In its initial Schedule 13D filing in July 2003, Corporex reported beneficial ownership in excess of 5% of the REIT's common shares. In February 2003, First Union had received an unsolicited written proposal from Corporex indicating an interest in pursuing a strategic transaction with First Union. At that time, First Union declined to proceed with negotiations with Corporex. First Union reports that it has had limited discussions with Corporex regarding this most recent proposal.

First Union has also held limited discussions with other third parties regarding proposed strategic alternatives. First Union's Board is in the process of determining its appropriate business strategy, which may or may not include the pursuit of a strategic alternative with a third party. No formal timetable has been established by the board.

In late June, First Union entered into a settlement, termination and standstill agreement with, among others, Gotham Partners that provided for the termination of the merger agreement regarding the merger of First Union with Gotham Golf, which included a termination payment to Gotham of $2.4 million.