Gotham Partners LP/NY, et al. – ‘SC 13D/A’ on 9/11/00 re: Transcontinental Realty Investors Inc – EX-99

On:  Monday, 9/11/00, at 9:47am ET   ·   Accession #:  899983-0-18   ·   File #:  5-40410

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Amendment to General Statement of Beneficial Ownership   —   Schedule 13D
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 13D/A    Amendment to General Statement of Beneficial           8     27K 
                          Ownership                                              
 2: EX-99       Declaration of William A. Ackman                       4±    17K 

EX-99   —   Declaration of William A. Ackman

                                                 Page 9 of 9 Pages
EXHIBIT 2                     

UNITED STATES DISTRICT COURT                                                  

FOR THE NORTHERN DISTRICT OF CALIFORNIA                                         

JACK OLIVE, JONATHAN NOBLE, M.D., JOHN                                          
P. PEDJOE AND ALLSOP, INC. PROFIT                                               
SHARING PLAN & TRUST, on behalf of                                              
themselves and all others similarly                                             
situated and derivatively on behalf of                                          
NATIONAL INCOME REALTY TRUST, a                                                 
California business trust, CONTINENTAL                                          
MORTGAGE AND EQUITY TRUST, a                                                    
California business trust,                                                      
TRANSCONTINENTAL REALTY INVESTORS, a                                            
California business trust, and INCOME                                           
OPPORTUNITY REALTY TRUST, a California                                          
business trust,                                                                 

Plaintiffs,                                                               

vs.                                                                           

GENE E. PHILLIPS; WILLIAM S.                                                    
FRIEDMAN; RICHARD N. LAPP;                                                      
MICHAEL E. SMITH; WILLIE K.                                                     
DAVIS; RAYMOND V. J. SCHRAG;                                                    
RANDALL K. GONZALEZ; JAMES W. HAMMOND,                                          
JR.; NATIONAL REALTY ADVISORS, INC., a                                          
Texas corporation; NATIONAL REALTY,                                             
L.P.,                                                                           

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Case No.  C 89 4331 MHP                                                         

DECLARATION OF WILLIAM A. ACKMAN                                                

Date:  August 8, 2000                                                           
Time:  2:00 p.m.                                                                
Place:  Courtroom of the                                                        
Hon.                                                                            
Marilyn Hall Patel                                                          

a Delaware limited partnership;                                                 
AMERICAN REALTY TRUST, INC., a Georgia                                          
corporation; NATIONAL OPERATING L.P.,                                           
a Delaware limited partnership;                                                 

Defendants,                                                               

-and-                                                                         

NATIONAL INCOME REALTY TRUST, a                                                 
California business trust; CONTINENTAL                                          
MORTGAGE AND EQUITY TRUST, a                                                    
California business trust;                                                      
TRANSCONTINENTAL REALTY INVESTORS, a                                            
California business trust; and INCOME                                           
OPPORTUNITY REALTY TRUST, a California                                          
business trust;                                                                 

Nominal Defendants.                                                       
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I, William A. Ackman, do hereby declare as follows:                             
1. I am one of the principals of Gotham Partners, L.P., Gotham                  
Partners III, L.P. and Gotham International Advisors, L.L.C., (collectively,    
"Gotham").  I submit this declaration in support of the recommendation of       
Settlement Counsel in the above-captioned matter that the advisory contract of  
Basic Capital Management, Inc. ("BCM") with Transcontinental Realty Investors,  
Inc. ("TRI") and Income Opportunity Realty Investors, Inc. ("IORI"), and the    
contracts of BCM's affiliates with such entities, be terminated immediately.    
The facts herein stated are true and correct of my own personal knowledge, and  
if called to testify to such facts I could and would do so competently.         
2. In June, 2000, following the substantial declines in the price               
of the securities of TRI (and IORI) following the announcement that Gene E.     
Phillips and A. Cal Rossi had been indicted, Gotham acquired a total of         
approximately 1,835,000 shares of TRI (for which it paid about $10.5 million).  
Based upon such acquisitions, it is my understanding that Gotham presently owns 
approximately 21 percent of the issued and outstanding shares of TRI.           
3. I have reviewed the materials heretofore filed by the parties                
in response to the Court's Order to Show Cause, including, among other things,  
the Declaration of Edward G. Zampa.  In my opinion, the loans by TRI of $12     
million to BCM and American Realty Trust, Inc. described in such materials are  
improper, not in the best interests of TRI and highly detrimental to TRI's      
unaffiliated shareholders, including Gotham.  First, the loan is severely       
undersecured.  Typically, margin loans are secured by collateral with a trading 
value of not less than twice the principal amount of the loan.  Here, based     
upon Mr. Zampa's Declaration, the $12 million of loans are secured only by      
stock with a public market value of about $3.6 million.   The stock pledged as  
security is itself highly volatile; BCM and ART have publicly stated that       
they may not be able to meet their existing loans; and Mr. Phillips, the        
principal or control person of the borrowers, is a defendant under a serious    
criminal indictment - all of which calls into question the borrowers'           
creditworthiness.                                                               

4. More fundamentally, I see no reasonable business purpose                     
behind TRI's making loans to BCM and ART at all.  A temporary decline in TRI's  
share price in response to Mr. Phillips' criminal indictment had no affect on   
TRI's underlying business.  Mr. Zampa's explanation for the board's action is   
that it was concerned about TRI's trading price, stating:  "it was in the       
interest of all shareholders of [TRI] to have the stock reflect the true value  
of the company."  Zampa Decl. Par. 21.  If that were the board's true           
objective, the logical course would have been for TRI itself to repurchase      
shares that became available at discounted prices.  The opportunity for TRI to  
repurchase its own and IORI shares at a discount to true value was an enormous  
corporate opportunity.  If TRI had repurchased its own and IORI shares, it      
would have simultaneously stabilized the price of TRI and IORI and served the   
interests of all shareholders.  Instead, the board has squandered this          
corporate opportunity and risked $12 million of corporate funds to assist BCM   
and ART in maintaining control over TRI and IORI.                               
5. We purchased shares of TRI because we believe that its share                 
price at the time of purchase and at today's trading price of $12 substantially 
understates the true value of the company.  We believe the stock trades at a    
discount because the companies are controlled by BCM, which charges excessive   
fees to TRI for managing its assets and business and because of Mr. Phillips'   
reputation.  If the board believes that it is "in the interest of all           
shareholders to have the stock reflect the true value of the company," it       
should replace BCM with an outstanding third party real estate manager on       
competitively bid terms.                                                        

6. In my opinion, there would be no deleterious effects on the                  
operations of TRI or IORI if the Court were to order the termination of the     
advisory contract of BCM with TRI and IORI and the related brokerage and        
property management contracts of BCM's affiliates with TRI and IORI.  In fact,  
as I have stated above, we believe that such a change would have a positive     
effect on TRI and IORI.  I am aware of several reputable and qualified real     
estate organizations that could immediately take over the functions that BCM    
and its affiliates have been performing for TRI and IORI, and which could do so 
without any disruption of their operations or other adverse impact upon them.   
I declare under penalty of perjury under the laws of the State of               
New York that the foregoing is true and correct, and that this Declaration was  
executed in New York, New York this 2nd day of August, 2000.                    

________________________________                                                
William A. Ackman                                                               

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘SC 13D/A’ Filing		Date		Other Filings
Filed on:		9/11/00
		8/8/00		SC 13D/A
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