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KENSINGTON INVESTMENT GROUP, INC.
4 ORINDA WAY, SUITE 220-D
ORINDA, CALIFORNIA 94563
IMPORTANT! ALARMING EVENTS REGARDING
YOUR INVESTMENT IN MALAN REALTY!
April 7, 2000
Dear Fellow Shareholder:
By now you should have received proxy materials from Malan Realty
Investors, Inc. (the "Company") with respect to the Annual Meeting of
Shareholders to be held on May 10, 2000. We have been a shareholder of the
Company since 1995 and are currently the Company's single largest shareholder.
Recent actions by management and the Board have us concerned about the future of
the Company. We believe we must act now in order to protect our investment. We
ask for your vote in the election of a new Board of Directors.
PROBLEMS WITH THE CURRENT BOARD OF DIRECTORS
- - Malan's stock price has declined since the initial public offering in 1994,
yet management compensation has increased dramatically.
- - We believe there has not been adequate effort made to enhance value for
shareholders.
- - Management and the board have actively worked to entrench themselves.
THE KENSINGTON BOARD INTENDS TO
- - Immediately consider all strategic alternatives which could realize the full
value of Malan's property portfolio, including selling properties,
distributing cash or buying back stock.
- - Evaluate the legality of management's "golden parachute" contracts and take
any actions necessary to protect the interests of all shareholders.
- - Most importantly, the Kensington Board intends to focus their experience and
energy on maximizing value for all shareholders, and will not "rubber stamp"
provisions designed to entrench management.
WHAT YOU NEED TO DO NOW TO PROTECT YOUR INVESTMENT
- - Together we need to elect a Board of Directors with a commitment to maximizing
value for all shareholders NOW!
- - Sign, date, vote "FOR" the Kensington Nominees and return the enclosed GOLD
proxy card.
- - IF YOU HAVE ALREADY SENT IN MANAGEMENT'S WHITE PROXY AND WISH TO CHANGE YOUR
VOTE, BE SURE TO COMPLETE, SIGN AND DATE THE ENCLOSED GOLD PROXY AND RETURN IT
IN THE POSTAGE-PAID ENVELOPE.
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SPECIFIC REASONS WE BELIEVE A NEW BOARD IS NEEDED
We are disappointed in management and the Board's efforts to entrench
themselves. We are disappointed with the failure of the current board to
articulate and implement a clear strategy to grow shareholder value. We are
disappointed that Malan's stock now trades at what we believe is a deep discount
to the value of its assets. We believe a change in leadership is needed. Before
voting, consider the experience and independence of the Kensington nominees as
well as what the current board has done to erode shareholder value.
WHO IS REALLY MAKING MONEY HERE AND WHERE IS THE BOARD'S LOYALTY DIRECTED?
- - Malan came public at $17.00 per share in 1994. Despite one of the strongest
real estate markets in 20 years, Malan's stock price is down 30%, recently
trading as low as $12.06 on March 31, 2000.
- - During this period, annual salary and bonus payments to management have
increased over 60% from 1994's levels and the company has spent over $7
million on "General & Administrative" expenses.
- - We are very disappointed that in six years the current board members have not
made significant personal financial commitments to the Company in the form of
meaningful stock purchases.
WHAT HAVE MANAGEMENT AND THE CURRENT BOARD DONE FOR SHAREHOLDERS?
- - They went to outrageous lengths to silence one of the Company's largest
shareholders. It appears to us that they actually tried to get this man fired
from his job after he began asking too many questions.
- - They put a "Poison Pill" in place and attempted to "Stagger the Board." We
believe these are self-serving moves which entrench them and protect them from
being accountable to shareholders.
- - They put in place "Golden Parachute" severance agreements which could further
enrich executives at the cost of shareholders if the current Board loses
control of the Company.
WHAT HAVE MANAGEMENT AND THE CURRENT BOARD NOT DONE FOR SHAREHOLDERS?
- - Since the summer of 1999, Prudential Securities, Inc. has been working with
the Company to evaluate strategic alternatives -- but nothing significant has
happened to enhance shareholder value.
- - We believe management has missed opportunities to take advantage of the strong
real estate markets and strengthen the balance sheet or buy back stock at low
prices.
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THE KENSINGTON NOMINEES
The Kensington Nominees are individuals of integrity and experience who are
committed to enhancing value for all shareholders. The Kensington Nominees have
a combined total of over 75 years of real estate asset management, investment
and capital markets experience.
ANDREW MILLER, age 45, has been in the real estate business since 1981. He
is currently the President of Miller Capital Advisory, Inc. ("MCA"), an advisory
business focused on real estate capital markets and asset management. Mr. Miller
built MCA and its affiliates on his background and reputation as a
multi-faceted, highly experienced investment real estate professional. Mr.
Miller has secured repeat consulting assignments serving a growing group of
prominent public pension plan sponsors. Mr. Miller is responsible for the firm's
strategic and marketing initiatives as well as delivery of services. Mr.
Miller's practice has focused on providing his clients with impartial
assessments of their real estate holdings and strategic action plans. Miller has
led several major transactions for the benefit of the firm's clients, including
property sales and joint venture restructurings.
Prior to forming MCA, Mr. Miller was employed by Homart Development
Corporation for 15 years. Homart was one of the nation's leading developers and
owners of investment properties prior to its liquidation in 1995. As Homart's
First Vice President, Capital Markets, Mr. Miller was responsible for asset
disposition, acquisition, financing and joint venture structuring activities. In
this capacity, Mr. Miller cultivated institutional investor relations and
directed capital raising transactions totaling over $3 billion. Mr. Miller
served the early years of his Homart career in various managerial capacities
including acquisitions analysis, corporate planning, financial control and
accounting, and corporate finance.
Mr. Miller's background working on challenging capital markets and real
estate joint venture initiatives is extensive. As a principal of Homart, Mr.
Miller successfully negotiated dispositions of partial interests in major
commercial properties to both corporate partners and to such institutional
investors as the State of Wisconsin Investment Board, JMB Group Trust V and The
Aetna. Mr. Miller also negotiated numerous joint venture agreements associated
with these dispositions and with Homart's separate acquisition activities. As
the leader of MCA, Mr. Miller has provided both general and specific joint
venture structuring advice to the firm's clients, including CalPERS, the Arizona
State Retirement System and the State of Michigan Retirement System.
Mr. Miller received his Master's Degree from the University of Chicago and
holds a Bachelor of Science degree from the University of Illinois, Urbana.
JEFFREY LEWIS, age 54, has been in the real estate business since 1971. He
is currently a Vice President at Kennedy Associates Real Estate Counsel, Inc.
("KAREC"), a real estate investment firm. Mr. Lewis joined KAREC in 1998 and is
responsible for managing one of the two KAREC national asset management teams in
addition to his direct responsibility for several properties.
Prior to joining the firm, Mr. Lewis was most recently a Principal
Investment Officer at the California Public Employees' Retirement System
(CalPERS) where he had general responsibility for the fund's national office
portfolio of 35 properties totaling over 15 million square feet and values of
approximately $1.4 billion. For the eight previous years, Mr. Lewis directed a
number of activities at CalPERS, including the design and implementation of the
very successful single family development financing program into which CalPERS
has committed over $800 million.
Prior to his association with CalPERS, Mr. Lewis operated a real estate
development company that developed, built and managed over 650 apartment units
in California and Nevada and in which he was the sole stockholder.
Mr. Lewis received his Master's Degree from Stanford University and holds a
Bachelor of Science degree in economics from The University of Nevada, Las
Vegas. He is a licensed real estate broker in California and Nevada and holds a
general contracting license in California.
JOHN P. KRAMER, age 42, has been in the real estate business since 1985. He
is President and co-founder of Kensington Investment Group, Inc., a registered
investment advisor engaged in the business of
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managing investments in real estate securities. He is involved in all aspects of
the organization and is primarily responsible for directing the firm's
investment policies.
Mr. Kramer was previously Executive Vice President at Liquidity Fund
Investment Corporation where he was responsible for directing the research,
marketing and trading activities of the firm. Prior to joining Liquidity Fund in
1985, Mr. Kramer was an associate with Federal Reserve Chairman Allen
Greenspan's economic consulting firm, Townsend-Greenspan & Co. in New York City,
and an account executive at Sutro & Co., Inc. and Prudential-Bache Securities in
San Francisco.
Mr. Kramer received his Masters Degree in Business Administration from the
University of California Berkeley in 1986, receiving an award for his work in
real estate finance while at the Business School. He received a Bachelor of Arts
in 1980 from the State University of New York, Oneonta, in Economics.
JILL HOLUP, age 36, has been in the real estate business since 1985. She is
a Partner at John McStay Investment Counsel, an investment management firm. Her
responsibilities include research, portfolio management and new business
development. Previously, Ms. Holup was a First Vice President, Equity Research
at McDonald & Company Securities (an investment bank) from 1996 through 1997.
From 1994 to 1996 she was a Senior Securities Analyst with RREEF Real
Estate Securities Advisers, where she specialized in REIT investing. Prior to
joining RREEF, Ms. Holup held the position of Portfolio Manager with Liquidity
Financial Group. While she was with Liquidity Financial Group from 1988 to 1994
she was responsible for research and portfolio management with respect to the
company's partnership and REIT investments. From 1985 to 1988 she was involved
in the real estate field in capacities including leasing, property management,
development and lending.
Ms. Holup received her Master's Degree in Business Administration from the
Haas School of Business at the University of California at Berkeley. She earned
her bachelor's degree in finance at the University of Texas, El Paso in 1985.
PAUL GRAY, age 34, has been in the real estate business since 1988. He is
Executive Vice President and co-founder of Kensington Investment Group, Inc., a
registered investment advisor engaged in the business of managing investments in
real estate securities. Mr. Gray has overall responsibility for investment
decision making on behalf of Kensington's portfolios and is the director of
Kensington's research group.
Mr. Gray was previously a partner of Golden State Financial Services, a
mortgage brokerage company. From 1988 to 1992, Mr. Gray was a senior analyst at
Liquidity Fund Investment Corporation where he managed the firm's REIT
portfolios and developed the models used to evaluate limited partnerships. He
was simultaneously Director of Research for the National Real Estate Index where
he was instrumental in designing the methodology and systems used to track real
estate values throughout the United States.
Mr. Gray received a Bachelor of Science in Finance and Real Estate in 1988
from the Haas School of Business at the University of California at Berkeley. He
is a licensed real estate broker in the state of California.
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THE KENSINGTON NOMINEES TO THE BOARD
The insert to this letter and the enclosed proxy statement contains
detailed information on the individuals we are nominating to the Board of
Directors. This information is intended to be a useful summary of their
qualifications. However it is no substitute for a personal meeting or detailed
discussion with us. Should you have any questions, comments or require anything
further, please do not hesitate to contact us.
WHO IS KENSINGTON AND WHO ARE ITS NOMINEES?
- - Kensington is a registered investment advisor specializing in real estate
securities. We manage mutual funds and other investment vehicles. Like you, we
are simply an investor in Malan Realty.
- - We have been a shareholder of Malan Realty since 1995 and are currently the
Company's single largest shareholder.
- - The slate of nominees that we are proposing are individuals of integrity and
experience with a combined total of over 75 years of real estate asset
management, investment and capital markets experience who are committed to
enhancing value for all shareholders.
WHY IS KENSINGTON DOING THIS?
- - Over the past year or so we have grown increasingly dissatisfied with the
Company's performance and the actions of the Board.
- - Recent actions by management and the Board have us concerned about the future
of the Company. We believe we must act in order to protect our investment.
IF ELECTED THE KENSINGTON NOMINEES INTEND TO
- - Immediately consider all strategic alternatives which could realize the full
value of Malan's property portfolio, including selling properties,
distributing capital and buying back stock.
- - Evaluate the legality of management's "golden parachute" contracts and take
any actions necessary to protect the interests of all shareholders.
- - Most importantly, the Kensington Board intends to focus their experience and
energy on maximizing value for all shareholders, and will not "rubber stamp"
provisions designed to entrench management.
THE CURRENT BOARD IS THE SAME GROUP THAT HAS BEEN IN PLACE SINCE 1994.
AS SHAREHOLDERS, CAN WE AFFORD TO LET THEM CONTINUE?
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Above, we have expressed our views regarding management and the current
board's performance. We have also demonstrated why we believe the Kensington
Nominees can better serve all shareholders.
If you have any questions regarding the voting of your proxies, please call
our proxy solicitor, Georgeson Shareholder Communications, at 800-223-2064.
Sincerely,
John P. Kramer
President of Kensington Investment
Group, Inc.
YOUR VOTE IS IMPORTANT
1. Kensington Investment Group urges you to DISCARD the WHITE proxy card
recently sent to you. A "WITHHOLD AUTHORITY" vote on the White proxy card is
not a vote for Kensington's nominees. To vote FOR our nominees you MUST
execute a GOLD proxy card.
2. If you voted on a Managements White proxy card BUT WISH TO SUPPORT OUR
NOMINEES, please sign, date and mail the enclosed GOLD proxy card in the
postage-paid envelope provided as soon as possible.
3. Remember -- only your latest dated proxy will determine how your shares are
to be voted at the meeting.
4. If any of your shares are held in the name of a bank, broker or other
nominee, please contact the party responsible for your account and direct
them to vote your shares for the Kensington nominees on the GOLD proxy card.
5. If you have any questions or need further assistance in voting your shares,
please contact our proxy solicitor.
[GEORGESON SHAREHOLDER COMMUNICATIONS INC. LOGO]
17 State Street, 10(th) Floor
New York, NY 10004
Banks and Brokers (212) 440-9800
Shareholders Call Toll Free (800) 223-2064
