SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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RECKSON ASSOCIATES REALTY CORP.
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(Name of Registrant as Specified In Its Charter)
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[LETTERHEAD OF RECKSON ASSOCIATES REALTY CORP.]
November 7, 2006
Robert J. Hordon
Jason B. Dahl
Jonathan R. Spitzer
Arnhold and S. Bleichroeder Advisers, LLC
1345 Avenue of the Americas
New York, NY 10105
Dear Sirs:
On behalf of the independent members of the Reckson Board of Directors, we are
writing in response to your letter of October 30, 2006. We value and appreciate
the input of shareholders, and wanted to take this opportunity to clarify some
key aspects of our decision to enter into a merger agreement with SL Green
Realty Corp. and further outline why we continue to believe that the transaction
creates superior value for Reckson shareholders - and that you should support it
at the upcoming November 22nd shareholder vote.
As you know, under the proposed transaction, shareholders will receive $31.68
per share in cash, an adjusted prorated dividend, and 0.10387 of a share of SL
Green for each share of Reckson stock they own - a combined value of $43.94 per
share based on SL Green's closing price on November 6, 2006. Upon closing,
Reckson shareholders will own over 15% of SL Green, the industry's best
performing office RElT over the past three years.
Since its reorganization three years ago, Reckson has performed very well for
its shareholders under management's leadership. Reckson has been a top
performing U.S. office REIT, with total returns of 131% since the
reorganization. However, several months ago we began to see signs that it would
become more difficult to continue growing and producing the level of returns
that shareholders have come to expect. Property valuations have risen
significantly, which we believe would impact our ability to continue to deliver
superior earnings growth.
Working with our investment bankers, Goldman Sachs and Citigroup, we analyzed a
number of potential alternatives and determined that the best option was to
pursue a sale of the entire Company, especially in light of the currently strong
M&A environment for REITs. We also considered whether it would be desirable to
sell the Company and its property portfolio in separate parts, or to sell our
Manhattan properties and retain our suburban assets. However, we determined that
these latter options would result in significant tax inefficiencies and
transaction costs, as well as increased execution risk, compared to the sale of
the entire Company.
At the Board's instruction, our bankers reached out to the most likely buyers in
the industry. Ten potential buyers indicated interest, six of whom provided
initial price indications. Of those six, two made proposals of $42.50 per share
while others gave indications of interest around the $40.00 level. This tight
grouping of price indications gave us a very good sense of the Company's private
market value, and we went back to our higher bidders seeking the best price
available. SL Green indicated that it would be willing to pay more if it could
enhance the value it could obtain through a divestiture of the suburban
properties, and determined independently that the best possible buyer of that
suburban portfolio was an investment group comprised of Marathon Asset
Management and members of Reckson's senior management team. SL Green proceeded
to negotiate a sales price with that group, which enabled it to raise its bid
for the entire company. SL Green's decision to sell certain assets to that
specific group was not - and is not - a condition of closing of the merger
agreement between Reckson and SL Green. SL Green had full incentive to maximize
the value it obtained in the sale of these assets and negotiated several
significant increases in price and other key concessions from the group in their
separate, arm's-length negotiations.
[RECKSON LOGO]
When it became clear SL Green intended to sell certain assets to a group which
included members of management, Reckson's independent directors instructed
Goldman Sachs to do two things: (1) contact the other bidders that were part of
the sale process to see if they would be willing to top SL Green's bid for
Reckson, given that a solution for the non-core suburban properties was now
available; and (2) contact all other bidders that were part of the sale process
as well as other potential bidders to see if they had any interest in acquiring
such non-core properties at a higher price than the price being offered by the
management group.
No one has submitted a higher bid for Reckson or such non-core properties. No
broader shopping of the deal for the suburban assets was practical then, nor is
permissible now, within the constraints of the requirements established by SL
Green to support its binding offer for the Company. Additionally, we received an
opinion from Goldman Sachs with respect to the fairness from a financial point
of view of the consideration to be received by Reckson shareholders in SL
Green's acquisition of Reckson. We also received an opinion from Greenhill with
respect to the fairness from a financial point of view of the consideration to
be received by Reckson in connection with SL Green's portfolio deal with the
management group.
In this context it is important to note that SL Green's offer was significantly
higher than any of the other indications that we received and that SL Green had
every incentive to receive the maximum value possible for the assets it is
selling to the investment group. All other bidders had the same opportunity to
partner with management or to seek higher valuation solutions for these assets.
With respect to your suggestion that we remarket the assets that are presently
subject to a binding sales contract between the investment group and SL Green,
please understand that these assets are not ours to remarket. They are the
subject of our binding merger agreement with SL Green. Moreover, we do not
believe that you have offered a compelling rationale for why our current
transaction with SL Green should not proceed on the terms and conditions that
were carefully and thoughtfully agreed to by the independent Board. Having
agreed to highly negotiated terms and put forth their best and highest offer in
the course of our competitive auction process, SL Green is not obligated to
change the terms of the merger agreement. Furthermore, while the merger
agreement with SL Green contains a customary "fiduciary out" which permits the
Board to accept a higher bid, subject to a customary break-up fee payment, no
such higher bids have emerged.
We are hopeful that all shareholders will judge this transaction on its merits.
We are confident that those who do so will conclude that this transaction
provides Reckson shareholders with the maximum value reasonably available. A
vote in favor of the transaction is in the Company's and shareholders' best
interest, while the alternative is at best a return to the prior position of the
Company with the same outlook for the future outlined above.
Very truly yours,
/s/ Peter Quick
Peter Quick
Lead Independent Director
/s/Douglas Crocker II
Douglas Crocker II
Independent Director
[RECKSON LOGO]
IMPORTANT INFORMATION AND WHERE TO FIND IT
Reckson and SL Green have filed a definitive proxy statement/prospectus as part
of a registration statement regarding the proposed transaction with the
Securities and Exchange Commission (SEC) on October 19, 2006. Investors and
security holders are urged to read the proxy statement/prospectus because it
contains important information about SL Green and Reckson and the proposed
transaction. Investors and security holders may obtain a free copy of the
definitive proxy statement/prospectus and other documents filed by SL Green and
Reckson with the SEC at the SEC's website at WWW.SEC.GOV. The definitive proxy
statement/prospectus and other relevant documents may also be obtained free of
charge from SL Green or Reckson by directing such request to: SL Green, 420
Lexington Avenue, New York, NY 10170, Attention: Investor Relations, or Reckson,
625 Reckson Plaza, Uniondale, NY 11556, Attention: Investor Relations. Investors
and security holders are urged to read the proxy statement, prospectus and other
relevant material before making any voting or investment decisions with respect
to the merger.