, 95825,
Attention: Larry Knorr, Vice President and Chief Accounting Officer within a
reasonable time before Peregrine delivers its proxy statement to shareholders
for that meeting in order for such proposal to be considered by the Board of
Trustees for inclusion in the proxy statement.
In order for a shareholder to bring other business before a shareholder
meeting, timely notice must be received by Peregrine within a reasonable time
before Peregrine delivers its proxy statement to shareholders for that
shareholder meeting. Such notice must include a description of the proposed
business, the reasons therefor, and other specific matters. These requirements
are separate from and in addition to the requirements a shareholder must meet to
have a proposal considered for inclusion in Peregrine's proxy statement. In each
case, the notice must be given to the Secretary of Peregrine at the address
listed above. Any shareholder desiring a copy of Peregrine's by-laws will be
furnished one without charge upon written request to the Secretary.
AVAILABLE INFORMATION
Because the Merger is a "going private" transaction, New WinShip, the
Majority Shareholders and Peregrine have filed a Rule 13e-3 Transaction
Statement on Schedule 13E-3 under the Exchange Act with respect to the Merger.
The Schedule 13E-3 and Peregrine's reports, proxy statements and other
information previously filed with the SEC contain additional information about
Peregrine. A copy of the written report presented by Duff & Phelps to the
-48-
<PAGE>
Special Committee, including Duff & Phelps's opinion as to the fairness of the
consideration to be received in the Merger, was filed as an exhibit to such
Schedule 13E-3. Copies of the Schedule 13E-3 are available for inspection and
copying at the principal executive offices of Peregrine during regular business
hours by any interested shareholder of Peregrine, or a representative who has
been so designated in writing, and may be inspected and copied, or obtained by
mail by written request directed to The Peregrine Real Estate Trust, 1300 Ethan
Way, Suite 200, Sacramento, California 95825, telephone (916) 929-8244,
Attention: Larry Knorr, Vice President and Chief Accounting Officer.
Peregrine has been subject to the informational requirementsof the
Exchange Act since 1979, and, in accordance therewith, filed reports, proxy
statements and other information with the SEC. Such reports and other
information may be inspected and copied or obtained by mail upon payment of the
SEC's prescribed rates at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W. Room 1024, Washington, D.C. 20549 and at the following
regional offices of the SEC: New York Regional Office, 7 World Trade Center, New
York, New York 10048, and Chicago Regional Office, 500 West Madison Avenue, 14th
Floor, Chicago, Illinois 60661. Certain reports, proxy statements and other
information filed by Peregrine may also be obtained at the SEC's World Wide Web
site, located at http://www.sec.gov.
This Information Statement includes information required to be
disclosed pursuant to Rule 14c-2 under the Exchange Act.
The SEC allows us to "incorporate by reference" information into this
Information Statement, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be a part of this Information
Statement, except for any information superseded by information contained
directly in this Information Statement This Information Statement incorporates
by reference the documents set forth below that Peregrine has previously filed
with the SEC. These documents contain important information about Peregrine and
its financial condition.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST TO: D.F. KING & CO., INC., 77 WATER STREET, NEW YORK, NEW YORK 10005,
TELEPHONE NUMBER (212) 269-5550 (collect) or toll free at (800) 758-5880.
The following documents filed with the SEC by Peregrine are
incorporated herein by reference:
(1) Peregrine's Annual Report on Form 10-K for the year ended December 31,
1999;
(2) Peregrine's Quarterly Reports on Form 10-Q for the periods ended
March 31, 2000, June 30, 2000 and September 30, 2000; and
(3) Peregrine's Current Report on Form 8-K dated September 1, 2000.
All documents filed by Peregrine pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act from the date of this information statement to the
date that is 20 business days
-49-
<PAGE>
following the mailing of this information statement, shall also be deemed to
be incorporated herein by reference.
-50-
<PAGE>
THE PEREGRINE REAL ESTATE TRUST
REQUESTS FOR ADDITIONAL COPIES OF THE INFORMATION STATEMENT SHOULD BE
DIRECTED TO THE INFORMATION AGENT AT THE TELEPHONE NUMBERS AND ADDRESS SET
FORTH BELOW.
THE INFORMATION AGENT:
D.F KING & CO., INC.
ADDRESS:
D.F KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT:
(212) 269-5550
ALL OTHERS CALL TOLL FREE:
(888) 242-8157
--------------------
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "MERGER AGREEMENT"), dated as
of September 26, 2000, is entered into by and between The Peregrine Real
Estate Trust, a California real estate investment trust ("PEREGRINE"),
WinShip Properties, a California real estate investment trust ("WINSHIP"),
TCW Special Credits Fund IV, TCW Special Credit Plus Fund, TCW Special
Credits Trust IV, TCW Special Credits Trust IVA, TCW Special Credits, as
investment manager of the Weyerhaeuser Company Master Retirement Trust
Separate Account, OCM Real Estate Opportunities Fund A, L.P., OCM Real Estate
Opportunities Fund B, L.P. and Oaktree Capital Management, LLC as investment
manager of Gryphon Domestic VII, LLC Separate Account (collectively, the
"OAKTREE ENTITIES").
RECITALS
1. Peregrine is a California real estate trust organized pursuant to
the Restated Declaration of Trust of Peregrine, dated as of October 7, 1994, as
amended from time to time ("DECLARATION OF TRUST").
2. WinShip is a California real estate trust organized pursuant to
the Declaration of Trust of WinShip, dated as of September 22, 2000.
3. At the time of the consummation of the Merger, WinShip will own
20,231,900 Common Shares of Peregrine (the "WINSHIP PEREGRINE SHARES").
4. The Trustees of Peregrine and WinShip have determined that it is
advisable and in the best interests of their respective entity and its
equityholders that the Peregrine merge with and into WinShip (the "MERGER").
TERMS AND PROVISIONS OF MERGER
In consideration of the foregoing Recitals and of the following terms and
provisions, and subject to the following conditions, it is agreed:
1. MERGER. The effective time of the Merger (the "EFFECTIVE TIME")
shall be a date to be agreed upon by the parties hereto, which date shall be not
more than five (5) business days following receipt of all necessary third party
consents and approvals, including, without limitation, all required shareholder
approvals and all required filings required pursuant to applicable state and
federal securities laws. As of the Effective Time, Peregrine shall be merged
with and into WinShip. Following the Effective Time, WinShip shall be the
surviving entity of the Merger (hereinafter sometimes referred to as the
"SURVIVING ENTITY"), and the separate organizational existence of Peregrine
shall cease.
<PAGE>
2. GOVERNING DOCUMENTS. The Declaration of Trust of WinShip, as it may
be amended or restated subject to applicable law, and as in effect immediately
prior to the Effective Time, shall constitute the Declaration of Trust of the
Surviving Entity without further change or amendment until thereafter amended in
accordance with the provisions thereof and applicable law.
3. TRUSTEES. The persons who are trustees of WinShip immediately prior
to the Effective Time shall, after the Effective Time, be the trustees of the
Surviving Entity, without change until their successors have been duly elected
or appointed and qualified or until their death, disability, resignation or
removal in accordance with the Declaration of Trust of the Surviving Entity and
applicable law.
4. NAME. The name of the Surviving Entity shall continue to be WinShip
Properties.
5. SUCCESSION. At the Effective Time, the Surviving Entity shall
acquire and possess all the rights, privileges, powers and franchises of a
public or private nature and be subject to all the restrictions, disabilities
and duties of Peregrine; and all property, real, personal and mixed, and all
debts due to Peregrine on whatever account, including all other things and
causes of action, shall be vested in the Surviving Entity; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Entity as they
were of Peregrine, and the title to any real property vested by deed or
otherwise shall not revert or be in any way impaired by reason of the Merger;
but all rights of creditors and liens upon any property of Peregrine shall be
preserved unimpaired, and all debts, liabilities and duties of Peregrine shall
thenceforth attach to the Surviving Entity and may be enforced against the
Surviving Entity to the same extent as if such debts, liabilities and duties had
been incurred or contracted by the Surviving Entity; PROVIDED, HOWEVER, that
such liens upon property of Peregrine shall be limited to the property affected
thereby immediately prior to the Merger.
6. FURTHER ASSURANCES. From time to time, as and when required or
requested by the Surviving Entity or by its successors and assigns, there shall
be executed and delivered on behalf of Peregrine such deeds, assignments and
other instruments, and there shall be taken or caused to be taken by it all such
further and other action, as shall be appropriate or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Entity the title to
and possession of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Peregrine and otherwise to carry
out the purposes of this Merger Agreement, and the Trustees and authorized
officers of the Surviving Entity are fully authorized in the name and on behalf
of Peregrine or otherwise, to take any and all such action and to execute and
deliver any and all such deeds, assignments and other instruments.
7. CONVERSION OF CAPITAL STOCK. Each issued and outstanding Common
Share of Peregrine (other than the WinShip Peregrine Shares) shall be
automatically converted into the right to receive $0.59 in cash per share (the
"MERGER PRICE").
-2-
<PAGE>
8. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Surviving Entity shall mail to each holder of record of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding Common Shares of Peregrine (the "CERTIFICATES") whose
shares are converted pursuant to SECTION 7 into the right to receive the Merger
Price (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Surviving Entity and shall be in such form
and have such other provisions as the Surviving Entity may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Price. Upon surrender of a Certificate for cancellation
to the Surviving Entity, together with such letter of transmittal duly executed
and completed in accordance with its terms, the holder of such Certificate shall
be entitled to receive in exchange therefor a check representing the Merger
Price per Common Share of Peregrine represented thereby, which such holder has
the right to receive pursuant to the provisions of SECTION 7, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received in the Merger. In the event of a transfer of ownership of Common Shares
of Peregrine which is not registered in the transfer records of Peregrine, the
Merger Price may be issued to a transferee if the Certificate representing such
Common Shares of Peregrine is presented to the Surviving Entity accompanied by
all documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this SECTION 8, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Price per Common Share represented thereby as contemplated
by SECTION 7 and this SECTION 8.
(b) NO FURTHER OWNERSHIP RIGHTS IN COMMON SHARES OF PEREGRINE. All
cash paid upon the surrender for exchange of Certificates in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Common Shares of Peregrine represented thereby. From
and after the Effective Time, the stock transfer books of Peregrine shall be
closed and there shall be no further registration of transfers on the stock
transfer books of the Surviving Entity of the shares of Common Shares of
Peregrine which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving Entity for
any reason, they shall be canceled and exchanged as provided in this SECTION 8.
(c) WITHHOLDING RIGHTS. The Surviving Entity shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Merger Agreement to any holder of Common Shares of Peregrine such amounts as the
Surviving Entity is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code of 1986, as amended (the
"CODE"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Entity, such withheld amounts shall be
treated for all purposes of this Merger Agreement as having been paid to the
holder of the Common Shares of Peregrine in respect of which such deduction and
withholding was made by the Surviving Entity.
-3-
<PAGE>
9. EMPLOYEE BENEFIT PLANS. As of the Effective Time, the Surviving
Entity shall assume all obligations of Peregrine under any and all employee
benefit plans in effect as of the Effective Time or with respect to which
employee rights or accrued benefits are outstanding as of the Effective Time
including without limitation the obligations of Peregrine pursuant to its 1998
Long Term Incentive Plan, but excluding the obligations of Peregrine under its
Trustee Stock Option Plan which shall be terminated pursuant to the terms
thereof as a result of the Merger.
10. ACCOUNTING MATTERS. WinShip agrees that upon the Effective Time, the
assets, liabilities, reserves and accounts of Peregrine shall be taken up or
continued on the books of WinShip in the amounts at which such assets,
liabilities, reserves and accounts shall have been carried on the books of
Peregrine immediately prior to the Effective Time, subject to such adjustments
as may be appropriate to give effect to the Merger.
11. CONVERSION OF NOTES. The Oaktree Entities hereby agree to convert
the Senior Secured Notes due 2001 held by the Oaktree Entities into equity of
the Surviving Entity immediately after the consummation of the Merger pursuant
to the terms of the Shareholders Agreement dated May 26, 2000 between The
Prudential Insurance Company of America, Gateway Recovery Trust and the Oaktree
Entities.
12. REPRESENTATIONS OF WINSHIP. WinShip hereby represents and warrants
that, as of the date hereof, it is not aware of any facts relating to the assets
and operations of Peregrine that have not been disclosed to Peregrine, or of
which Peregrine does not otherwise have knowledge, that could be reasonably
expected to materially positively affect the value of the Common Shares of
Peregrine.
13. GOVERNING LAW. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts entered into and to be performed wholly within the State of
California.
14. AMENDMENT. Subject to applicable law, this Merger Agreement may be
amended, modified or supplemented by written agreement of the parties hereto at
any time prior to the Effective Time with respect to any of the terms contained
herein.
15. DEFERRAL OR ABANDONMENT. At any time prior to the Effective Time,
this Merger Agreement may be terminated and the Merger may be abandoned or the
time of consummation of the Merger may be deferred for a reasonable time by the
Trustees of Peregrine or of WinShip, or any combination or all of them, if
circumstances arise which, in the opinion of such Trustees, make the Merger
inadvisable or such deferral of the time of consummation advisable.
16. COUNTERPARTS. This Merger Agreement may be executed in any number of
counterparts each of which when taken alone shall constitute an original
instrument and when taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of this Merger Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
-4-
<PAGE>
17. ASSURANCE. Peregrine and WinShip agree to execute any and all
documents, and to perform such other acts, which may be necessary or expedient
to further the purposes of this Merger Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, Peregrine and WinShip have caused this Merger
Agreement to be signed by their respective duly authorized officers and
delivered this 26th day of September, 2000.
THE PEREGRINE REAL ESTATE TRUST, a
California real estate investment trust
By: /s/ Roger D. Snell
------------------------------------
Name: Roger D. Snell
Title: President and CEO
WINSHIP PROPERTIES, a California real estate
investment trust
By: /s/ Richard Masson
------------------------------------
Name: Richard Masson
Title: President
TCW SPECIAL CREDITS FUND IV
By: TCW Special Credits
Its: General Partner
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Richard Masson
-------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
-6-
<PAGE>
TCW SPECIAL CREDITS PLUS FUND
By: TCW Special Credits
Its: General Partner
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TCW SPECIAL CREDITS TRUST IV
By: Trust Company of the West, Trustee
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
-7-
<PAGE>
TCW SPECIAL CREDITS TRUST IVA
By: Trust Company of the West, Trustee
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
OCM REAL ESTATE OPPORTUNITIES FUND A,
L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
-8-
<PAGE>
OCM REAL ESTATE OPPORTUNITIES FUND B,
L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
GRYPHON DOMESTIC VII, LLC SEPARATE ACCOUNT
By: Oaktree Capital Management, LLC
Its: Investment Manager
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
-9-
<PAGE>
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
By: TCW Special Credits
Its: Investment Manager
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
-10-
<PAGE>
Appendix B
September 1, 2000
Special Committee of the Board of Trustees
Peregrine Real Estate Trust
d.b.a. WinShip Properties
1300 Ethan Way, Suite 200
Sacramento, California 95825
To the Special Committee of the Board of Trustees:
Duff & Phelps, LLC ("Duff & Phelps") has been engaged by Peregrine Real Estate
Trust ("Peregrine" or the "Company"), as financial advisor to the Special
Committee of the Board of Trustees of the Company in connection with a
contemplated transaction (the "Proposed Transaction") involving the Company.
Specifically, Duff & Phelps has been engaged to provide an opinion (the
"Opinion") as to whether the Proposed Transaction is fair to the Company's
common shareholders from a financial point of view.
It is our understanding that the Proposed Transaction contemplates a merger of
the Company with and into a newly formed company that will be owned by certain
persons who are currently shareholders of the Company and that certain minority
interest shareholders of the Company will receive cash as merger consideration
in the amount of $0.59 per share. These minority interest shareholders currently
hold approximately 10% of the Company's common stock outstanding. In connection
with the Proposed Transaction, the Company will cease to exist as a separate
entity and the newly created entity owned by Prudential, Gateway and the Oaktree
Entities, as described in the Shareholders' Agreement dated May 26, 2000, will
succeed to all of the assets and liabilities of the Company.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. Met with certain members of senior management of Peregrine at the
Company's headquarters in Sacramento, California, to discuss the
history, financial condition, future prospects and projected
performance of the Company;
2. Reviewed a recent draft of the Peregrine Schedule 14C filing;
3. Reviewed the final draft of the Agreement and Plan of Merger (the
"Merger Agreement") among The Peregrine Real Estate Trust, a
California real estate investment trust, and WinShip Properties, a
California real estate investment trust;
4. Reviewed the final draft of the Declaration of Trust of WinShip
Properties;
<PAGE>
Special Committee of the Board of Trustees
Peregrine Real Estate Trust
September 1, 2000
Page 2
5. Visited selected properties of the Company and reviewed appraisals
and management estimates of the values of the properties;
6. Reviewed financial projections for Peregrine, as prepared by
Peregrine management;
7. Reviewed unaudited financial statements for Peregrine for the six
months ended June 30, 2000, and audited financial statements for
Peregrine for the years ended December 31, 1995 through 1999;
8. Reviewed miscellaneous SEC filings for the Company;
9. Reviewed the historical trading price and volume of Peregrine common
stock;
10. Reviewed other operating and financial information provided by
management of the Company; and
11. Reviewed economic, industry and market information and conducted
such studies, analyses and investigations as we deemed appropriate.
Our Opinion assumes the accuracy and completeness of the information provided to
us. Duff & Phelps has not independently verified the accuracy and completeness
of the information supplied to us with respect to the Company and does not
assume any responsibility with respect to it. Furthermore, we have assumed that
there has been no material change in the assets, financial condition, business,
or prospects of the Company since the date of the most recent financial
statements made available to us. Furthermore, industry information and data on
comparable companies used as background for our analysis were obtained from
regularly published sources. We did not independently verify the accuracy and
completeness of the information obtained from published sources. Any
inaccuracies in the information on which we relied could materially affect our
opinion. Duff & Phelps has previously provided financial advisory services to
the Company.
In rendering this Opinion, we have assumed that the Proposed Transaction occurs
on terms that are described in the Merger Agreement. Nonetheless, it should be
recognized that we are not making any recommendation as to whether the
shareholders of the Company should vote in favor of the Proposed Transaction or
any other matter.
Based upon and subject to the foregoing, it is our opinion that, as of date
hereof, the Proposed Transaction is fair to the Company's common shareholders
from a financial point of view.
Respectfully submitted,
Duff & Phelps, LLC
