WINDSOR REAL ESTATE INVESTMENT TRUST 8 PROXY STATEMENT
(ADVISOR FORM)
QUESTIONS & ANSWERS
1. Q. I don't want to read all this stuff -- can you just tell me what
I'm voting on?
A. There are four proposals being presented to Shareholders.
Proposals 1 and 2 involve the amendment and restatement of the
Declaration of Trust of the Trust to convert the Trust from a
finite-life entity to an infinite-life entity, and to create a
more flexible entity and structure, which will allow the Trust to
begin implementing its growth plan.
A number of important actions will be taken promptly upon
approval of the Proposals.
Upon approval of the Proposals, the Trust will create an UPREIT
structure that is similar to that used by a substantial number of
leading real estate investment trusts and begin an aggressive
acquisition campaign. If the Trust is successful in the
implementation of its growth plan, the Trust will also seek to
list the Common Shares of the Trust on a national securities
exchange or NASDAQ, and if deemed appropriate, raise capital
through an underwritten public offering of Shares.
In addition to the Organizational Amendments, there are two other
proposals for the Shareholders to consider. The first is the
adoption of an Equity Compensation Plan for the Trust. By using
options and other securities of the Trust to pay its key
employees, the Trust is able to tie their compensation to the
success of the Trust.
The last proposal is to re-elect the existing Trustees for an
additional year. This gives the Trustees an opportunity to
implement the growth plan and effect the changes that they
envision for the Trust.
2. Q. What happens if this is approved?
A. See Answer 1 above.
If the Organizational Amendments are approved, it is expected
that the Trust will engage in certain transactions and effect
certain changes that are expected to benefit the Trust's
Shareholders. They are briefly, (i) the Additional Chateau
Investment, (ii) the creation of an UPREIT structure to
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facilitate tax-free and tax-deferred acquisitions, (iii) the
implementation of a growth oriented Business Plan, and (iv) if
successful in the implementation of the Business Plan, the future
listing of Common Shares of the Trust on a national securities
exchange or NASDAQ, and if deemed appropriate, raising capital
through an underwritten public offering of Shares.
3. Q. What happens if this is not approved?
A. Not much, probably. It is expected that the Trust will probably
continue in accordance with is existing plans and policies.
4. Q. How do I benefit?
A. The Trustees believe that adopting the Organizational Amendments
will benefit the Trust and its Shareholders in a number of ways
including the following:
i) the Trust will be positioned to capitalize on acquisition
and development opportunities;
ii) the Trust's more flexible organizational and capital
structure should position the Trust for additional growth;
iii) the Trust will have the opportunity to diversify its
portfolio of properties as the Trust acquires additional
properties over time;
iv) if the Organizational Amendments are approved and the Trust
is successful in implementing the Business Plan, the Trust
anticipates that it may be able to list the Common Shares on
a national securities exchange or include them for quotation
on NASDAQ, within two to four years following the adoption
of the Organizational Amendments, thereby greatly enhancing
Shareholders' liquidity;
v) the successful implementation of the Trust's Business Plan
will provide opportunities for the Trust to increase
distributions to Shareholders over time; and
vi) with a more flexible capital and operating structure the
Trust will be able to respond more efficiently too, and
anticipate the occurrence of, changing conditions in the
United States equity markets.
5. Q. What risks are involved?
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A. Risk factors relating to the Organizational Amendments are set
forth on pages 17 through 20 of the Proxy Statement. The risks
identified in the Proxy Statement include the following:
i) the fundamental change in the nature of the Shareholders'
investment in the Trust and changes in Shareholders' rights;
ii) the possible mandatory redemption of Preferred Shares by the
Trust under the Amended Declaration;
iii) the current and potential conflicts of interest arising out
of the Trust's relationship with Chateau, and the Trust's
Advisor, which is also owned by Chateau;
iv) Chateau's future control of the Trust and its affairs
following the adoption of the Amended Declaration and By-
laws and the Additional Chateau Investment;
v) constraints on growth opportunities and the implementation
of the Business Plan, and no assurance of the availability
of capital or other financing;
vi) the risk that the properties that the Trust acquires and
develops may fail to perform in accordance with the Trust's
expectations; and
vii) the risks associated with increased indebtedness and
leverage.
While the Trustees believe that it is important for the
Shareholders to be aware of these, they note that they considered
such risk factors in the making of their recommendation that the
Shareholders vote for the Organizational Amendments, and that
they concluded that the potential benefits of adopting the
Organizational Amendments far outweighed the potential risks.
6. Q. What other options do I have?
A. As a practical matter, as a Shareholder of the Trust you only
have a couple of options. First, you can vote for or against the
Proposals, or you can abstain from voting. If you, and the other
Shareholders, vote for the Organizational Amendments the Trust
will make a significant number of changes, and begin implementing
its growth plan. We, as the Advisor to the Trust, and the
Trustees, believe without question that this is the best thing
for the Trust to do at this time, and that the Shareholders are
likely to receive substantial benefits.
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If you and the other Shareholders vote "against" the
Organizational Amendments, fail to, or don't vote with respect to
the Proposals, we don't see much happening. You, and the other
Shareholders will continue to have a limited opportunity to sell
your shares, to the extent the Trust is in a position to pay
dividends on the shares it will continue to do so.
Lastly, you can always sell your Shares in the Trust. Giving the
limited trading activity and limited demand for the Shares, we
don't think that's a very attractive option.
7. Q. What if the Shareholders don't vote for the Proposals? What if I
don't do anything personally, am I bound by the Vote?
A. See the second paragraph of Answer 6 above.
If YOU don't do anything, you will be considered to have
abstained from voting with respect to each of the Proposals,
which has the same effect as voting against them. In doing so,
you are effectively leaving the decision to adopt or reject the
proposals in the hands of the other Shareholders, but as a
Shareholder you will be bound by the vote regardless of whether
you vote.
8. Q. What is a "finite" life REIT? What is an "infinite" life REIT?
A. Generally, a finite-life REIT is one that engages in a single
public offering, invests that proceeds from such offering in
properties, and then holds such properties until a predetermined
liquidation date, or sells its properties over time. Proceeds
from sales or financing of properties are typically distributed
to Shareholders and are not reinvested in properties.
An infinite-life REIT has no preset liquidation date, and
generally is designed to be a growth-oriented entity that
continues to increase its portfolio of properties over time, and
to engage in additional public offerings of Shares to enable it
to acquire additional properties and to grow, and seeks to create
abroad public market for its shares.
9. Q. What are the advantages/disadvantages to me if this is approved?
A. If the Organizational Amendments are approved, it is expected
that the Trust will engage in certain transactions and effect
certain changes that are expected to benefit the Trust's
Shareholders. They are briefly, (i) the Additional Chateau
Investment, (ii) the creation of an UPREIT structure to
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facilitate tax-free and tax-deferred acquisitions, (iii) the
implementation of a growth oriented Business Plan, and (iv) if
successful in the implementation of the Business Plan, the future
listing of Common Shares of the Trust on a national securities
exchange or NASDAQ, and if deemed appropriate, raising capital
through an underwritten public offering of Shares.
The Trustees anticipate that if the Trust is successful in doing
these things that the Shares will increase in value, and that it
will be easier for Shareholders to sell their Shares, or buy
additional Shares.
See also Answer 4 above.
The potential disadvantages of the Proposals to a Shareholder are
for the most part set forth in the "risk factors" section of the
document on pages 17 through 20.
10. Q. Why are you making these changes? How do they benefit you?
A. Our role, as you are aware, is to be the Advisor to the Trust.
While we also believe that the Organizational Amendments are in
the best interests of the Trust's Shareholders, it is the
Trustees of the Trust who are making the Proposals, and
ultimately, it's you the Shareholders who will be giving the
Trustees final authority to proceed with the Proposals, and other
changes to be effected upon their approval.
If the Organizational Amendments are approved, and the Trust is
successful in implementing the growth plan, we as the Advisor,
will also benefit. First, because part of our compensation is
based upon the total value of the Trust's assets, if the value of
the Trust's assets goes up, this portion of our compensation will
go up as well. Additionally, to the extent that we are the
procuring cause with respect to the acquisition of a property
(and no other broker is involved on the buying side), the
Advisory Agreement permits us to receive a portion of the
brokerage fee paid by the sellers (but at no cost to the Trust,
of course). Finally, to the extent the Trust is highly
successful in implementing the growth plan, and that it achieves
returns that exceed the Liquidation Preferences of the Shares,
the Advisor would receive 15% of any such excess, upon any
liquidation of the Trust, with the Shareholders receiving the
other 85%.
11. Q. What are the costs involved to make these changes in the Trust?
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A. The Trustees have estimated the costs in connection with the
preparation of the Proxy Statement and related documents and
presenting the Proposals to the Shareholders at the Annual
Meeting to be approximately $125,000. These costs relate to work
which will already have been done for the Trust at the time of
the Annual Meeting. Accordingly, they will be incurred by the
Trust regardless of whether the Proposals are adopted.
12. Q. How did Chateau get involved with this? Why?
A. First of all the Proposals are being proposed by the Trustees,
not Chateau. The Trust's relationship with Chateau goes back
quite a ways, and given the benefits of that relationship so far,
we and the Trustees hope that it continues far into the future.
Chateau first came into contact with the Trust in 199_, when it
began to supply on-site management services to the Trust, and
certain affiliate of the Trust, then, in September 1997, Chateau
purchased all of the outstanding capital stock of The Windsor
Corporation, the Advisor to the Trust.
If Proposals 1 and 2 are approved, Chateau has advised the Trust
that it will make the Additional Chateau Investment and that it
intends to announce that the Trust will be a primary vehicle
through which Chateau will make investments in manufactured home
communities that do not fit the core asset type typical of the
existing Chateau portfolio, which is characterized by large,
stable, institutional-quality, fully amenitized properties. The
Trust's future affiliation with Chateau will benefit the Trust by
providing it with access to Chateau's national organization,
management team and investment and management philosophies. A
large part of implementing the business plan of the Trust will
involve working "in tandem" with Chateau and its management.
Hence, the new proposed name of the Trust, "N" Tandem.
13. Q. What if I don't like the way the new Trust (N' Tandem) is being
run -- what can I do about it?
A. First off, we don't expect that to happen, as we think the Trust
will be successful in implementing the growth-plan, that the
Trust's Shareholders will reap substantial benefits, and
generally that the Shareholders will be VERY happy with the
Trust's new direction. That being said, we are very open to
hearing from our Shareholders, to the extent you have questions
about why were doing things a certain way, or disagree with any
of our decisions, we would like to hear from you.
14. Q. Where can I get a copy of the Investor's names and addresses?
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A. A list of names and addresses of Shareholders of the Trust is
available to any Shareholder who makes a request to the Trust for
the same. We would expect, of course that any recipient of a
shareholder list will comply with federal and state securities
laws in connection with the use of the list.
15. Q. What are my tax consequences?
A. The Trust's lawyers have advised the Trust that there are no tax
consequences to the Trust, or Shareholders of the Trust, which
will occur as a result of the adoption of the Organizational
Amendments generally. Each Shareholder's original basis in his
or her Shares, and holding period, will remain unchanged.
16. Q. Please explain "Cumulative Voting Option."
A. Under regular voting a Shareholder has a right to cast one vote
"for" or "against" each nominee for Trustee, for each Share held.
Under the Cumulative Voting Option, each Shareholder is entitled
to three votes per share held, which may be allocated among the
nominees in such Shareholder's discretion. The cumulative voting
option will no longer exist if the Organizational Amendments are
approved.
17. Q. Explain the "Equity Compensation Plan."
A. Under the Equity Compensation Plan a compensation committee of
the Board may make grants of incentive stock options, non-
qualified stock options, restricted shares and dividend
equivalent rights.
The principal purpose of the Plan is to afford the Trust with the
flexibility to pay key employees with future equity of the Trust,
rather than cash, thereby reducing the current operating expenses
of the Trust. Additionally, by using options and other
securities of the Trust to pay its key employees, the Trust is
able to tie their compensation to the success of the Trust. If
the key employees are successful in implementing the Trust's
growth plan, and the Trusts shares increase in value, the key
employees, like the Shareholders, will benefit from this. On the
other hand, if the key employees are not successful in their
efforts, they will end up receiving substantially less in total
compensation, than they would have received if their compensation
were only cash.
The purpose of the Equity Compensation Plan is to (i) provide
incentive to key employees, officers and trustees of the Trust
and other persons expected to provide significant services to the
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Trust, including the employees, officers and directors of the
Advisor, (ii) to encourage proprietary interest in the Trust,
(iii) to encourage such key employees to remain in the employ of
the Trust and the Advisor, (iv) to attract new employees with
outstanding qualifications, and (v) to afford additional
incentive to others to increase their efforts in providing
significant services to the Trust and the Advisor.
18. Q. What will be the Business Plan of the Trust? How will it differ
in the future from what it is now?
A. The main thrust of the Trust's new Business Plan is to
aggressively grow the Trust, principally through the acquisition
of properties. It is expected that the Trust will, to the extent
possible, utilize a self-financing structure, and that the Trust
will employ higher levels of leverage than it has in the past and
will focus primarily on "lower profile assets" meaning properties
(i) that are typically not part of a portfolio of manufactured
housing community properties; (ii) that are located in tertiary
demographic and geographic markets; (iii) that are not managed by
a nationally known manufactured home community operator; (iv)
that may be managed by an on-site owner who lives at the
property; and (v) that may be smaller and are likely to have
fewer amenities, and a greater proportion of single-wide homes
than the typical Chateau community. In implementing the growth
plan, it is also expected that the Trust will work in tandem with
executives and management of Chateau, and as a result be able to
take advantage of their vast knowledge and experience in the
manufactured home community industry.
The Trust expects that a substantial portion of its future
acquisitions will utilize a structure involving (i) the
assumption of existing mortgage indebtedness, or new mortgage
financing, and (ii) the issuance of OP Units in the Operating
Partnership to sellers, in exchange for their equity in the
property being acquired. By utilizing this structure,
acquisitions are effectively self-financed, and no outside
financing or funding is required. Additionally, to the extent
the Trust deems it desirable, the Trust may choose to utilize
second mortgages, or leveraged refinancings to provide the Trust
with additional capital for further acquisitions.
19. Q. How will these changes affect the value of my Shares and/or
distributions?
A. Following Shareholder approval of the Proposals, the Trustees
intend to continue to pay the Preferred Shares Dividend and
Common Shares Dividend in accordance with past practice. If the
Trust is successful in implementing its growth plan, the Trustees
expect that they will be able to increase distributions to
Shareholders over time, and that there will be a substantial
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increase in the market value of and liquidity of the Trust's
Shares.
20. Q. Where is the Trust getting the money to buy more properties?
A. While the Trust is likely to seek to make a significant private
placement of Shares in order to partially fund its growth plan,
it is expected that a majority of acquisitions will utilize a
self-financing structure.
See second paragraph of Answer 18 above.
21. Q. What is each of my Shares worth today? Will this change? How
much?
A. Although Shares do occasionally trade through an informal
secondary market, there is no established trading market for the
Shares. As for recent sales, sales of shares over the past few
months, though infrequent ranged from $ to $ per
share.
The Trustees hope that if the new Business Plan of the Trust is
successfully implemented following Shareholder approval will
result in greater distributions to Shareholders over time, and in
an increase in the market value of and liquidity of the Trust's
Shares.
22. Q. How much have I received in distributions to date?
A. The Trust has paid quarterly dividends on its shares from its
inception at a rate of $ per share. The Trust's
historical distributions on the Shares are set forth on page 10
of the Proxy Statement.
23. Q. How can I dispose of my Shares now (or later)?
A. As you are probably aware a formal trading market for the Shares
does not exist. The Trustees anticipate that sales of Shares by
Shareholders following the adoption of the Organizational
Amendments will need to continue to be made in the same manner as
before, unless and until the Trust is successful in listing
Shares on a national securities exchange or NASDAQ.
24. Q. What do the Trustees get out of this? What have they received so
far?
A. The adoption of the Organizational Amendments will not in and of
itself not directly benefit any of the Trustees. Certain
benefits are expected to accrue to Chateau, as a Shareholder of
the Trust, and as the owner of the Advisor. These benefits are
described in the Proxy Statement. Under the Equity Compensation
Plan, each of the Trustees of the Trust will be eligible to
receive grants under the Plan. If the Trustees are able to grow
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the Trust through the implementation of the Business Plan, and
such growth increases the value of the Trust's Shares, the value
of any grants received by them would also increase in value.
25. Q. What do you think I should do?
A. We think you should vote your shares for the Proposals, and let
us get on with the growth plan. A lot of though and planning has
gone into the Organizational Amendments and the changes which we
intend to effect following their approval. We think this is a
real winner. We think there are very attractive acquisition
opportunities available in the current market place, and we are
eager to begin implementing the growth plan.
26. Q. What are the results so far / How close is the vote?
A. Under the SEC Proxy Rules, it's a violation for anyone to make a
prediction about the results of any vote, so we can't really
answer your question. What we can tell you however, is that the
Shareholders we have heard from have been overwhelmingly
positive, and that between 85% and 90% of all votes received have
been "for" the Organizational Amendments. The problem however is
that the Declaration of Trust requires that a majority of the
holders of Preferred Shares, and Common Shares, vote for the
Proposals in order for them to be adopted, and that
unfortunately, a lot of Shareholders don't take the time to vote,
or fill out and send in their proxy cards. The Trustees have
asked us to tell you that every vote counts, and to relay their
request that Shareholders vote with respect to the Proposals and
send in their proxy cards as soon as possible.
27. Q. The Shares are in my husband's and my name -- he died last year -
- what do I do?
A. The Trust's attorneys have advised us that generally the
beneficiary of the Shares under your husband's will has the right
to vote the Shares on your husband's behalf if the estate has
been fully probated. If not, the Executor or Executrix should be
able to vote the Shares on your husband's behalf. We would urge
you, however, to call the lawyer who handled your husband's
estate, to address your particular situation.
28. Q. I hold these shares in my IRA -- who needs to sign?
A. You need to speak to your IRA Custodian or Trustee. They will
either vote the Shares for you, or direct you to vote the Shares
yourself.
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29. Q. What additional paperwork do you need for my vote?
A. If the Shares are solely in your name, the only thing you need to
do is to fully fill out the Proxy Card, sign it and enclose it in
the pre-paid, pre-addressed envelope and mail or federal express
the envelope to Arlen Capital LLC, the Trust's Administrative
Agent, for receipt by them no later than October 22, 1998.
If the Shares are in multiple names, all Shareholders need to
sign the Proxy Card. Additionally, if someone other than the
person who is the Shareholder of record is signing on behalf of
such person, then we need evidence of the signing person's
authority to do so, such as a copy of Power-of-Attorney, or
letter of administration.
30. Q. How many shares do I own?
A. The records supplied to us by the Trust's transfer agent show you
as owning [number] Shares as of the record date.
