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SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
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<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(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):
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
/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:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
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[FIRST UNION CORPORATION LOGO] FIRST UNION
REAL ESTATE INVESTMENTS
IMPORTANT NOTICE TO FIRST UNION SHAREHOLDERS
FROM THE CHAIRMAN
March 30, 1995
Dear Fellow Shareholder:
In recent weeks my colleagues and I have spoken to many of you, and we are
very gratified by your interest in your Trust's future. We know that many of you
are frustrated with the flurry of mailings and telephone calls, but hope you
will understand that frequent communications are an unavoidable consequence of
proxy contests.
I am writing to bring you up to date on recent developments, and to urge
once again that you reject the Turkey Vulture group's slate of inexperienced
nominees by voting management's WHITE PROXY CARD to re-elect Stephen R. Hardis,
E. Bradley Jones and me as Trustees with the stewardship of your investment in
First Union.
A CONFLICT OF INTEREST
DISQUALIFIES THE DISSIDENTS FROM SERVING
The Declaration of Trust which governs First Union includes an important
provision intended to protect your investment from trustees who have other
investments that could lead to divided loyalties. Without question, this
stipulation would disqualify Richard M. Osborne and his running mates from
serving as trustees for as long as they hold prohibited investments.
The Declaration of Trust states that no trustee may own, directly or
indirectly, more than 1 percent of another REIT nor more than 1 percent of any
other real estate company that competes with the Trust for investments. The
rules also disqualify any person who "is otherwise affiliated with" any such
person.
Mr. Osborne owns approximately 15 percent of another
REIT -- PruRealty -- which disqualifies him automatically, and about 4 percent
of Cardinal Realty, which is in the apartment business as is First Union. The
other candidates -- James Webb and Steven Calabrese, an investor in the Turkey
Vulture Fund -- are clearly "affiliated with" Mr. Osborne.
If the dissident slate is elected, First Union would have to ask the courts
to enforce the Declaration of Trust, thus incurring additional legal costs that
could otherwise be avoided. THEREFORE, IT IS IMPORTANT THAT YOU VOTE THE WHITE
PROXY CARD.
DOES THE TURKEY VULTURE GROUP
REALLY DESERVE YOUR VOTE?
We believe the Trust's performance must improve, and you now have a new
management team and largely reconstituted Board of Trustees (five of nine
members have joined the Board since 1991) implementing a long-range strategy
that is already producing results, as evidenced by the upturn in property net
operating income for the first time since 1990.
It may interest you to know that Salomon Brothers has recently published
its analyst's report about your Trust that includes the following: "The actions
taken by the new management team have been positive for bondholders, and
ultimately should benefit shareholders. However, if shareholders
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side with Turkey Vulture/Osborne, we believe that the positive momentum from a
credit perspective would come to an end."
Standard & Poor's commented, "New management, firmly in place since January
of 1994, appears to have a very clear, rational plan for returning the REIT to
prosperity..." And Moody's said, "...the rating agency is encouraged by the new
management's steps to strengthen the firm's financial and operating
characteristics."
The Turkey Vulture group asks you to exchange that for three unqualified
candidates who are unwilling to explain their strategy. Instead, Mr. Osborne has
offered a series of vague and contradictory statements about his plans, and
little to substantiate the credentials of his slate.
- For example, Mr. Osborne promised in his first letter to you that his
proxy materials would "describe our strategy." Yet, when he did issue his
proxy statement, it indicated he would not formulate a plan until he is
elected, explaining that "a proxy contest is not the best forum for
detailed discussion of a business plan." In a more recent shareholder
letter, he suggested that he would try to merge the Trust with a larger
REIT. He initially told the investing public in his SEC filings that his
acquisition of shares of First Union was for investment purposes and that
he had no other current plans, yet he had earlier told the Turkey Vulture
Fund investors in his offering memorandum that he would use their money
to buy "target entities" that "...offer an opportunity for a tender
offer, merger, asset disposition or other form of corporate
reorganization." In fact, in a phone conversation that was legally tape
recorded to protect First Union shareholders -- because it exposed Mr.
Osborne's secret and illegal scheme -- fellow investor Mark Escaja
admitted Turkey Vulture's intent involved "buying it, breaking it up and
selling the parts."
- Mr. Osborne is telling you that your shares are undervalued. But when he
tried to interest Andrew Farkas, Chairman and CEO of Insignia Financial
Group (one of the largest real estate investment banking firms in the
country today), in the First Union deal, Mr. Farkas has said that he
declined, telling Mr. Osborne that his own analysis indicated that the
shares are not undervalued. When Mr. Farkas asked Mr. Osborne if he has
analyzed the Trust, the reply was, "Nope...I just follow my gut."
- Mr. Osborne states in his proxy materials that, if elected, he would try
to distribute as a dividend the proceeds from the sale of two mall
properties. He did not tell you that doing so would reduce cash flow by
approximately $3 million a year, thereby causing the Trust to be in
default of its loan covenants and making it even more difficult for the
Trust to increase dividends.
- Osborne nominee James Webb has testified under oath that he has done no
analysis to determine whether First Union's management should be
replaced, that he has not looked at any of the public filings of the
Trust and that he has no knowledge of First Union's management structure
or organization. He also said that he has no pertinent real estate
management experience, has never been an officer or director of a
for-profit company, has never done any work directly for a REIT and had
not even met Mr. Osborne when he agreed to be a nominee for trustee.
WE ARE ASKING FOR DAMAGES ON BEHALF OF OUR SHAREHOLDERS
BECAUSE MR. OSBORNE'S ACTIONS ARE DAMAGING THE TRUST
By filing misleading and inaccurate statements with the Securities and
Exchange Commission, disregarding proxy rules and manipulating First Union's
stock price, management believes that Mr. Osborne is causing damage to First
Union and its shareholders. Accordingly, Mr. Osborne has forced your Trust to
engage in a costly legal battle, and, as a result, we have asked U.S. District
Court for $30 million in damages on behalf of our shareholders. However, there
can be no assurances given with respect to the damages, if any, that the Trust
may recover.
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As you may know, we sued Mr. Osborne and several other individuals and
entities on February 3 because of their failure to provide the information
required by the federal securities rules. In addition, the proxy battle Mr.
Osborne launched compels your Trust to defend itself against his attempt to seat
three ineligible candidates on your Board. Because of Mr. Osborne's continued
disregard for the federal proxy rules and his ongoing misrepresentations and
misstatements to shareholders and the SEC, we amended our complaint on March 20
and requested damages.
This is not the first time Mr. Osborne has been sued while making a move on
a public company. In his unsuccessful bid for Broadview Financial Corp., for
example, the company sued Mr. Osborne, claiming that he was defrauding
shareholders by manipulating the market to his advantage, in part through the
same types of nondisclosures and misstatements we are now being subjected to. In
addition, People's Savings Bank sued Mr. Osborne for attempting a takeover while
failing to comply with Ohio disclosure and reporting statutes.
In fact, Mr. Osborne and his business interests are no strangers to the
courts. A lawsuit currently pending in U.S. District Court in Cleveland
contends, among other things, that companies owned by Mr. Osborne and his family
conspired, through a pattern of racketeering, to defraud local governments and
businesses into awarding them cement contracts by falsely claiming that a shell
company they created and controlled was a "minority business enterprise." Though
the Osbornes were successful in winning a number of MBE contracts, the City of
Cleveland has since revoked the MBE certification.
COMPARE THE CANDIDATES
Again, I ask you to look beyond the web of misleading information the
Turkey Vulture group has spun and to consider the basis of the choice you are
being asked to make -- who would you rather entrust with your investment?
The two groups of candidates for the Board of Trustees are a study in
contrasts -- on the one hand, experienced real estate and public company
professionals who have a focused strategy for the Trust and on the other hand
three individuals with no experience operating a public real estate company,
virtually no knowledge of the Trust and no publicly disclosed plans for its
future growth.
Even if you have cast the rival slate's proxy card, YOU STILL HAVE TIME TO
VOTE THE WHITE PROXY CARD. (If you have cast only the white card or cast the
white card most recently, you need take no further action.)
If you would like more information about what is at stake, please call me
or Thomas Kmiecik, our Vice President-Treasurer, at (800) 394-4030 or collect at
(216) 781-4030, or Corporate Investor Communications, Inc., our proxy solicitor,
at (800) 346-7885 or collect at (201) 896-1900.
The very future of First Union rests in your hands. I hope you will agree
that, despite what a group of corporate raiders would have you believe, the
interests of the majority of the shareholders will be best served by supporting
your new management team as we implement the Trust's long-term strategic
plan -- one that has been very carefully formulated to generate future growth
for you.
Sincerely,
/s/ James C. Mastandrea
James C. Mastandrea
Chairman and Chief Executive Officer
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IMPORTANT
1) Please vote management's WHITE PROXY CARD and mail it in the
enclosed postage paid envelope.
2) Please DO NOT return the red, white and blue proxy card sent to
you by Mr. Osborne and his Turkey Vulture group, even as a
protest vote against the dissident candidates.
3) If you have any questions about voting your shares or want
further information, please do not hesitate to call us or our
proxy solicitor.
FIRST UNION REAL ESTATE INVESTMENTS
THOMAS T. KMIECIK, VICE PRESIDENT -- TREASURER
(800) 394-4030 OR COLLECT AT (216) 781-4030.
CORPORATE INVESTOR COMMUNICATIONS, INC.
(800) 346-7885 OR COLLECT AT (201) 896-1900.
