SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
First Union Real Estate Equity and Mortgage Investments
............................................................................
(Name of Registrant as Specified In Its Charter)
The Committee to Unlock the Value of First Union Real Estate Invesstments
.............................................................................
(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:
Shares of Beneficial Interest, $1.00 par value
......................................................................
2) Aggregate number of securities to which transaction applies:
......................................................................
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):
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
......................................................................
[X] Fee paid previously with preliminary materials.
[ ] Check box if any 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:
......................................................................
4) Date Filed:
......................................................................
Page 1 of 13 Pages
<PAGE>
<PAGE>
PROXY STATEMENT
IN OPPOSITION TO THE BOARD OF TRUSTEES OF
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
ANNUAL MEETING OF SHAREHOLDERS
SCHEDULED FOR APRIL 11, 1995
TO ALL SHAREHOLDERS OF FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS:
This Proxy Statement is furnished by The Committee to Unlock the Value of
First Union Real Estate Investments (the "Committee") in connection with its
solicitation of proxies to be used at the Annual Meeting of Shareholders of
First Union Real Estate Equity and Mortgage Investments ("First Union" or the
"Company") scheduled to be held on Tuesday, April 11, 1995, at the National
City Bank Auditorium, on the fourth floor of the National City Center Annex
Building, 1900 East Ninth Street, Cleveland, Ohio 44114 at 10:00 A.M., local
time, and at any adjournments or postponements thereof. This Proxy Statement
and the accompanying RED, WHITE AND BLUE Proxy Card are first being sent to
the Company's shareholders on or about March 13, 1995.
The Company has set February 10, 1995, as the Record Date for
determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting. According to the Company, as of the close of business on the
Record Date there were outstanding and entitled to vote at the Annual Meeting
a total of 18,262,725 shares of Beneficial Interest, par value $1.00 per
share (the "Shares"). Each Share is entitled to one vote on all matters
submitted to a vote of the shareholders at the Annual Meeting. Pursuant to
Section 8.2 of the Company's Amended Declaration of Trust, the affirmative
vote of the holders of a plurality of the Shares cast at the Annual Meeting
is required for the election of trustees. If you own your First Union Shares
in the name of a brokerage firm, your broker cannot vote such Shares unless
he receives your specific instructions.
As of the Record Date, the Committee had the right to vote an aggregate of
1,672,800 Shares, including 725,000 Shares purchased on March 10, 1995 with
voting and proxy rights, constituting approximately 9.3% of the total votes
eligible to be cast at the Annual Meeting. See "The Committee."
THE COMMITTEE URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED RED, WHITE
AND BLUE PROXY CARD TO VOTE FOR THE ELECTION OF THE COMMITTEE'S NOMINEES AS
TRUSTEES. A POSTAGE-PAID ENVELOPE HAS BEEN PROVIDED FOR YOUR CONVENIENCE.
REASONS FOR THIS SOLICITATION
The Committee is urgently soliciting your proxy to enable us to salvage
and then revive the Company. We had high hopes for the Company when we first
made our investments. We now believe that First Union has little or no future
if management is not changed immediately. The Committee seeks your help to
elect three trustees with substantial commercial real estate experience who
will constitute one-third of the Board of Trustees. We believe these new
trustees will be more knowledgeable in real estate investment and management,
more responsive to shareholder concerns and more responsible in their
direction of the management of the Company. The Committee's nominees, if
elected, will seek the removal of James C. Mastandrea, the current Chief
Executive Officer of the Company, whose policies are a continuation of past
mistakes and who we believe has shown a callous disregard for shareholders.
We believe that the Committee's nominees, through a new management team, will
implement the policies necessary to maximize shareholder value.
We send you this request for your proxy and ask for your vote for a number
of reasons:
(1) The Company's Shares, which once traded at prices exceeding $27.00
per share, have steadily declined for more than eight years, hovering in
the $6.00 -$10.00 range for most of the past year.
(2) The Company's current Trustees and executive officers have shown
little faith in the Company--their total investment in the Company amounts
to only 245,348 Shares (excluding
<PAGE>
<PAGE>
unexercised options), or only 1.3% of outstanding Shares. Of the 245,348
Shares, 162,500 Shares of restricted stock were awarded to executive
officers in 1994 under the Company's Long Term Incentive Performance Plan.
Therefore, the Trustees and executive officers have purchased at most only
82,848 Shares, or less than 0.5% of the outstanding Shares, on the open
market.
(3) From 1993 to 1994, Mr. Mastandrea's annual salary, not including
bonuses, increased from $200,000 to $250,000, an increase of 25%, and his
bonus increased to $110,610, an increase of 25% on an annualized basis.
Moreover, in 1994 Mr. Mastandrea received options to purchase 162,500
Shares and was rewarded with 112,500 Shares of restricted stock under the
Company's 1994 Long Term Incentive Performance Plan. All these increases
and grants were made while from 1993 to 1994 the Company's per share
earnings were cut in half.
(4) From 1992 to 1993, annual general and administrative expenses
increased 27%, or $408,000; from 1993 to 1994, the annual increase was
82%, or $1.6 million!
(5) As of December 31, 1994, the average dividend yield of 102 real
estate investment trusts was 7.7%. (Source, A.G. Edwards & Sons, Inc.,
Quarterly REIT Review, January 18, 1995.) First Union's yield was only
6.0% as of December 31, 1994.
(6) Net income has declined from $1.02 per share in 1992, to 77 cents
per share in 1993, to 36 cents per share in 1994.
(7) In 1994, First Union sold a 50% interest in two regional shopping
malls, one in Wilkes Barre, Pennsylvania and the other in Fairmount, West
Virginia (the "Malls") for a sale price equivalent to approximately $58
per square foot. Mr. Mastandrea then agreed on behalf of the Company to
use a portion of the proceeds of the Mall sales to purchase a suburban
shopping center outside of his hometown of Chicago for a price equivalent
to approximately $120 per square foot.
(8) The Mall sales generated over $29 million in gains for the
Company, or over $1.60 per share. None of these gains were distributed to
the Company's shareholders.
WHAT WE WILL DO
A proxy contest is not the best forum for detailed discussion of a
business plan. Our nominees, however, have experience in investing, managing
and analyzing real estate in a profitable manner. They are committed to:
(1) The hiring of a chief executive officer who will be responsive to
shareholders and who will aggressively manage the Company enabling it to
provide returns to the shareholders that they have every right to expect
and for so long have not received;
(2) An urgent review of all the Company's real estate investments,
including appraisals of properties, with a view toward improving the
performance of the portfolio;
(3) The development of a plan to increase the dividends payable to
shareholders;
(4) The imposition of strict controls on overhead expenses and the
implementation of necessary steps to cut overhead costs;
(5) The termination of all stock option and restricted stock award
plans that benefit management at the expense of shareholders;
(6) The termination of the Rights Agreement, which is commonly known
as a poison pill, adopted by the Company in 1990;
(7) The termination of the restrictions in Section 6 of the Company's
By-Laws that prohibit any person from owning more than 9.8% of the Shares;
(8) The termination of the staggered election of members of the
Company's Board of Trustees;
(9) The implementation of a continuous, effective shareholder
relations program to keep shareholders informed about the Company;
(10) To the extent possible, a reversal of management's decision not
to distribute the over $29 million in gains received from the Mall sales;
and
2
<PAGE>
<PAGE>
(11) The evaluation of the possibility of enhancing shareholder value
by merging the Company with a larger, well run real estate investment
trust ("REIT").
WHAT WE WILL NOT DO
(1) We will NOT terminate employees simply for the sake of cutting costs;
our grievance is with the Company's trustees, including Mr. Mastandrea, not
its professional staff. We trust that with stability, a coherent business
plan, professional management and shareholder oversight, their distinguished
talents can be put to profitable use.
(2) We will NOT waste the shareholders' money on lavish offices for the
management.
(3) We will NOT increase the pay and benefits of officers or reward them
with grants of Shares or "golden parachutes" at a time when First Union share
prices are declining.
(4) We will NOT hire expensive outside consultants to give advice on
matters that First Union's management should know for themselves.
(5) We will NOT take any action to impair First Union's status as a REIT
under the Internal Revenue Code of 1986.
(6) We will NOT announce a new policy of investor communications (Source,
Letter, dated March 25, 1994, from Mr. Mastandrea to First Union
shareholders), and then refuse to meet with the Company's largest shareholder
and spend Company funds to launch enormously expensive litigation against the
shareholder. See "Litigation."
WHY SHAREHOLDER INVESTMENTS WILL BE LOST
IF MANAGEMENT IS NOT CHANGED
We have summarized the events and failures which have led us to believe
that management must change. We have invested approximately $12.6 million
(including obligations for margin debt) in the Company. We describe below in
further detail why we believe that First Union's shareholders deserve a
prompt and comprehensive change of First Union's ways of doing business.
1. The Market's Rejection of First Union
From a high of over $27.00 per share in 1987, First Union's stock traded
at less than $6.25 per share on September 30, 1994 and, after the
announcement of our investment, has since risen to a high of $8.50 per share
on January 19, 1995, and again on January 30, 1995. On March 10, 1995, the
last trading day prior to the date of this Proxy Statement, the closing sales
price for First Union Shares was $7.50 per share. This steep per share
decline shows that the market is trying to send a message to First Union. We
seek your proxy because management is not getting the message.
2. Mr. Mastandrea Has Personally Benefitted at the Expense of First Union
Shareholders
While the performance of First Union has continued to decline from 1993 to
1994, Mr. Mastandrea received a $50,000 annual salary increase, or 25%, and
an increase in his bonus equal to 25% on an annualized basis. At the same
time, Mr. Mastandrea received the following: (1) options to purchase 162,500
Shares; (2) a reward of 112,500 Shares of restricted stock under the
Company's 1994 Long Term Incentive Performance Plan; (3) a "golden parachute"
that requires the Company, in certain circumstances, to continue to pay his
base salary and bonus and provide benefits, including pension contributions
and vesting of options, for a period of three years after Mr. Mastandrea is
no longer employed by the Company, and, in certain circumstances such as the
termination of Mr. Mastandrea without cause after a change in control of the
Company (as defined), the base salary, bonus and benefits otherwise payable
over the three-year period become immediately due and payable by the Company
in a lump sum; (4) Company-paid memberships in several exclusive Cleveland
social clubs; and (5) a $2.5 million split-dollar life insurance policy, all
the premiums on which are paid by the Company during his employment and on
which the Company must continue to pay premiums, in certain circumstances,
even after he is no longer employed by the Company. Mr. Mastandrea began
serving as President and Chief Operating Officer of the Company in July 1993
and was promoted to Chairman, President and Chief Executive Officer of the
Company in January 1994.
3
<PAGE>
<PAGE>
As shareholders, we continue to fund Mr. Mastandrea's lucrative salary and
perquisites without receiving any value in return.
3. First Union Shares Continually Underperform the Market
Based on information provided by the Company, the following performance
graph assumes the investment of $100 on December 31, 1989 in First Union
Shares, the New York Stock Exchange (NYSE) Composite, and All REITs, with
dividends reinvested when paid and share prices as of the last day of each
calendar year. The All REITs was compiled by the National Association of Real
Estate Investment Trusts (NAREIT). The "star" in the table indicates the date
on which Mr. Mastandrea joined First Union.
1989 1990 1991 1992 1993 1994
First Union $100 $50 $53 $76 $85 $62
All REITs $100 $83 $112 $126 $149 $150
NYSE Composite $100 $96 $124 $130 $148 $145
As the graph indicates, a $100 investment in First Union Shares on
December 31, 1989 would be worth $62 on December 31, 1994. The same $100
would be worth $145 if invested in the NYSE Composite or $150 if invested in
All REITs.
LITIGATION
Richard M. Osborne is sole managing member of Turkey Vulture Fund XIII,
Ltd., an Ohio limited liability company (the "Fund"), that was formed to
acquire, hold, sell or otherwise invest in all types of securities and other
instruments. The Fund is the largest shareholder in First Union. Mr. Osborne
attempted to meet with management of First Union to discuss First Union and
the significant investment made by the Fund. Management of First Union
refused to meet with him. Instead, on February 3, 1995, First Union commenced
an action (No. 1:95CV 0274) in the U.S. District Court for the Northern
District of Ohio, Eastern Division, against Mr. Osborne, the Fund, and
various other persons (the "First Union Action"). First Union alleges, among
other matters, that the named defendants were conspiring to take control of
First Union, violated federal and state securities laws and breached certain
obligations to other First Union shareholders. First Union is seeking, among
other matters, (1) an injunction to prevent the defendants from acquiring
additional Shares, voting any shares and taking any action to control First
Union, and (2) divestiture or rescission for all Shares owned by the
defendants.
Mr. Osborne and the Fund vehemently deny all charges made by First Union
and are contesting the charges vigorously. Among other matters, Mr. Osborne
and the Fund have sought (1) dismissal of the First Union Action, (2) a
declaration that First Union breached its fiduciary duty to its shareholders
by bringing the First Union Action and thereby wasting corporate assets, (3)
damages in the amount of all fees and costs incurred in prosecuting and
defending the First Union Action and all damages awarded from the failure of
the trustees of First Union to independently investigate the basis of the
First Union Action and from their obligation to not abuse the process, and
(4) the production of the First Union shareholder list.
On February 8, 1995, the court denied First Union's motion for a temporary
restraining order on the grounds that First Union failed to show a
substantial likelihood of prevailing on the merits of its claim, or
irreparable injury if the motion was not granted. The court has scheduled a
hearing on First Union's injunction motion for May 2, 1995.
4
<PAGE>
<PAGE>
Other defendants in the First Union Action have denied the Company's
charges and are contesting the Company's charges. On March 6, 1995, defendant
Mark P. Escaja submitted a counterclaim for damages arising from attorney
fees, loss of reputation, and mental and emotional distress. He is seeking
from First Union $500,000 in compensatory damages and $500,000 in punitive
damages. On March 10, 1995, defendants Developers Diversified Corporation
("Developers"), The Wolstein Corp., Inc., Bert Wolstein, Scott Wolstein and
Heritage Capital Corporation (collectively, the "Wolstein Defendants")
submitted a counterclaim for abuse of process and defamation. They are
seeking from First Union compensatory damages in the amount of $10 million
for Developers and no less than $1 million for each of the other Wolstein
Defendants and punitive damages in the amount of $20 million for Developers
and no less then $5 million for each of the other Wolstein Defendants. In
addition, they are seeking costs and attorney's fees.
Despite clear evidence that, other than the Fund, none of the other
defendants in the First Union Action own any Shares or have any intention to
purchase any Shares of First Union, the Company continues to wage legal
warfare, without any concern over the cost to the Company and its
shareholders.
THE COMMITTEE
The members of the Committee are Steven A. Calabrese, Richard M. Osborne,
and James R. Webb. The Committee believes that, as of the Record Date, its
members beneficially owned or were entitled to vote an aggregate of 1,672,800
Shares, including 725,000 Shares purchased on March 10, 1995 with voting and
proxy rights, constituting approximately 9.3% of the outstanding Shares. As
of the date hereof, 1,690,500 Shares, including the 725,000 shares purchased
on March 10, 1995, are owned by the Fund. Mr. Osborne, as the sole managing
member of the Fund, is the beneficial owner of the 1,690,500 Shares. The Fund
was formed to acquire, hold, sell or otherwise invest in all types of
securities and other instruments. See "Appendix A."
WE ARE SHAREHOLDERS, NOT CORPORATE RAIDERS
Contrary to First Union's groundless accusations, neither the Committee
nor any of its members are attempting to benefit themselves at the expense of
any other shareholders. Rather, the Committee is seeking to increase value to
all shareholders. Neither the Committee nor its members will acquire any of
First Union's operations or assets or be compensated either as principal or
agent in transactions relating to the redeployment of First Union assets, or
earn any profits, commissions or other fees from First Union for their
services in connection therewith, other than (1) such compensation, if any,
as might be payable to any of the Committee members solely in their
capacities as trustees of First Union, (2) payments received by Committee
members in their capacity as holders of First Union stock, and (3)
reimbursements of professional fees and expenses incurred in the legal
proceedings brought by First Union against Mr. Osborne and the Fund. See
"Litigation."
Additional information concerning the members of the Committee and their
holdings of Shares is set forth in Appendix A hereto.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL 1: NOMINEES FOR ELECTION AS TRUSTEES
The Company's Board of Trustees is presently composed of nine trustees,
divided into three classes of trustees who serve for three-year terms. The
trustees elected at the Annual Meeting will serve in such capacity until the
1998 Annual Meeting of Shareholders and thereafter until their successors
shall have been elected and qualified. In opposition to the incumbent Class
II of the Board of Trustees the Committee is proposing a slate of three
experienced and well-qualified nominees for election as trustees of the
Company who, if elected, would constitute one-third of the Board of Trustees.
Each nominee named below has consented to serve as a trustee of the
Company if elected. The Committee does not expect that any of the nominees
will be unable to stand for election but, in the event that a vacancy in the
slate of nominees should occur unexpectedly, the Shares represented by the
enclosed RED, WHITE AND BLUE Proxy Card will be voted for a substitute
candidate selected by the Committee.
5
<PAGE>
<PAGE>
The following information concerning business address, age, and principal
occupation has been furnished by the Committee' nominees.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS AGE PRINCIPLE OCCUPATION FOR PAST FIVE YEARS
- -------------------------- ----- -----------------------------------------------------------------
<S> <C> <C>
Steven A. Calabrese 34 Since 1988, Mr. Calabrese has been Executive Vice President and a
1110 Euclid Avenue Director of Calabrese, Racek and Markos, Inc. ("CRM"), a
Suite 300 commercial-industrial real estate appraisal company located in
Cleveland, Ohio 44115 Cleveland, Ohio. He is also an executive officer and a Director
of various affiliates of CRM, also located in Cleveland, that
provide full-service real estate property management,
construction and environmental services. Mr. Calabrese is a
member of the Appraisal Institute, holds the MAI designation and
is also a certified appraiser.
Richard M. Osborne 49 Mr. Osborne is President and Chief Executive Officer of OsAir,
7001 Center Street Inc., Mentor, Ohio ("OsAir"), a company he founded in 1963. OsAir
Mentor, Ohio 44060 is a manufacturer of industrial gases for pipeline delivery and a
real property developer. Mr. Osborne has substantial experience
in real estate development and management. During his career as a
real estate entrepreneur, he has developed, managed or sold over
1 million square feet of industrial space and over 1.5 million
square feet of commercial space, and is currently developing a
250 acre industrial park in Mentor, Ohio. At its formation in
November 1994, Mr. Osborne became the sole managing member of the
Fund. Mr. Osborne is also Vice-Chairman and Director of Great
Lakes Bank, of Mentor, Ohio, a position he has held since the
Bank's founding in July 1994. From 1985 through 1990, Mr. Osborne
was Chairman of the Board of Peoples Savings Bank of Ashtabula,
now First Bankcorp of Ohio.
James R. Webb, PhD. 47 Dr. Webb is Professor and Director of the Center for the Study of
Department of Finance Real Estate Brokerage and Markets at the James J. Nance College
College of Business of Business, Cleveland State University, a position that he has
Cleveland State University held since 1991. From 1989 to 1991, he was Professor and Chairman
Cleveland, Ohio 44115 of the Department of Finance at that College of Business. Since
1991, Dr. Webb has been the Chairman of the Board of the National
Bureau of Real Estate Research, a non-profit organization
specializing in real estate analysis, and since 1987, he has been
the Executive Director of the American Real Estate Society, the
largest real estate education and research organization in the
United States. Dr. Webb founded that organization in 1985 and
served as its President in 1986. In addition, he has published
over eighty articles on various aspects of real estate investment
in professional and academic journals. Dr. Webb received his PhD.
from the University of Illinois in 1982.
</TABLE>
None of the nominees has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) during the past ten
years. Additional information concerning the Committee's nominees is set
forth in Appendix A hereto.
The Committee urges you to sign, date and return the enclosed RED, WHITE
AND BLUE proxy card to vote for the election of the Committee's nominees as
trustees.
6
<PAGE>
<PAGE>
PROPOSAL 2: SHAREHOLDER PROPOSAL
Statement in Support and Proposal
Mr. Allen Wolff, D.V.M., Trustee, 4241 Center Road, Brunswick, Ohio
44212-0474, who is the beneficial owner of 520 Shares of Beneficial Interest,
has, according to the Company, advised it that he intends to present at the
Annual Meeting the following proposal:
I have invested my life savings in various equities to try to provide for
retirement and old age, and I want the funds to be there when I need them.
Throughout corporate America, many stockholder proposals have been introduced
to try to control compensation to directors and top management and to try to
tie them in with profits and dividends. Management opposes this! . . . Most
shareholder proposals fail because (1) the investors are not organized and
have no alternative, (2) management already controls a large number of votes
and then rewards itself with more shares to vote against such proposals, and
(3) we are not playing on a level field; management gets to count unmarked
proxies as voting in favor of their position and then is allowed to solicit
proxies at the company's expense.
I feel that many Boards of Directors have lost touch with the investors,
and it seems that they are giving more and more rewards for less and less
success. In Junior High School, we learned that there were three (3) parts to
any business: CAPITAL, LABOR AND MANAGEMENT. The boards seem to have
forgotten this lesson. The boards, in general, are self-perpetuating groups
seemingly intent on rewarding themselves and members of management, at the
expense of the investor.
I am particularly dismayed at the statement on proxies that "Proxies
signed, but not specifically marked, will be voted as management has
suggested."
Management says that stockholders clearly understand how their votes will
be counted if they don't put Xs in the boxes; yet many shareholders didn't
understand THAT (and I have letters about that). They say that this process
allows the stockholder not to be burdened with making THREE OR FOUR Xs. WOW!
How many shareholders even understand what they are being asked to vote on?
Last April at the annual meeting of First Union Real Estate Trust, a
company that also has reduced its dividends in the last two years, there was
a management proposal to increase compensation ("because that's what we have
to do to attract top executives"). An interesting question from the floor to
the CEO: "Without this incentive, would you not work very hard at your base
salary?" Answer muted. The proposal passed by 69% (including the UNMARKED
proxies). An astute investor in the audience did some quick arithmetic and
pointed out that less than 50% of the shares voted were actually voted for
the proposal.
When I go to the polls and figure there is no clear choice among
candidates and leave that space "unmarked", it is not voted in favor of the
incumbent or the incumbent's party, it is merely a non-vote.
Therefore, be it resolved that in future proxies of this company, there
will be no discretionary power of voting by the named proxy-holder on any
issues where no direction has been given, including ANY ISSUE "WHICH MAY
PROPERLY COME UP AT THE MEETING."
Committee's Statement
The Committee takes no position regarding this proposal. RED, WHITE AND
BLUE Proxy Cards not marked with respect to this proposal will be voted as an
abstention.
Vote Required
According to the Company, approval of this proposal will require the
affirmative vote of the holders of a majority of the Shares present in person
or by proxy and voting at the meeting.
VOTING OF PROXIES
Unless otherwise indicated, the persons named in the accompanying RED,
WHITE AND BLUE Proxy Card will vote properly executed and duly returned
proxies (1) FOR the election of three Committee nominees as members of Class
II of the Board of Trustees of the Company to serve for a term of three years
until the 1998 annual meeting of shareholders and until their successors are
elected and
7
<PAGE>
<PAGE>
qualified, (2) as an abstention with respect to the shareholder's proposal
set forth in Proposal 2, and (3) in accordance with their judgment on such
other business as may be properly presented to the meeting and any
adjournment or postponement thereof.
RED, WHITE AND BLUE Proxy Cards should be signed, dated and returned in
the postage-paid envelope provided. Execution of the enclosed RED, WHITE AND
BLUE Proxy Card will not affect a shareholder's right to attend the Annual
Meeting and vote in person. A shareholder who has given a proxy may revoke it
at any time before such proxy is voted either by a later dated proxy or by
voting in person at the Annual Meeting. Attendance at the Annual Meeting will
not in and of itself constitute a revocation. If you were a shareholder of
record on the Record Date, you will retain the voting rights in connection
with the Annual Meeting even if you sell or sold such Shares after the Record
Date. Accordingly, it is important that you vote the Shares held by you on
the Record Date or grant a proxy to vote such Shares whether or not you still
own such Shares.
Shareholders cannot select trustees from among those proposed by the
Company and the Committee. Therefore, if you wish to support the Committee's
nominees, your last dated properly executed proxy must be a RED, WHITE AND
BLUE Proxy Card.
PROXY SOLICITATION; EXPENSES
Proxies may be solicited by members of the Committee and their nominees by
mail, telephone, telecopier and personal solicitation. Regular employees of
Mr. Osborne of all classes may be used to solicit proxies, and when used,
will not receive additional compensation therefor. Banks, brokerage houses
and other custodians, nominees and fiduciaries will be requested to forward
the soliciting material of the Committee to their customers for whom they
hold shares, and the Committee will reimburse them for their reasonable
out-of-pocket expenses.
The Committee has retained Beacon Hill Partners, 90 Broad Street, New
York, New York, 10004, to assist in the solicitation of proxies. The
Committee has agreed to pay Beacon Hill Partners a fee of $25,000 and to
reimburse it for its reasonable out-of-pocket expenses. Approximately 25
people will be used by Beacon Hill Partners in its solicitation efforts. The
entire expense of preparing, assembling, printing and mailing this Proxy
Statement and related materials and the cost of soliciting proxies for the
nominees proposed by the Committee will be borne by the Committee.
The Committee anticipates that its total expenditures relating to the
solicitation will be approximately $225,000 (excluding costs represented by
salaries and wages of regular employees of Mr. Osborne); total expenditures
to date have been less than $30,000. All expenses of the solicitation will be
borne by the members of the Committee in a manner to be determined by them.
The Committee will seek reimbursement from the Company for those expenses and
does not intend to seek shareholder approval for such reimbursement at a
subsequent meeting unless such approval is required under Ohio law.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
In order to be included in the Company proxy statement for the 1996 Annual
Meeting, any shareholder proposal to be presented at the 1996 Annual Meeting
must be received in the Office of the Secretary of the Company by the date
specified in the Company proxy statement for this year's Annual Meeting.
OTHER MATTERS
The Committee is not aware of any other matters scheduled to be presented
at the Annual Meeting. If any other matters properly come before the meeting,
the persons named in the enclosed RED, WHITE AND BLUE Proxy Card will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their judgment.
Sincerely,
March 13, 1995
THE COMMITTEE TO UNLOCK THE
VALUE OF FIRST UNION REAL
ESTATE INVESTMENTS
8
<PAGE>
<PAGE>
APPENDIX A
On the date hereof, Richard M. Osborne, as the sole managing member of the
Fund, is the beneficial owner of 1,690,500 Shares, representing approximately
9.3% of the 18,262,725 Shares outstanding according to the most recently
available filing by the Company with the Securities and Exchange Commission.
Steven A. Calabrese is the beneficial owner of 17,000 Shares, representing
less than 0.1% of the Shares outstanding. R-C Enterprises, a general
partnership ("R-C Enterprises"), of which Mr. Calabrese is managing partner,
is a member of the Fund.
Under the terms of the Operating Agreement of the Fund, Mr. Osborne as the
sole managing member, manages all day-to-day operations involving, and makes
all decisions concerning, the business and affairs of the Fund. Other than
Mr. Osborne, the members have no authority or power to bind the Fund, vote
securities owned by the Fund, make investment decisions for the Fund or
dispose of any securities held by the Fund. Each member has agreed, under the
terms of the Operating Agreement, to indemnify the Fund for any costs or
damages incurred by the Fund as a result of the exercise of any unauthorized
authority by each such member.
Under Rule 13d-3 promulgated by the Securities and Exchange Commission, "a
beneficial owner of a security includes any person, who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares:
(1) Voting power which includes the power, to vote, or to direct the
voting of, such security, and/or
(2) Investment power which includes the power to dispose, or to direct
the disposition of, such security."
Because the members of the Fund, other than Mr. Osborne, lack any of the
requisite powers of beneficial ownership, none of them, other than Mr.
Osborne, are beneficial owners of the Shares solely because of their
investment as members in the Fund.
Mr. Osborne believes that as of the Record Date, the members of the Fund,
or their affiliates (including Mr. Calabrese), were, through purchases of
Stock other than by the Fund, beneficial owners of 81,000 Shares, or less
than 0.5% of the outstanding Shares. Neither the Fund nor Mr. Osborne has any
interest, beneficial or otherwise, in these 81,000 Shares.
The Operating Agreement of the Fund contains a provision that prohibits
any of the members or their affiliates from selling, selling short or
covering short sales in any securities in which the Fund has a long position.
In addition to any other remedies available under law, the penalties under
the Operating Agreement for violating this provision are (1) disgorgement of
any profits to the Fund, (2) payment of any losses, claims, damages,
liabilities, cost and expenses (including attorneys' fees) of the Fund, and
(3) if Mr. Osborne determines in his sole discretion, expulsion of the member
from the Fund. The foregoing provision was included in the Operating
Agreement to avoid any conflict of interest among the members by insuring
that the Fund could not be damaged by an adverse act of any one member.
The table below sets forth all Shares purchased by Mr. Osborne within the
past two years, the dates on which such purchases were made and the amount of
such purchases. The 20,000 Shares purchased on August 11, 1994 and 10,000 of
the Shares purchased on December 28, 1994 were purchased by the Profit
Sharing Trust of OsAir. All 906,000 Shares set forth in the table below,
including those Shares purchased by the Profit Sharing Trust, were
contributed to the Fund by Mr. Osborne on January 13, 1995. Other than this
transfer to the Fund on January 13, 1995, Mr. Osborne sold no shares during
the two year period.
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES
- ----------------- ----------------
<S> <C>
August 2, 1994 35,000
August 3, 1994 27,500
August 4, 1994 5,100
August 5, 1994 25,800
August 8, 1994 1,600
</TABLE>
A-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES
- ----------------- ----------------
<S> <C>
August 9, 1994 5,000
August 11, 1994 20,000
October 3, 1994 4,000
October 4, 1994 38,000
October 5, 1994 8,900
October 6, 1994 15,500
October 7, 1994 7,700
October 10, 1994 5,200
October 11, 1994 22,800
October 12, 1994 21,700
October 13, 1994 44,300
October 14, 1994 20,000
October 17, 1994 12,000
October 20, 1994 700
October 21, 1994 16,000
October 24, 1994 9,900
October 25, 1994 10,900
October 26, 1994 5,500
October 27, 1994 25,400
October 28, 1994 17,000
October 31, 1994 9,800
November 1, 1994 4,700
November 16, 1994 13,700
November 17, 1994 5,800
November 18, 1994 14,000
November 21, 1994 13,700
November 22, 1994 12,000
November 23, 1994 40,800
December 6, 1994 18,200
December 7, 1994 20,100
December 8, 1994 31,000
December 9, 1994 102,000
December 14, 1994 17,400
December 16, 1994 22,300
December 19, 1994 20,000
December 21, 1994 17,800
December 22, 1994 20,600
December 23, 1994 24,900
December 27, 1994 2,500
December 28, 1994 14,200
December 29, 1994 22,000
December 30, 1994 20,000
January 4, 1995 4,500
January 5, 1995 5,800
January 6, 1995 5,500
January 10, 1995 17,200
</TABLE>
A-2
<PAGE>
<PAGE>
The table below sets forth all Shares purchased by the Fund, the dates on
which such purchases were made and the amount of such purchases, other than
the 906,000 Shares contributed to the Fund by Mr. Osborne on January 13,
1995. The Shares owned by the Fund are held in two margin accounts. The
Shares owned prior to the purchase of 725,000 Shares on March 10, 1995 are
held in an account in which there are also securities other than the Shares.
The margin balance of that account as of February 27, 1995, was approximately
$2.8 million. The 725,000 Shares are held in a margin account, and as of
March 10, 1995, the margin balance with respect to such Shares, was
approximately $2.9 million. The Fund sold no Shares during the two year
period.
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES
- ----------------- ----------------
<S> <C>
January 16, 1995 9,000
February 2, 1995 3,000
February 3, 1995 12,800
February 7, 1995 9,300
February 8, 1995 10,000
February 9, 1995 4,300
February 10, 1995 11,100
March 10, 1995 725,000
</TABLE>
The table below sets forth all Shares purchased by Mr. Calabrese, the
dates on which such purchases were made and the amount of such purchases. The
Shares purchased on January 17, 1995, were purchased by Mr. Calabrese and his
wife, Nancy Calabrese, and were held in a margin account, in which there were
also securities other than the Shares. The margin balance of that account as
of February 27, 1995 was approximately $60,000. Mr. Calabrese sold no Shares
during the two year period. Mrs. Calabrese's address is 861 West Hill Drive,
Cleveland, Ohio 44040.
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES
- ---------------- ----------------
<S> <C>
January 17, 1995 13,200
January 19, 1995 3,800
</TABLE>
After the Record Date, the Shares purchased on January 17, 1995 were
transferred to R-C Enterprises. The transfer took place on or about March 9,
1995.
Except as otherwise set forth in this Appendix A, neither the Committee or
any of its members or any "associate" of any of the foregoing persons or any
other person who may be deemed a "participant" in the Proxy Solicitation is
the beneficial or record owner of any Shares. Except as otherwise set forth
in this Appendix A, neither the Committee or any of its members or any
"associate" of any of the foregoing persons or any other person who may be
deemed a "participant" in the Proxy Solicitation has purchased or sold any
Shares within the past two years, borrowed any funds for the purpose of
acquiring or holding any Shares or is or was within the past year a party to
any contract or arrangement or understanding with any person with respect to
any Shares. There has not been any transaction since the beginning of the
Company's last fiscal year and there is not currently any proposed
transaction to which the Company is a party, in which the Committee or any of
its members or any "associate" or immediate family member of any of the
foregoing persons or any other person who may be deemed a "participant" in
the Proxy Solicitation had or will have a direct material interest.
A-3
<PAGE>
<PAGE>
IMPORTANT
- -------------------------------------------------------------------------------
Your vote is important. No matter how many or how few First Union shares
you own, please vote FOR the Committee's nominees by signing, dating and
mailing the enclosed RED, WHITE AND BLUE Proxy Card today. The Committee
urges you NOT to return any proxy cards sent to you by the Board of Trustees
of First Union.
If you have already returned a Board of Trustees' proxy card before
receiving this Proxy Statement, you have every right to change your vote by
signing and returning the enclosed RED, WHITE AND BLUE Proxy Card. Only your
latest dated properly executed proxy will count at the Annual Meeting.
If you own your First Union Shares in the name of a brokerage firm, your
broker cannot vote such Shares unless he receives your specific instructions.
Please sign, date and return the enclosed RED, WHITE AND BLUE Proxy Card in
the postage-paid envelope that has been provided.
If you have any questions about how to vote your First Union shares,
please call our proxy solicitor:
Beacon Hill Partners
90 Broad Street
New York, NY 10004
Telephone: 1-800-755-5001
- -------------------------------------------------------------------------------
<PAGE>
<PAGE>
PROXY
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
1995 ANNUAL MEETING OF SHAREHOLDERS
Unless otherwise specified, this proxy will be voted FOR Item 1 and ABSTAIN
on Item 2 and will be voted in the discretion of the proxies on such other
matters as may properly come before the meeting or any adjournment(s) or
postponement(s) thereof.
1. Election of Trustees FOR [ ] WITHHOLD [ ]
Committee nominees are:
Steven A. Calabrese, Richard M. Osborne, and James R. Webb
(Authority to vote for any nominee(s) may be withheld by lining through or
otherwise striking out the name of such nominee(s).)
THE COMMITTEE RECOMMENDS A VOTE FOR ITEM 1.
2. Shareholder Proposal Concerning Tabulation of Proxies
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Proxy revokes all prior proxies and voting instructions.
(Continued and to be signed and dated on the reverse side)
<PAGE>
<PAGE>
SOLICITED ON BEHALF OF THE COMMITTEE TO UNLOCK THE VALUE OF FIRST UNION REAL
ESTATE INVESTMENTS PROXY SOLICITED IN OPPOSITION TO THE BOARD OF TRUSTEES
The undersigned hereby appoints Steven A. Calabrese, Richard M. Osborne and
James R. Webb, and each of them, with full power of substitution, as proxies
for the undersigned, to represent and vote, as designated on the reverse side,
all shares of beneficial interest of First Union to which the undersigned is
entitled to vote at the 1995 Annual Meeting of Shareholders of First Union
scheduled to be held on April 11, 1995, and at any adjournment(s) or
postponement(s) thereof, and revokes all prior proxies with respect to the
matters covered by this proxy.
_____________________________
Signature
_____________________________
Signature
_____________________________
Title or Authority
Dated:________________ , 1995
(Please sign exactly as your name appears on share certificates, indicating
title or representation capacity, where applicable)
PLEASE SIGN, DATE AND MAIL YOUR PROXY TODAY.
If you have any questions on voting, please call: Beacon Hill Partners at
1-800-755-5001.
<PAGE>
<PAGE>
THE COMMITTEE TO UNLOCK THE VALUE OF
FIRST UNION REAL ESTATE INVESTMENTS
DEAR FELLOW FIRST UNION REAL ESTATE INVESTMENTS SHAREHOLDER:
HOW LONG CAN YOU AFFORD TO WAIT?
We believe that new direction is needed at First Union Real Estate
Investments, AND NEEDED NOW! In Mr. Mastandrea's letter to shareholders last
year dated March 25, 1994, he speaks of the company's "re-birth" and striving
to grow and enhance shareholder value. WHAT HAPPENED? The Board paints a rosy
picture as the shareholders suffer from declining stock values and earnings.
PERFORMANCE SPEAKS LOUDER THAN PREDICTIONS.
OUR PLEDGE TO SHAREHOLDERS
[ ] We will tell the truth to the shareholders, something First Union
management cannot or will not do
[ ] We will reduce costs and eliminate the senseless waste of funds on
consultants, lavish offices and high priced lawyers
[ ] We will hire a CEO, responsive to shareholders, who will aggressively
manage the Company enabling it to provide returns to shareholders that they
have every right to expect--BUT SO FAR HAVE NOT RECEIVED.
[ ] If present management has not squandered the $29 million plus in gains
received from the mall sales, we will work to distribute the gain of over
$1.60 per share to shareholders
[ ] We will commence an urgent review of all the Company's real estate
investments with a view toward improving the performance of the portfolio
[ ] We will push our goal to increase the dividends to shareholders on an on
going basis
[ ] We will eliminate those things that protect management at the expense of
shareholder value such as stock option and restricted stock award plans, the
Rights Agreement commonly known as a poison pill, the restriction on any
person owning more than 9.8% of the shares and the staggered board
[ ] We will implement a continuous, effective shareholder relations program
to keep shareholders informed about the Company
[ ] We will maintain REIT status
[ ] We will evaluate the possibility of enhancing shareholder value by
merging the Company with a larger, well run REIT.
<PAGE>
<PAGE>
FIRST UNION'S FUTURE IS AT STAKE
The current Board will be asking you for your support. Let's review what
they have delivered before listening to what they are promising.
[ ] The stock price, which once exceeded $27 per share, has steadily declined
for more than eight years
[ ] 1994 earnings are less than one half of 1993 earnings
[ ] General and Administrative expenses jumped 82% in 1994 from 1993
[ ] The dividend yield is far below that of other comparable REITs
[ ] First Union recently sold its stake in two regional shopping malls for a
sale price equivalent to approximately $58 PER SQUARE FOOT. Immediately
following this transaction, Mastandrea entered into an agreement on behalf of
the Company to purchase a shopping center, near his hometown of Chicago, for
a price equivalent to approximately $120 PER SQUARE FOOT. We believe this
price is too rich and not a prudent way to spend shareholder money. In
addition, we have demanded for the Company to disclose the sellers and all
the agents involved in the transaction and whether any of them had a direct
or indirect affiliation with the Trust or any of its employees. To date, the
Company has refused to reveal this information.
HOW MUCH IS TOO MUCH?
The Company's callous disregard for shareholders is painfully apparent in
Mr. Mastandrea's salary and bonuses. During 1994, Mr. Mastandrea received a
salary of $250,000, PLUS a bonus of $110,610 (25% more than 1993), PLUS other
compensation of $9,151, PLUS a restricted stock award valued at $717,188,
PLUS other compensation totaling $35,630, which includes a $2.5 million
dollar life insurance policy, PLUS a golden parachute entitling him to three
years salary, bonus and benefits upon certain changes-in-control, PLUS stock
options to purchase 162,500 shares which have a potential estimated market
value of $1,407,861. WE PROMISE YOU, ALL THIS STOPS IF WE ARE ELECTED.
TO MAKE MATTERS WORSE, hidden in Mastandrea's employment contract is an
agreement that may force the Company to exchange real estate property owned
by Mastandrea near his hometown of Chicago for shares in First Union. We can
only hope that the $120 PRICE PER SQUARE FOOT that the Company agreed to pay
for a nearby property won't apply to these transactions.
Mastandrea is not the only executive enjoying the gravy train, Gregory
Bruhn, our Chief Financial Officer, has stepped up to the trough as well. For
eight-and-a-half months work during 1994, Bruhn received a salary of
$111,372, PLUS a bonus of $46,456, PLUS a restricted stock award valued at
$127,500, PLUS stock options to purchase 45,000 shares which have a potential
estimated market value of $439,654, PLUS--THE COMPANY PAID $57,219 FOR BRUHN
TO RELOCATE.
<PAGE>
<PAGE>
AND IF THAT'S NOT BAD ENOUGH!
Not to waste too much time attacking the past, we thought all stockholders
should know the following: The Company is currently paying Donald S.
Schofield, our past CEO, a consulting salary of $250,000 a year. But wait--it
gets better--the Company has also agreed to pay Schofield $12,500 a month in
case he becomes disabled. And if he dies, the Company has agreed to pay his
heirs $8,333 per month for 30 months. DID THE STOCK PRICE INCREASE SO MUCH
UNDER SCHOFIELD THAT THIS IS JUSTIFIED?
WHERE HAVE ALL THE STOCK OPTIONS GONE ?
To Mastandrea, where else. Last year when the company adopted a Long Term
Incentive Performance Plan, Mr. Mastandrea stated that the plan is "designed
to more closely align the interest of the management team with those of our
shareholders." According to the Company's proxy statement, Mastandrea hoarded
53.3% of all grants last year. So much for the little people.
THEY DON'T EVEN BELIEVE IN THE COMPANY
Can you believe all 13 Trustees and executive officers as a group only own
82,848 shares, or less than 0.5% of the outstanding shares? They also have
options and restricted stock in the amount of 267,091 shares. You can see why
the current board does not act like shareholders because they really aren't.
IF THEY ARE SO CONFIDENT IN FIRST UNION'S FUTURE, DON'T YOU THINK THEY'D PUT
THEIR OWN MONEY ON THE LINE AND BUY SOME SHARES?
Can anything tell you more about a company then the ownership of its
shares by management? We already own 1,707,500 shares. In addition, we will
require all Company executives to purchase shares of the Company. THE ONLY
WAY TO ACT LIKE A SHAREHOLDER IS TO BE A SHAREHOLDER!
THE FUTURE OF FIRST UNION IS IN YOUR VOTE
Your vote is important. No matter how many or how few shares you own,
please vote for the Committee's Nominees by:
SIGNING, DATING and MAILING the enclosed RED, WHITE and BLUE PROXY CARD
TODAY in the postage-paid envelope provided.
THE COMMITTEE URGES YOU NOT TO RETURN ANY WHITE PROXY CARDS SENT TO YOU BY
THE INCUMBENT BOARD OF TRUSTEES. If you own your shares in the name of a
brokerage firm, your broker cannot vote your shares unless he receives your
specific instructions. Please sign, date and return the enclosed RED, WHITE
and BLUE proxy card in the return envelope that has been provided.
If you have any questions about how to vote your shares, please call our
proxy solicitor at:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, NY 10004
800-755-5001
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
No matter how many or how few shares you own, please vote for the
Committee's Nominees by:
SIGNING, DATING and MAILING the enclosed RED, WHITE and BLUE proxy card
TODAY in the postage paid envelope provided.
THE COMMITTEE URGES YOU NOT TO RETURN ANY WHITE PROXY CARDS SENT TO YOU
BY THE INCUMBENT BOARD OF TRUSTEES. If you own your shares in the name of a
brokerage firm, your broker cannot vote your shares unless he receives your
specific instructions. Please sign, date and return the enclosed RED, WHITE
and BLUE proxy card in the return envelope that has been provided.
If you have any questions about how to vote your shares, please call our
proxy solicitor at:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, NY 10004
800-755-5001
- -------------------------------------------------------------------------------
