UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 24)
First Union Real Estate Equity and Mortgage Investments
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(Name of Issuer)
Shares of Beneficial Interest, $1.00 par value
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(Title of Class of Securities)
337400105
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(CUSIP Number)
Stephen Fraidin, P.C.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
(212) 859-8140
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
March 31, 1998
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(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 |_|. (A
fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
SEC1746(12-91)
SCHEDULE 13D
CUSIP No. 337400105 Page 2 of 6 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners, 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
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York, U.S.A.
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,601,951 Shares
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 2,601,951 Shares
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,601,951
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.24%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
SCHEDULE 13D
CUSIP No. 337400105 Page 3 of 6 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners 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
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York, U.S.A.
NUMBER OF 7 SOLE VOTING POWER
SHARES 30,449 Shares
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 30,449 Shares
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,449 Shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.10%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
SCHEDULE 13D
CUSIP No. 337400105 Page 4 of 6 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham International Advisors, L.L.C.
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
NUMBER OF 7 SOLE VOTING POWER
SHARES 287,900
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 287,900
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
287,900
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.91%
14 TYPE OF REPORTING PERSON*
00; IA
*SEE INSTRUCTIONS
This Amendment No. 24 amends and supplements the Statement on Schedule
13D (the "Schedule 13D") relating to the shares of Beneficial Interest, par
value $1.00 per share ("Shares"), of First Union Real Estate Equity and
Mortgage Investments, an Ohio business trust (the "Company") previously
filed by Gotham Partners, L.P. ("Gotham"), Gotham Partners II, L.P., both
New York limited partnerships, and Gotham International Advisors, L.L.C., a
Delaware limited liability company. Capitalized terms used and not defined
in this Amendment have the meanings set forth in the Schedule 13D.
Except as specifically provided herein, this Amendment does not modify
any of the information previously reported on the Schedule 13D.
Item 4 is hereby amended to add the following information:
"Item 4. Purpose of the Transaction
On March 31, 1998, counsel for Gotham and Gotham II filed a
Defendants' and Counterclaimants' Motion for Preliminary Injunction in the
Court of Common Pleas, Cuyahoga County, Ohio. A copy of such Motion is
attached as Exhibit 46 hereto and incorporated herein by this reference.
On March 31, 1998, Judge Timothy J. McGinty of the Court of Common
Pleas, Cuyahoga County, Ohio, ordered that the Company hold a Special
Meeting of the Beneficiaries of the Company in lieu of the 1998 Annual
Meeting of the Beneficiaries of the Company, with the change in the
characterization of the meeting being without prejudice to Gotham's
proposal and nominations. The Special Meeting will be held on May 19, 1998,
and the record date for such meeting will be April 28, 1998. The Court also
ordered that the Company (i) not provide any new employee benefits or
compensation outside the ordinary course of business and (ii) not transfer
any assets of the Company other than for fair value. Finally, the Court
ordered the Company to distribute Gotham's proxy materials in accordance
with the Federal proxy rules."
Item 7 is hereby amended to add the following information:
"Item 7. Material to be Filed as Exhibits.
46. Defendant's and Counterclaimants' Motion for Preliminary
Injunction filed in the Court of Common Pleas, Cuyahoga County, Ohio on
March 31, 1998."
After reasonable inquiry and to the best of ou knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
April 1, 1998
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
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
-------------------------------
David P. Berkowitz
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
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
-------------------------------
David P. Berkowitz
President
GOTHAM INTERNATIONAL ADVISORS, L.L.C.
By: /s/ William A. Ackman
-------------------------------------
William A. Ackman
Senior Managing Member
By: /s/ David P. Berkowitz
-------------------------------------
David P. Berkowitz
Senior Managing Member
EXHIBIT 46
IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
FIRST UNION REAL ESTATE ) CASE NO. 347063
EQUITY AND MORTGAGE )
INVESTMENTS, )
)
Plaintiff, ) JUDGE TIMOTHY J. McGINTY
)
v. ) DEFENDANTS' AND
) COUNTERCLAIMANTS' MOTION
GOTHAM PARTNERS, L.P., et al., ) FOR PRELIMINARY INJUNCTION
)
Defendants and )
Counterclaimants. )
Last Friday, this Court ruled that all shareholders of First Union
Real Estate Equity and Mortgage Investments ("First Union" or the "Trust")
"should have a fair opportunity to decide the direction of their
corporation at the April 14, 1998 annual meeting." Judgment Entry of March
27, 1998 ("Judgment") at 13. Unchastened by the Court's ruling that First
Union management has been acting to entrench itself rather than to protect
First Union and its REIT status, First Union is continuing on its course of
ignoring its own Declaration of Trust ("Declaration") and impeding its
shareholders' electoral rights. First Union's reaction to the Judgment was
swift and shocking. It immediately issued a press release, in which Chief
Executive Officer James Mastandrea implied that the Judgment was a nullity,
stated that continued litigation was necessary to reach a "real decision"
on the issues in the case, and stated that all the issues determined by
this Court would "have to be reconsidered in the pending federal case."
Exhibit A.
In the same release, First Union announced that it was purporting to
delay the April 14 meeting and to reset the record date for determination
of shareholders entitled to vote at that meeting. Consistent with First
Union's desire to sow confusion and disarray in the electoral process, it
failed to disclose even the meeting and record dates as reset.
These attempts at delay are lawless. First, there is no provision in
First Union's Declaration or By-Laws that authorizes such a postponement.
The Declaration provides: "Annual meetings of the Beneficiaries shall be
held at 2:00 p.m. Eastern Standard time on the second Tuesday of the fourth
month following the end of each fiscal year . . . ." Decl. ss. 7.1
(emphasis added). Under this provision, the annual meeting for 1998 must be
held on April 14.(FN1) See State ex Carpenter v. Kreutzer, 100 Ohio St.
246, 126 N.E. 54 (1919) Second, this action was undertaken with the
improper purpose of frustrating the desire of Gotham Partners, L.P. and
Gotham Partners, II, L.P. (together, "Gotham") and other First Union
shareholders to vote to change the leadership of First Union. Thus, the
Court should issue an order preliminarily restraining First Union and those
acting in concert with it, including its Trustees and officers, from taking
any steps to delay the conduct of the annual meeting on April 14 or to
change the record date for determining shareholders entitled to vote at
that meeting.
- ---------------------------
[FN]
1 To determine those beneficiaries entitled to vote at the annual
meeting, the Trustees may "fix a record date, which ... shall not be
more than sixty days preceding the date of the meeting of the
Beneficiaries...." Decl. ss. 7.4. On February 18, First Union
disclosed in its preliminary proxy materials filed with the Securities
and Exchange Commission that pursuant to this section it had set the
record date as February 13, 1998. The Declaration makes no provision
for altering the record date once set.
</FN>
In addition, Gotham seeks preliminary relief to prevent First Union
and those acting in concert with it, including its Trustees and officers,
from taking any action outside the ordinary course of business pending the
conclusion of the annual meeting and the seating of Trustees following that
meeting. As the Court is aware, over at least the last two weeks management
and the Trustees have, without notice to or the approval of First Union's
shareholders, repeatedly acted in an attempt to confer millions of dollars
of benefits upon First Union management and employees with the Trust
receiving no benefit in return. On or about March 19, the Trustees
purported to amend Mastandrea's employment agreement such that, instead of
his compensation being reduced to comply with Internal Revenue Code
limitations on excessive executive compensation, his compensation is
increased to pay him for taxes that he may owe for receipt of excessive
compensation, which could cost the Trust millions of dollars without any
corresponding benefit. These actions have been undertaken not to benefit
First Union or its shareholders, but to bestow undeserved economic
windfalls upon management and to "scorch the earth," in a reckless effort
to inflict economic damage to the value of First Union and thereby to
dissuade Gotham and other First Union shareholders from voting to change
the size and composition of the Board of Trustees.
To prevent further damage to the Trust and the electoral process, the
Court should issue an order preliminarily enjoining First Union and those
acting in concert with it, including its Trustees and officers, from taking
or authorizing further action outside the ordinary course of business
pending the completion of the annual meeting and the seating of new
Trustees following that meeting. See Joseph E. Seagram & Sons, Inc. v.
Abrams, 510 F. Supp. 860, 861 (S.D.N.Y. 1981) ("It is inconceivable that an
alleged flourishing enterprise has authorized its board to subject the
assets and charter of the company to a scorched earth policy to be
accomplished in the name of the exercise of business judgment but in fact .
. . merely to thwart a change . . . which may end the tenure of the present
directors and key officers of the company.") (entering temporary
restraining order against, inter alia, actions outside the ordinary course
of business) (opinion and order attached as Exhibit B). In addition, the
Court should enjoin First Union and those acting in concert with it,
including its Trustees and officers, from taking any action to effectuate
any decisions made by the Board or any committee of the Board since January
8, 1998 that have the purpose or effect of bestowing any benefits upon any
First Union Trustee or any officer or employee, including (without
limitation) the First Amendment to Employment Agreement Between First Union
Real Estate Equity and Mortgage Investments and James C. Mastandrea, dated
on or about March 19, 1998, and any policies, practices or procedures acted
on by the Trustees on or about March 23, 1998 concerning employee severance
and accelerated vesting of options and restricted shares.
Finally, the Court should appoint as a receiver a representative of an
independent investment bank or accounting firm to observe and monitor First
Union's activities pending the outcome of the annual meeting and the
seating of Trustees following that meeting. See Granada Investments, Inc.
v. DWG Corp., 823 F. Supp. 448, 459-60 (N.D. Ohio 1993) (under Ohio law,
courts have broad equitable powers to appoint receivers to remedy
mismanagement and preserve assets) (citing Phoenix Portland Cement Co. v.
Shadrach, 18 Ohio App. 264, 267-69 (Franklin County 1924)).
OF COUNSEL: /s/ David C. Weiner
-----------------------------------
David C. Weiner (0013351)
HAHN LOESER & PARKS LLP Michael J. Garvin (0025394)
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2301
(216) 621-0150
- and -
OF COUNSEL
FRIED, FRANK, HARRIS, SHRIVER /s/ John Sullivan
& JACOBSON -----------------------------------
John Sullivan
24th Floor
One New York Plaza
New York, New York 10004-1980
(212) 859-8000
Attorneys for Defendants and
Counterclaim Plaintiffs
Dated March 30, 1998
Cleveland, Ohio
CERTIFICATE OF SERVICE
----------------------
A copy of the foregoing Motion for Preliminary Injunction was sent by
messenger to Frances Floriano Goins, Squire, Sanders & Dempsey L.L.P., 4900
Key Tower, 127 Public Square, Cleveland, Ohio 44114-1304, attorneys for
Plaintiff and Counterclaim Defendant, this 30th day of March, 1998.
/s/ David C. Weiner
-----------------------------------
One of the attorneys for Defendants
and Counterclaim Plaintiffs
