First Union REIT Inks $88.7M Merger With Gotham Partners

NEW YORK CITY-Manhattan-based REIT: First Union Real Estate Equity and Mortgage Investments, has signed a definitive merger agreement with golf course owner/operator Gotham Golf Partners LP. The $88.7-million transaction will result in the creation of a new company to be called Gotham Golf Corp.

First Union common shareholders will receive either $2.55 per share in cash or $2.20 per share plus a pro-rata share of notes backed by the REIT’s remaining real estate assets. The notes will be secured by a pledge of two loans, one on each of First Union’s two remaining properties. One is a $3.5 million first leasehold mortgage on the Circle Tower office building in Indianapolis. The other is an approximate $16.5 million mezzanine loan on the Park Plaza mall in Little Rock, Arkansas. Both loans will bear interest at 11% payable in cash semi-annually in arrears.

Each note will have a face amount of $100, which is approximately $0.575 per share, and will bear interest at 11% per annum on its face amount. As a result, shareholders who elect to keep the note rather than the $0.35 cash alternative will in effect be paying approximately 60.9% of the face amount of the note. The notes will mature on May 31, 2010 concurrently with the underlying loans that secure them.