SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
Santa Anita Realty Enterprises, Inc.
Santa Anita Operating Company
(Name of Issuer)
Common Stock, $0.10 par value
(Title of class of securities)
801209206
801212101
(CUSIP Number)
William A. Ackman
Gotham Partners
110 East 42nd Street
New York, New York 10017
(212) 286-0300
(Name, address and telephone number of person
authorized to receive notices and communications)
March 17, 1997
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition which is the subject
of this Schedule 13D, and is filing this Schedule because of
Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with
the statement [ ].
Page 1 of 3 Pages<PAGE>
This Amendment No. 2 is filed by Gotham Partners, L.P., a
New York limited partnership ("Gotham"), and Gotham Partners
II, L.P., a New York limited partnership ("Gotham II" and
together with Gotham, the "Reporting Persons"), and amends and
supplements the following Items of those certain Schedule 13Ds
(the "Schedule 13Ds") originally filed on November 21, 1996, in
each case by adding the information set forth below. Capi-
talized terms used herein without definition shall have the
meanings ascribed thereto in the Schedule 13Ds.
ITEM 4. PURPOSE OF TRANSACTION.
KAI has today filed an amendment to its Schedule 13D,
originally filed with the Securities and Exchange Commission on
October 24, 1996, which describes certain proposed transactions
relating to the Companies. The amendment to the KAI Schedule
13D provides additional detail as to these matters. It is
attached as an exhibit hereto and incorporated herein by
reference. It is expected, as reported in the amendment to the
KAI Schedule 13D, Gotham will purchase certain securities in
connection with the transactions described therein.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed as part of this Schedule
13D:
(1) Amendment No. 3 to Schedule 13D, originally filed
with the Securities and Exchange Commission on
October 24, 1996, by Apollo Real Estate Investment
Fund II, L.P., Apollo Real Estate Advisors II, L.P.,
Koll Arcadia Investors, LLC, and Koll Arcadia, LLC
(together with all exhibits thereto).
Page 2 of 3 Pages<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete, and correct.
March 21, 1997
GOTHAM PARTNERS, L.P.
By: SECTION H PARTNERS, L.P.
its general partner
By: KARENINA CORPORATION
a general partner of Section H
Partners, L.P.
By: /s/ William A. Ackman
William A. Ackman
President
GOTHAM PARTNERS II, L.P.
By: SECTION H PARTNERS, L.P.
its general partner
By: KARENINA CORPORATION
a general partner of Section H
Partners, L.P.
By: /s/ William A. Ackman
William A. Ackman
President
Page 3 of 3 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 3)
Santa Anita Realty Enterprises, Inc.
Santa Anita Operating Company
(Name of Issuer)
Common Stock
------------
(Titles of Classes of Securities)
801209206
801212101
---------------
(CUSIP Numbers)
W. Edward Scheetz
c/o Apollo Real Estate Advisors, L.P.
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 261-4000
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
With a copy to:
Patrick J. Foye, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telephone: (212) 735-2274
March 17, 1997
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this statement because of Rule 13d-1(b)(3) or
(4), check the following box: [ ]
Check the following box if a fee is being paid with the
statement: [ ]
SCHEDULE 13D
CUSIP NO.
-----------------
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
APOLLO REAL ESTATE INVESTMENT FUND II, L.P.
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES ---------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 989,900
EACH ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH ---------------------------------------------------
10 SHARED DISPOSITIVE POWER
989,900
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
989,900
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.6% of Realty; 8.7% of Operating
- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- ---------------------------------------------------------------------------
SCHEDULE 13D
CUSIP NO.
-----------------
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
APOLLO REAL ESTATE ADVISORS II, L.P.
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, OO
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES ---------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 989,900
EACH ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH ---------------------------------------------------
10 SHARED DISPOSITIVE POWER
989,900
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
989,900
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.6% of Realty; 8.7% of Operating
- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- ---------------------------------------------------------------------------
SCHEDULE 13D
CUSIP NO.
-----------------
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KOLL ARCADIA INVESTORS, LLC
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES ---------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 989,900
EACH ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH ---------------------------------------------------
10 SHARED DISPOSITIVE POWER
989,900
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
989,900
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.6% of Realty; 8.7% of Operating
- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- ---------------------------------------------------------------------------
SCHEDULE 13D
CUSIP NO.
-----------------
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KOLL ARCADIA LLC
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES ---------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 989,900
EACH ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH ---------------------------------------------------
10 SHARED DISPOSITIVE POWER
989,900
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
989,900
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.6% of Realty; 8.7% of Operating
- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- ---------------------------------------------------------------------------
This Amendment No. 3 amends and supplements the following Items of
the Schedule 13D, as amended (the "Schedule 13D"), of Apollo Real Estate
Advisors II, L.P., Apollo Real Estate Investment Fund II, L.P., Koll
Arcadia Investors, LLC and Koll Arcadia LLC filed on October 24, 1996 with
the Securities and Exchange Commission with respect to the Paired Common
Stock of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating
Company. Unless otherwise indicated, all capitalized terms used but not
defined herein have the meanings set forth in the Schedule 13D.
Item 4. Purpose of Transaction.
Item 4 is hereby amended to include the following:
On March 17, 1997, KAI and Colony Capital, Inc. ("Colony") each
submitted a formal proposal to recapitalize the Companies (the
"Recapitalization"), providing up to $27 per Paired Share in cash to the
Companies' stockholders. The proposals of KAI and Colony are separate and
independent, and the obligations of KAI and Colony in connection with the
proposed Recapitalization are independent obligations and therefore not
conditioned on each other. Neither KAI nor Colony have authorized the other
to act as its agent and they are not intending to create any agency,
partnership or similar relationship between them prior to the consummation
of the Recapitalization. KAI's and Colony's offers to consummate the
Recapitalization will only remain open through March 28, 1997. Principal
terms of proposed Recapitalization include:
RECAPITALIZATION CONSIDERATION. In the Recapitalization, the
Companies would (i) pay a special cash dividend of $11 per Paired Share to
all current shareholders (the "$11 Special Dividend") and (ii) commence a
self-tender offer to purchase up to 5,600,000 Paired Shares (the "Self
Tender") in which current stockholders of the Companies would have the
option, in addition to payment of the $11 Special Dividend, to (x) retain
their existing Paired Shares, (y) receive $16 in cash per Paired Share or
(z) receive per Paired Share an additional $11 in cash together with one
warrant to purchase one Paired Share at $16.25 per Paired Share for a five
year period (the "Warrant"). None of KAI, Colony nor any of their
affiliates intends to tender any Paired Shares in the Self Tender. In the
Recapitalization, KAI and Colony would cause the Companies to distribute up
to an aggregate of $232 million to stockholders of the Companies.
TRANSACTION STRUCTURE. In connection with the Transaction, two
newly formed limited liability companies will be formed by causing (i)
Realty to contribute substantially all of its properties and assets,
subject to substantially all of its liabilities, to a newly formed limited
liability company (the "Realty LLC"), and (ii) Operating and its
subsidiaries to contribute substantially all of their properties and
operating assets, subject to substantially all of their liabilities, to
another limited liability company (the "Operating LLC" and together with
Realty LLC, the "LLCs"). In exchange for contributing their assets to the
LLCs, the Companies shall receive the number of LLC units equal to the
current number of outstanding Paired Shares. Such LLC units would not be
publicly traded but would be subject to the same pairing restrictions as
the Paired Shares. Substantially all future business activities of the
Companies will be conducted through the LLCs as the operating entities.
TRANSACTION EQUITY FINANCING. To consummate the
Recapitalization, subsequent to the payment of the $11 Special Dividend,
(i) KAI would purchase 3,900,000 units of the LLCs (the "LLC Units") at a
price equal to $11 per LLC Units, or $42.9 million in the aggregate, and
(ii) Colony would purchase 2,600,000 Units, or $28.6 million in the
aggregate. The LLC Units would be exchangeable on a one-for-one basis into
Paired Shares, subject to REIT ownership limitations.
In addition, (i) KAI would purchase 2,076,923 convertible
preferred LLC units or shares of convertible preferred stock (the
"Preferred LLC Units") at $13 per Unit, or $27 million in the aggregate,
and (ii) Colony would purchase 1,384,615 Preferred LLC Units at $13 per
Unit, or $18 million in the aggregate. Distributions on the Preferred LLC
Units would accrue at 12% per annum for three years and then become payable
on a current basis. The Preferred LLC Units would be convertible by the
holder into Paired Shares at $13 per share (a conversion ratio of
one-to-one) and will be convertible (at a conversion ratio of one-for-one)
at the Companies' option on or after the third anniversary of the issuance
date.
DEBT FINANCING. A nationally recognized financial institution
has indicated its interest in loaning up to $135 million to Realty LLC.
Such amount will consist of (i) a four year loan of $95 million, with
interest floating monthly at a premium over one-month LIBOR, secured by,
among other things, a first mortgage lien on the Santa Anita racetrack,
improvements (the "Racetrack") and surrounding land (the "Excess Land");
and (ii) a two year loan of up to $40 million, with interest floating
monthly at a premium over one-month LIBOR, secured by, among other things,
100% of the proceeds from sales of certain non-core assets of the Company,
excluding the Racetrack and Excess Land. Realty would guarantee such loans.
STAND-BY PURCHASE. Pursuant to the terms of a letter agreement,
dated as of January 28, 1997 (the "Letter Agreement"), by and between
Gotham Partners, L.P. ("Gotham") and KAI, Gotham has committed to purchase
on a stand-by basis up to 5,600,000 Warrants, for $5 per Warrant, or up to
$28 million in the aggregate. Pursuant to the terms of the Letter
Agreement, Gotham would purchase from the Companies one Warrant for each
Paired Share purchased by the Companies pursuant to the $16 all cash
election under the Self-Tender. It is not expected that Gotham would tender
any Paired Shares into the Self-Tender.
In addition, KAI and Colony have agreed that upon consummation
of the Recapitalization they will offer to sell to Gotham in the aggregate
(i) 181,818 LLC Units at $11 per LLC Unit, or $2 million in the aggregate,
and (ii) 230,769 Preferred LLC Units at $13 per Unit, or $3 million in the
aggregate.
GOVERNANCE. Following the completion of the Recapitalization,
the Boards of Directors of the Companies would consist of nine persons, of
whom three would be representatives of KAI, three would be representatives
of Colony and three would be independent directors (one of whom is expected
to be a representative of Gotham). The LLCs will each have a Board of
Member Repre- sentatives which will replicate the composition of the Boards
of the Companies. In addition, upon consummation of the Recapitalization,
the Companies will appoint certain new executive officers.
On March 14, 1997, AREIF II entered into a letter agreement with
Colony in connection with the Recapitalization relating to, among other
matters, corporate governance issues following consummation of the
Recapitalization, a standstill agreement prohibiting additional purchases
of the securities of the Companies and the allocation of certain fees and
expenses.
Item 7. Material to be filed as Exhibits.
Item 7 is hereby amended and restated in its entirety as
follows:
(1) Letter, dated March 14, 1997, from KAI and Colony
to the Companies.
(2) Press Release, dated March 17, 1997.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 17, 1997
APOLLO REAL ESTATE INVESTMENT FUND II, L.P.
By: Apollo Real Estate Advisors II, L.P.
Managing Member
By: Apollo Real Estate Capital Advisors II, Inc.
General Partner
By: /s/ Michael D. Weiner
----------------------------------
Name: Michael D. Weiner
Title: Vice President,
Apollo Real Estate Capital
Advisors II, Inc.
APOLLO REAL ESTATE ADVISORS II, L.P.
By: Apollo Real Estate Capital Advisors II, Inc.
General Partner
By: /s/ Michael D. Weiner
-----------------------------------
Name: Michael D. Weiner
Title: Vice President,
Apollo Real Estate Capital
Advisors II, Inc.
KOLL ARCADIA INVESTORS, LLC
By: Apollo Arcadia LLC
Member
By: /s/ Michael D. Weiner
-----------------------------------
Name: Michael D. Weiner
KOLL ARCADIA LLC
By: /s/ James C. Watson
-----------------------------------
Name: James C. Watson
EXHIBIT 1 - LETTER
Koll Arcadia Investors, LLC Colony Capital, Inc.
4343 Von Karman Avenue 1999 Avenue of the Stars
Newport Beach, CA 92660 Los Angeles, CA 90067
March 14, 1997
Santa Anita Realty Enterprises, Inc.
Santa Anita Operating Company
Boards of Directors
285-301 West Huntington Drive
Arcadia, California 91066
Gentlemen:
On behalf of Koll Arcadia Investors, LLC
("KAI") and Colony Capital, Inc. ("Colony"), enclosed
please find copies of a formal proposal from both KAI and
Colony relating to their proposed recapitalization (the
"Recapitalization Proposal") of Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company
(together, the "Santa Anita Companies").
We firmly believe that the Recapitalization
Proposal provides the stockholders of the Santa Anita
Companies with superior value and is in the best long
term interest of the Santa Anita Companies.
KAI and Colony have each undertaken
considerable effort and expense to develop the
Recapitalization Proposal. Accordingly, KAI's and
Colony's offer to consummate the Recapitalization
Proposal shall remain open through March 28, 1997. In
addition, the Santa Anita Companies and its affiliates
hereby agree that during the 45 day period beginning on
the date the Santa Anita Companies execute this letter
agreement, they shall not, and they shall use their best
efforts to cause their respective officers, employees,
agents and financial advisers not to, directly or
indirectly, (i) solicit, initiate or encourage the
submission of inquiries, proposals or offers from any
corporation, partnership, person or other entity or group,
other than from KAI and Colony and their respective
officers, employees and agents, relating to any acquisition
or purchase of any of the assets (other than in the ordinary
course of business) of, or any equity interest in, the Santa
Anita Companies or any of their affiliates or any merger,
consolidation, restructuring, recapitalization or
business combination involving the Santa Anita Companies
or any of their affiliates, (ii) participate in any
discussions or negotiations, including any existing or
ongoing discussions and negotiations, regarding the
foregoing or furnish to any person or entity information
concerning the Santa Anita Companies or any of their
affiliates in connection with the foregoing, (iii)
authorize any officer or agent to do any of the foregoing
or (iv) otherwise cooperate in any way with, or assist,
facilitate, encourage, or participate in any effort or
attempt by any other person or entity to do or seek any
of the foregoing.
KAI, Colony and their respective advisors are
prepared to meet with you and the Special Committees to
answer any additional questions you or the Special
Committees may have. Please call Bill Scully at (212)
261-4052 or Kelvin Davis at (310) 282-8820 at your
earliest convenience so that we may move the process
forward.
If you agree with the foregoing, please sign
and return two copies of this letter agreement, which
will constitute our agreement with respect to the subject
matter of this letter agreement.
Very truly yours,
KOLL ARCADIA INVESTORS, LLC
By:_____________________________
Name:
Title:
COLONY CAPITAL, INC.
By:____________________________
Name:
Title:
Confirmed and agreed to as of
the date first above written
SANTA ANITA REALTY ENTERPRISES, INC.
By:_________________________________
Name:
Title:
SANTA ANITA OPERATING COMPANY
By:__________________________________
Name:
Title:
cc: Ron D. Sturzenegger,
Morgan Stanley & Co. Incorporated
TERM SHEET
Set forth below are the terms of a proposal by Koll
Arcadia Investors, LLC ("KAI") and Colony Investors II, L.P.
("Colony") relating to the recapitalization (the "Transaction")
of Santa Anita Realty Enterprises, Inc. ("Realty") and Santa
Anita Operating Company ("Operating", and together with Realty,
the "Companies"). Although presented together in this term sheet
for ease of reference, the obligations of KAI and Colony in
connection with the proposed Transaction are independent
obligations and neither KAI nor Colony have authorized the other
to act as its agent and they are not intending to create any
agency, partnership or similar relationship between them prior to
the consummation of the Transaction.
Transaction Structure: In connection with the Transaction,
two newly formed limited liability
companies will be formed by causing
(i) Realty to contribute
substantially all of its properties
and assets, subject to substantially
all of its liabilities, to a newly
formed limited liability company
(the "Realty LLC"), and (ii)
Operating and its subsidiaries to
contribute substantially all of
their properties and operating
assets, subject to substantially all
of their liabilities, to another
limited liability company (the
"Operating LLC" and together with
Realty LLC, the "LLCs"). In
exchange for contributing their
assets to the LLCs, the Companies
shall receive the number of LLC
units equal to the current number of
outstanding Paired Shares. Such LLC
units would not be publicly traded
but would be subject to the same
pairing restrictions as the Paired
Shares. Substantially all future
business activities of the Companies
will be conducted through the LLCs
as the operating entities.
Transaction
Consideration: In the Transaction, the Companies
would (i) pay a special cash
dividend of $11 per Paired Share to
all current shareholders (the "$11
Special Dividend") and (ii) commence
a self-tender offer to purchase up
to 5,600,000 Paired Shares (the
"Self-Tender") in which current
stockholders of the Companies would
have the option, in addition to
receiving the $11 Special Dividend,
to (x) retain their existing Paired
Shares, (y) receive $16 in cash per
Paired Share or (z) receive per
Paired Share an additional $11 in
cash together with one warrant to
purchase one Paired Share at $16.25
per Paired Share for a five year
period (the "Warrant"). None of
KAI, Colony nor any of their
affiliates intends to tender any
Paired Shares in the Self-Tender.
In the aggregate, KAI and Colony
would cause to be distributed up to
$232 million to the shareholders of
the Companies.
In the event any shareholder does
not participate in the Self-Tender
and such shareholder does not
exchange Paired Shares for units of
the LLCs, and, as a result,
following the consummation of the
Self-Tender, such shareholder's
percentage ownership of Paired
Shares could cause Realty to fail to
qualify or be disqualified as a
REIT, then the Companies, pursuant
to Section 7.5 of the By-Laws of
Realty and Section 6.5 of the By-
Laws of Operating, could call for
purchase from such shareholder such
number of Paired Shares sufficient
to maintain or bring the direct or
indirect ownership of Paired Shares
into conformity with the REIT
requirements.
Conversion of Paired
Shares to Units: Consistent with the REIT
qualification requirements, KAI and
Colony will each exchange currently
owned Paired Shares or Preferred
Shares for LLC Units so that neither
owns more than 4.9% of the
outstanding Paired Shares upon
consummation of the Transaction.
Transaction Financing:
Investment by KAI and Colony
(i) KAI would purchase 3,900,000
units of the LLCs (the "LLC Units")
at a price equal to $11 per LLC
Unit, or $42.9 million in the
aggregate, and (ii) Colony would
purchase 2,600,000 Units, or $28.6
million in the aggregate. The LLC
Units would be exchangeable on a
one-for-one basis into Paired
Shares, subject to REIT ownership
limitations.
In addition, (i) KAI would purchase
2,076,923 convertible preferred LLC
units or shares of convertible
preferred stock (the "Preferred LLC
Units") at $13 per unit, or $27
million in the aggregate, and (ii)
Colony would purchase 1,384,615
Preferred LLC Units at $13 per unit,
or $18 million in the aggregate.
Distributions on the Preferred LLC
Units would accrue at 12% per annum
for three years and then become
payable on a current basis. The
Preferred LLC Units would be
convertible by the holder into
Paired Shares at $13 per share (a
conversion ratio of one-for-one) and
will be convertible (at a conversion
ratio of one-for-one) at the
Companies' option on or after the
third anniversary of the issuance
date.
Debt Financing
A nationally recognized financial
institution (the "Financial
Institution") has offered to loan up
to $135 million to Realty LLC. Such
amount will consist of (i) a four
year loan of $95 million (the
"Racetrack Loan") secured by, among
other things, (a) a first mortgage
lien on the Santa Anita racetrack,
improvements (the "Racetrack") and
surrounding land (the "Excess
Land"), (b) a first priority lien of
all excess cash flow from the
racetrack, (c) first priority
security interest in all other
tangible and intangible property of
Realty; and (ii) a two year loan of
up to $40 million (the "Non-Core
Asset Loan" and together with the
Racetrack Loan, the "Loans") secured
by, among other things, (a) 100% of
the proceeds from sales of certain
non-core assets of the Company,
excluding the Racetrack and Excess
Land (the "Non-Core Assets"), (b)
100% of the cash flow from the Non-
Core Assets, (c) 100% of the excess
cash flow from the Racetrack, except
to the extent required to conform to
REIT distribution requirements, and
(d) cash on hand at the time of
purchase. The interest rate on the
Racetrack Loan will float monthly at
one-month LIBOR plus 412.5 basis
points. The interest rate on the
Non-Core Asset Loan will float
monthly at one-month LIBOR plus
412.5 basis points during the first
year and will float monthly at one-
month LIBOR plus 462.5 basis points
during the second year. In
addition, the Companies will grant
the Financial Institution warrants
to purchase up to 1,440,000 Paired
Shares or a similar number of LLC
Units at a strike price equal to $27
per share less any dividends paid to
existing stockholders of the
Companies contemporaneously with the
Transaction. Realty will guarantee
the Loans.
Stand-By Purchase
Pursuant to the terms of a letter
agreement, dated as of January 28,
1997 (the "Letter Agreement"), by
and between Gotham Partners, L.P.
("Gotham") and KAI, Gotham has
committed to purchase on a stand-by
basis up to 5,600,000 Warrants, for
$5 per Warrant, or up to $28 million
in the aggregate. Pursuant to the
terms of the Letter Agreement,
Gotham would purchase from the
Companies one Warrant for each
Paired Share purchased by the
Companies pursuant to the $16 all
cash election under the Self-Tender.
It is not expected that Gotham would
tender any Paired Shares into the
Self-Tender.
Tax Treatment: The formation of the LLCs, including
Realty's contribution of its core
assets (subject to the Racetrack
Loan) to Realty LLC, will generally
be treated as a tax-free capital
contribution to a limited liability
company for Federal income tax
purposes. After the formation of
the LLCs, Realty will hold its LLC
units with the same aggregate tax
basis applicable to the core assets
it contributed to the LLC. Realty's
tax basis in its LLC units will not
be reduced by the amount of the
Loans assumed by Realty LLC in the
formation because Realty will
guarantee the Loans.
Following the formation, Realty LLC
will hold the core assets at a tax
basis equal to that at which Realty
held them prior to the formation.
On the occurrence of Realty LLC's
sale of the core assets or its
payments of principal with respect
to the Loans, Realty will realize
gain or ordinary income,
respectively, in its capacity as a
member of the Realty LLC and the
guarantor of such debt. Pursuant
to the REIT rules, Realty will be
required to distribute such gain or
income to its shareholders in the
year such gain or income is
realized.
The $11 Special Dividend will be a
tax-free return of Realty's current
shareholders' basis to the extent
Realty has no tax earnings and
profits from other sources in the
taxable year of the Transaction. To
the extent the $11 Special Dividend
exceeds a Realty shareholder's basis
in its Realty stock, it will be
taxable as gain from the sale or
exchange of such stock. Such
capital gain will be long term if
such shareholder held such stock for
more than one year prior to the $11
Special Dividend.
Each Realty shareholder selling
shares pursuant to the Self-Tender
will recognize capital gain or loss
in an amount equal to the difference
between $16 and the tax basis of the
stock sold by such shareholder, as
adjusted to reflect the effect, if
any, of the $11 Special Dividend
thereon. Such capital gain will be
long term if such shareholder held
such stock for more than one year
prior to the Self-Tender.
Existing
Operations/Business Plan: Please see Exhibit A.
Future Share Valuation: KAI and Colony expect the post-
Transaction value of the Paired
Shares to reflect a well
communicated strategy to
aggressively maximize value in three
distinct areas: (i) acquisitions of
assets which best utilize the paired
share REIT structure and KAI's and
Colony's operating expertise, (ii)
horse racing efficiencies and (iii)
development of excess land owned by
Realty.
KAI and Colony expect to achieve
material improvement in financial
performance beginning in 1998, after
they have conducted an extensive
review of strategic alternatives.
See Exhibit B for two summary pro
forma scenarios for the Companies
through the year 2002 together with
relevant material assumptions.
KAI and Colony expect the post-
Transaction Paired Shares to trade
on the basis of anticipated future
dividend yields and funds from
operations, consistent with
valuation parameters for other
paired share REITs (see Exhibit B).
KAI and Colony do not expect the
Companies to pay dividends in excess
of those required to maintain REIT
status.
Governance: Following completion of the
Transaction, the Boards of Directors
of the Companies would consist of
nine persons, of whom three would be
representatives of KAI, three would
be representatives of Colony and
three would be independent
directors. The Boards of the
Companies will each establish
Executive Committees each consisting
of three directors, of whom two
would be representatives of Apollo
and one would be a representative of
Colony. The LLCs will each have a
Board of Member Representatives
which will replicate the composition
of the Boards of the Companies,
including the establishment of
Executive Committees. In addition,
upon consummation of the
Transaction, the Companies and LLCs
will appoint the officers set forth
on Exhibit A.
Exchange of LLC Units for
Paired Shares:
KAI and Colony will each have the
option at any time after one year to
tender all or any of its LLC Units
or Preferred LLC Units to Realty and
Operating. Tenders will be in pairs
representing the same percentage
interests in Realty LLC and
Operating LLC. If LLC Units or
Preferred LLC Units are tendered,
the Companies will have the option
to deliver, in exchange for such
tendered units, either or both of
(i) Paired Shares representing
ownership of the Companies
equivalent to the percentage
ownership of the LLCs, as
represented by the tendered LLC
Units or Preferred LLC Units, or
(ii) cash equal to the market value
of such Paired Shares; provided,
however, that while Realty is a
qualified REIT it will not issue in
an exchange Paired Shares which
would cause any person to own,
directly, indirectly or
constructively, more than 9.8% of
the Paired Shares outstanding at the
time of the exchange.
Registration Rights: Holders of LLC Units or Preferred
LLC Units will have the right to
cause resale of the Paired Shares
receivable upon an exchange of LLC
Units or Preferred LLC Units to be
registered under Federal and state
securities laws.
Transaction Protection: The Companies would agree not to
initiate any contact with, solicit,
encourage or enter into or continue
any discussions, negotiations,
understandings or agreements with,
anyone other than KAI or Colony (a
"Third Party") with respect to, or
furnish or disclose any non-public
information regarding Realty,
Operating or their subsidiaries,
including the LLCs, to any Third
Party in connection with any
competing transaction proposal from
a Third Party. Notwithstanding the
foregoing, to the extent the Boards
of Realty and Operating could be
required by their fiduciary duties
as determined in good faith on the
written advice of the Companies'
outside counsel, at any time prior
to the approval by the Companies'
stockholders of the Transaction, (i)
Realty and Operating may, in
response to an unsolicited request
furnish non-public information with
respect to Realty and Operating or
their subsidiaries to any Third
Party pursuant to a customary
confidentiality and standstill
agreement and discuss that
information but not a Competing
Transaction Proposal (as defined in
the Amended and Restated Formation
Agreement, dated as of October 24,
1996 and as amended as of January 7,
1997 (the "Amended Formation
Agreement"), by and among the
Companies and Colony) with the Third
Party and (ii) upon the receipt by
Realty or Operating of a Competing
Transaction Proposal from a Third
Party, if the Board of each of
Realty and Operating has reasonably
determined that the transaction
contemplated by the Competing
Transaction Proposal, if
consummated, would constitute an
Alternative Transaction (as defined
in the Amended Formation Agreement),
then Realty and Operating may
participate in discussions and
negotiations with the Third Party
regarding the Competing Transaction
Proposal.
At least ten business days prior to
entering into definitive agreements
with respect to an Alternative
Transaction, Realty and Operating
will deliver an Alternative
Transaction Notice to KAI and Colony
advising both of the determination
by the Boards of Directors of the
Companies that the transaction
contemplated by the Competing
Transaction Proposal would
constitute an Alternative
Transaction, which notice will
include a summary of the Alternative
Transaction. During such ten
business day period, KAI and Colony
may propose an improved transaction
to the Companies.
Termination
Fees/Expenses: If prior to the approval of the
stockholders of the Companies of the
Transaction (i) Realty and Operating
have delivered an Alternative
Transaction Notice to KAI and Colony
as provided for above, (ii) the
terms of the Alternative Transaction
are not modified in a manner adverse
to Realty or Operating and (iii)
Realty and Operating have paid a
termination fee equal to $6 million
to each of KAI and Colony and
reimbursed KAI's and Colony's
expenses related to the Transaction
(including, without limitation, fees
and disbursements of its counsel,
accountants and other financial,
legal, accounting or other advisors
and out-of-pocket expenses) up to $1
million each, then Realty and
Operating may terminate their
agreement with KAI and Colony and
enter into an agreement with the
Qualified Third Party (as defined in
the Amended Formation Agreement)
with respect to the Alternative
Transaction described in the
Alternative Transaction Notice
provided to KAI and Colony as
described above.
Representations and The Companies will make customary
Warranties: representations relating to, among
other things, organization,
capitalization, authority to enter
into agreements, financial
statements, consents and approvals,
litigation, absence of any material
adverse change, undisclosed
liabilities, SEC documents, REIT
qualification, absence of zoning or
title conditions relating to
properties, environmental matters,
tax matters (including filing and
payment of all applicable federal,
state and local taxes), compliance
with laws (including, without
limitation, California law
applicable to racetracks and the
rules and regulations of the CHRB).
Diligence Completed: KAI and Colony have completed
significant due diligence on the
Companies, including a review of
company-supplied documents available
in the "war room" as of December
1996. KAI and Colony have not
reviewed additional documentation
provided as per the revised index
dated January 16, 1997 and received
January 27, 1997 but believe that we
could do so within 10 business days
of entering into exclusive
negotiations. The information most
pertinent to valuation issues which
has not been received involves taxes
(further detail on basis for owned
assets and partnership properties)
and operational data regarding horse
racing. Although it appears that
some of this data may have been
provided in the data room recently,
it is likely that KAI and Colony
will require access to additional
detailed information and to
management responsible for racing
operations to complete our analysis
of the racing revenue and expense
structure.
Upon entering into exclusive
negotiations, KAI and Colony will
complete their remaining due
diligence on an expedited schedule,
predicated of course, upon the full
cooperation of the companies and
their respective personnel.
Authorizations: This proposal is not subject to
further internal approvals by KAI,
Apollo or Koll, or by Colony or any
of its affiliates.
Conditions of Consummation of the Transaction is
Closing/Approvals: subject to the satisfaction of the
following conditions:
- No misrepresentation or
breach of covenants and warranties;
- No material adverse change in
business of the Companies;
- Receipt of legal opinion from
counsel of the Companies regarding,
among other things, REIT
qualification;
- No temporary restraining
order, preliminary or permanent
injunction or other order issued by
any court of competent jurisdiction
or other legal restraint or
prohibition preventing the
consummation of the Transaction
shall be in effect;
- All consents of government
and regulatory authorities obtained;
- All other necessary consents
from other parties to all material
contracts, leases, agreements and
permits;
- Execution of definitive
documentation relating to the
Transaction and the transactions
contemplated thereby;
- Transaction (including
election of KAI and Colony director
nominees) shall have received
requisite shareholder approval;
- Rights under the Rights
Agreement, dated as of June 15,
1989, among Realty, Operating and
Union Bank, as rights agent (the
"Rights Agreement"), shall not have
become exercisable; and
- Operating and Operating LLC
will qualify as "operating
companies" within the meaning of
Department of Labor Regulations, and
Realty LLC will qualify as a "real
estate operating company" within the
meaning of Department of Labor
Regulations.
Existing Termination Consistent with the terms of the
Fees/Expenses: Amended Formation Agreement prior to
executing definitive documentation
relating to the Transaction, the
Companies shall pay Colony the
Termination Fee and Colony's
Transaction Expenses as set forth in
the Amended Formation Agreement.
Public Announcements: All announcements regarding any
agreed transaction will be upon
joint approval of the parties,
subject to each party's legal
obligations to make public
announcements as required by events.
Other Terms and The Companies will amend the Rights
Conditions: Agreement to permit the commencement
and closing of the transactions
which are the subject of the
Transaction without any such event
or the passage of time resulting in
the occurrence of the Distribution
Date (as defined in the Rights
Agreement).
Within thirty days of executing
definitive documentation relating to
the Transaction, Realty and
Operating shall (i) prepare and file
with the SEC a joint proxy statement
to solicit proxies in connection
with a special meeting of
shareholders of the Companies to
vote on the Transaction and (ii)
call a stockholders meeting for the
purpose of, among other things,
approving the Transaction and
electing the KAI and Colony director
nominees.
The Companies shall grant Koll
Arcadia LLC options to purchase
approximately 3% of the post-
Recapitalization Paired Shares or
LLC Units at an agreed exercise
price on the date of the grant
increasing on a formula basis over
time.
Other
Considerations/Information: The Companies will indemnify
officers and directors of the
Companies and the LLCs and
vigorously defend any litigation
relating to the Transaction.
Independent Proposals: The proposals of KAI and Colony are
separate and independent. All
negotiations relating to this
Transaction shall involve both KAI
and Colony.
EXHIBIT 2 - PRESS RELEASE
FOR IMMEDIATE RELEASE Contact: Owen Blicksilver
For KAI and Colony
212-303-7603
Koll Arcadia Investors, Colony Capital Announce Proposal
To Recapitalize Santa Anita Companies;
Investors Would Acquire 70% Stake
NEW YORK/LOS ANGELES, March 17 -- Koll Arcadia Investors
(KAI) and Colony Capital, Inc. today each announced a
proposal to recapitalize the Santa Anita Companies (NYSE:
SAR), a "paired share" REIT based in Arcadia, CA. The
proposal by KAI, would provide up to $27 per share in cash
to Santa Anita Companies' stockholders.
Under the terms of the proposal, KAI and Colony would
contribute an aggregate of $116.5 million in new equity
capital and would cause the Santa Anita Companies to
distribute a special dividend of $11 per common share to all
shareholders from the proceeds of a new financing. In
addition, approximately $61.5 million of the $116.5 million
would be used to fund a self-tender for 5.6 million SAR
shares in which existing shareholders would be given the
option to receive $16 in cash (in addition to the $11 per
share special dividend) for each share acquired in the
tender, or $11 in cash plus a warrant valued at $5. Gotham
Partners, L.P. has agreed to act as a standby purchaser to
acquire warrants from the Companies for stockholders
choosing the cash option.
Accordingly, the KAI/Colony proposal will result in the
distribution of more than $230 million to Santa Anita
stockholders. KAI and Colony would own approximately 70% of
the recapitalized Companies following the transaction, and
will receive a majority of seats on the Boards of Directors.
Gotham Partners, L.P., will also have a representative on
the Boards.
Representatives of KAI and Colony said "we believe it is in
the best interests of all the shareholders for the two
largest shareholders of Santa Anita to participate in the
recapitalization of the Companies. We both have significant
investments in the Companies and believe our organizations
possess complementary strengths, in terms of capital and
transaction opportunities, and share a common vision to
foster the growth of Santa Anita into a major enterprise.
Each of our organizations looks forward to bringing the
recapitalization process to a timely conclusion and getting
to the business of maximizing shareholder values."
The representatives added that "by coordinating the
resources of KAI and Colony, this new proposal improves on
KAI's most recent offer, through the commitment of an
additional $25 million of equity capital and the sponsorship
of another major shareholder. This additional equity will
enhance the Companies' ability to immediately embark upon
accretive acquisitions."
KAI is an investment partnership comprised of principals of
the Koll Companies and Apollo Real Estate Investors II,
L.P., a $570 million equity fund. KAI had previously made a
recapitalization proposal to the Companies and owns
approximately 8.7% of the paired common stock of the
Companies.
Colony Capital, Inc. is a Los Angeles-based investment firm
which invests on behalf of Colony Investors II, L.P., a $625
million equity fund. Colony had previously announced a
planned strategic alliance with the Companies and owns
approximately 8.0% of the paired stock of the Companies on a
fully diluted basis.
Gotham Partners, L.P. is a New York-based investment fund
and 5% shareholder of the Companies, which agreed to act as
standby purchaser of warrants as part of KAI's previous
offer.
# # #
