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* * * * *
Jim,
Just a couple of comments on your article.
1) Management has also asserted that when considering EOP's NAV, and the cash
stock blend, that it believes the deal to be NAV neutral to its shareholders. I
agree to disagree with you on certain aspects of the deal, but I expect that you
will at least acknowledge what we have asserted with regard to the our believe
of the valuation of the consideration from an NAV perspective.
2) To imply that we could get 144 UPREIT unitholders and seven arms length
development partners to approve a liquidation is surmountable, without further
discussion is an issue. I would be interested in reading further discussion on
how you believe these issues would be surmounted considering the small band of
value we are working with here.
3) Your comment on our option to pay Bill Wilson's (or any UPREIT unitholder)
taxes if we were to breach a representation and sell a contributed asset is
erroneous. We have no option to sell such assets, and the damages would be
decided in litigation. While our paying his taxes is one likely outcome, there
are other damages which the UPREIT unitholders could claim as well. To imply
that we have such an option, I believe is misleading and not based on fact.
4) I believe you should state ( when describing the downturn in pricing
conditions in #3) that a 5% downturn in the value of our assets, a very low
discount when assuming a fire sale, would cause a $1.60 reduction in NAV. Once
again we can agree to
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disagree, but at least quantify how small the difference is. As a matter of
fact, when using your calculations, it would take a reduction in asset price of
only 2.4% to make up the differential between your liquidation value and your
EOP value of $17 (which gives us no credit for EOP's NAV). I just had a
consultant from Ernst and Young who recently advised a client on a liquidation
strategy in my office. He believed fair assumptions would be a 20% discount to
current market value and a two year time frame to sell, without any partner
conflicts.
5) Your comment on NAV dilution for EOP seems flawed, if our NAV is higher by
the same percentage as EOPs based on your published commentary, shouldn't the
NAV dilution be the same? Are you assuming your calculated NAV for us, and the
derived NAV based on our interpretation of our own NAV for them? It seems you
just jump back and forth between the valuations as it fits your needs, without
quantifying conclusions.
6) You suggest in the next to last paragraph that the deal is bad for CPP's
shareholders, and in the last paragraph say that the advantages of liquidation
would be small and subtle?
Thanks for your consideration of these matters
Kevin
