<PAGE> 1
(AMERICAN INDUSTRIAL PROPERTIES REIT HEADING)
April 4, 1994
Dear Fellow Shareholder:
A company called American Holdings, Inc. has announced its intention to
wage a proxy contest in opposition of the proposed merger of American Industrial
Properties REIT (the "Trust") into a wholly-owned subsidiary of the Trust.
Your Trust Managers believe that Paul Koether, the Chairman of the Board
and President of American Holdings, and his wife, Natalie Koether, legal counsel
to American Holdings, are the moving force behind this proxy fight. We think
that there are a number of facts you should know about the Koethers and their
affiliated companies.
WHAT YOU SHOULD KNOW ABOUT THE KOETHERS
The Koethers and associates of theirs have in the past:
- accumulated a stake in public companies and threatened to seek
control, only to try later to sell the stake back to the issuer at
above-market prices;
- been called by several courts "GREENMAILERS;" one court even went
so far as to say that a partnership formed and controlled by the
Koethers "dealt in many forms of SHAREHOLDER BLACKMAIL in attempts
to gain control of corporations or be bought out at a substantial
premium;" and
- made what the Delaware Court of Chancery characterized as a
"THREAT" to block a proposed merger of a public company, and, when
the company's Board refused to be intimidated into buying the
Koethers' holdings for a 90% premium, brought a lawsuit (which was
thrown out by the Court) to stop the merger.
ASK YOURSELF, WHOSE INTEREST ARE THE KOETHERS SEEKING TO SERVE -- YOURS, OR
THEIR OWN?
<PAGE> 2
THE TRUST'S PLANS FOR GROWTH
WE BELIEVE THAT THE PROPOSED MERGER WILL ALLOW US TO BUILD ON OUR STRATEGY
OF REPOSITIONING THE TRUST TO PURSUE OPPORTUNITIES AVAILABLE IN TODAY'S REAL
ESTATE AND CAPITAL MARKETS. Since last December, when we announced the decision
to use our available cash resources to defease the Trust's outstanding zero
coupon notes, we have been hard at work to arrange new financing to complete the
defeasance and bring growth capital into the Trust. We believe we are making
good progress in this direction, and the proposed merger is in furtherance of
that goal.
Your Trust Managers believe that the Trust's plan to convert from being
organized in Texas to a Maryland corporation, American Industrial Properties,
REIT (the "Company"), will:
- allow the Trust to take advantage of the many benefits associated
with the corporate form of organization;
- provide an improved capital structure through the increase in
authorized shares, which is expected to provide the Trust with the
flexibility to raise additional capital through subsequent public
offerings;
- allow the Company to use the increased shares to more easily
negotiate and structure future acquisitions of industrial
properties; and
- eliminate the risk of property sales required by Texas law that are
inconsistent with our growth strategy and could be detrimental to
shareholder interests.
In addition, an exchange ratio of one share of the new company for each
five shares of the Trust is intended to increase the trading price of the
shares, which may attract additional investors with minimum trading
requirements. Because the proposed merger does not include any third parties,
but is simply a merger between the Trust and its wholly-owned subsidiary, each
shareholders' percentage ownership in the new Company will be the same as that
in the Trust (except for fractional shares).
2
<PAGE> 3
We believe that each element of the proposed merger, including the
conversion of the Trust to a Maryland corporation, is consistent with widely
accepted practices in today's real estate investment trust industry and is
intended to enhance shareholder value. A substantial number of REITs that made
initial public offerings during 1993 were organized in Maryland, which we
believe provides a more established body of law for real estate investment
trusts than does the Texas REIT Act.
Your Trust Managers believe that there are many opportunities in today's
markets to acquire industrial distribution properties at attractive returns. WE
BELIEVE THAT THE TRUST'S FUTURE GROWTH DEPENDS DIRECTLY ON THE CONSUMMATION OF
THE PROPOSED MERGER AND THE INCREASE IN AUTHORIZED SHARES. In our opinion, the
real issue before you is whether your Trust will be positioned to realize its
operating and growth potential, or risk stagnation in a growth environment. WE
ENCOURAGE YOU TO CONSULT YOUR BROKER OR OTHER FINANCIAL ADVISOR TO DISCUSS THE
BENEFITS OF THE PROPOSED MERGER.
After the consummation of the merger, the Company intends to continue to
qualify as a real estate investment trust for federal income tax purposes, and
has applied for the continuation of its listing on the New York Stock Exchange
under the symbol "IND."
WE URGE YOU TO VOTE FOR THE PROPOSED MERGER.
Please promptly sign, date and return the enclosed WHITE PROXY CARD to
vote for the merger. Be sure to vote only on the WHITE PROXY CARD.
Thank you for your continued interest and support.
On behalf of your Trust Managers,
/s/ Charles W. Wolcott
Charles W. Wolcott
President and CEO
3
<PAGE> 4
IMPORTANT
1. Be sure to vote only on the WHITE PROXY CARD. WE URGE YOU NOT TO SIGN
ANY BLUE PROXY CARDS YOU RECEIVE FROM AMERICAN HOLDINGS OR ITS ASSOCIATES.
2. If your shares are held in "street name," only your broker or banker can vote
your shares and only upon receipt of your specific instructions. Please
return the WHITE PROXY CARD in the envelope provided or contact the person
responsible for your account and instruct that individual to vote a WHITE
PROXY CARD on your behalf today.
3. If you have executed American Holdings blue proxy card, you have every right
to change your vote by signing, dating and returning the enclosed WHITE PROXY
CARD. Any proxy may be revoked by a later-dated proxy. ONLY YOUR LATEST-DATED
PROXY WILL COUNT AT THE SPECIAL MEETING OF SHAREHOLDERS.
4. If you have any questions or need assistance in voting your shares, please
feel free to contact me, Charles Wolcott, at our toll-free number,
1-800-550-6053, or contact D. F. King & Co., Inc. at 1-800-669-5550.
4
