Shelbourne Properties II, Inc.
c/o American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Exhibit 99.2
March 18, 2004
Dear Stockholder of Shelbourne Properties II, Inc.:
In accordance with the Plan of Liquidation previously approved by the
Company's stockholders, the Company intends to enter into a liquidating trust
agreement (the "Trust Agreement") on or about April 16, 2004, for the purpose of
winding up the Company's affairs and liquidating its assets. It is currently
anticipated that, on or about April 16, 2004, the Company will transfer its then
remaining assets to the Trustee (as defined below) of the Shelbourne II
Liquidating Trust (the "Liquidating Trust"). The Liquidating Trust will also
assume the Company's then remaining liabilities. April 15, 2004 (the "Record
Date") will be the last day of trading of the Company's common stock on the
American Stock Exchange, and the Company's stock transfer books will be closed
as of the close of business on such date. The transfer of assets by the Company,
and the assumption of liabilities by the Liquidating Trust, will not cover the
Company's interest in a group of properties net leased to an affiliate of Accor
S.A. since the Company has no economic interest in these properties.
Under the terms of the proposed Trust Agreement, on April 16, 2004, each
stockholder of the Company on the Record Date (each, a "beneficiary")
automatically will become the holder of one unit of beneficial interest ("Unit")
in the Liquidating Trust for each share of the Company's common stock then held
of record by such stockholder. As provided in the Company's Plan of Liquidation,
the holder of Class B Units in the Company's Operating Partnership is entitled
to receive 15% of all distributions made by the Company and the Liquidating
Trust after such time as aggregate distributions by the Company and the
Liquidating Trust from and after August 19, 2002 exceed a specified per share
amount. After giving effect to dividends paid since August 19, 2002, the
remaining unpaid per share amount as of March 15, 2004 was $3.21. After the
specified per share amount has been received by beneficiaries, the holder of
Class B Units will receive 15% of all subsequent distributions by the
Liquidating Trust.
After April 16, 2004, all outstanding shares of the Company's common stock
will be deemed cancelled, and the rights of beneficiaries in their Units will
not be represented by any form of certificate or other instrument. Stockholders
of the Company on the Record Date will not be required to take any action to
receive their Units. The Trustee will maintain a record of the name and address
of each beneficiary and such beneficiary's aggregate Units in the Liquidating
Trust. Subject to certain exceptions related to transfer by will, intestate
succession or operation of law, the Units will not be transferable, nor will a
beneficiary have authority or power to sell or in any other manner dispose of
any Units.
It is currently contemplated that the initial trustee (the "Trustee") of
the Liquidating Trust will be Xxxxxx X. Xxxxxx. Successor trustees may be
appointed to administer the Liquidating Trust in accordance with the terms of
the Liquidating Trust Agreement. It is expected that from time to time the
Liquidating Trust will make distributions of its assets to beneficiaries, but
only to the extent that such assets will not be needed to provide for the
liabilities (including contingent liabilities) assumed by the Liquidating Trust.
No assurances can be given as to the amount or timing of any distributions by
the Liquidating Trust.
For federal income tax purposes, on April 16, 2004, each stockholder of
the Company on the Record Date will be deemed to have received a pro rata share
of the assets of the Company to be transferred to the Liquidating Trust, subject
to such stockholder's pro rata share of the liabilities of the Company assumed
by the Liquidating Trust. Accordingly, on April 16, 2004 each stockholder will
recognize gain or loss in an amount equal to the difference between (x) the fair
market value of such stockholder's pro rata share of the assets of the Company
that are transferred to the Liquidating Trust, subject to such stockholder's pro
rata share of the liabilities of the Company that are assumed by the Liquidating
Trust, and (y) such stockholder's adjusted tax basis in the shares of the
Company's common stock held by such stockholder on the Record Date.
The Liquidating Trust is intended to qualify as a "liquidating trust" for
federal income tax purposes. As such, the Liquidating Trust will be a complete
pass-through entity for federal income tax purposes and, accordingly, will not
itself be subject to federal income tax. Instead, each beneficiary will take
into account in computing its taxable income, its pro rata share of each item of
income, gain, loss and deduction of the Liquidating Trust, regardless of the
amount or timing of distributions made by the Liquidating Trust to
beneficiaries. Distributions, if any, by the Liquidating Trust to beneficiaries
generally will not be taxable to such beneficiaries. The Trustee will furnish to
beneficiaries of the Liquidating Trust a statement of their pro rata share of
the assets transferred by the Company to the Liquidating Trust, less their pro
rata share of the Company's liabilities assumed by the Liquidating Trust. On a
yearly basis, the Trustee also will furnish to beneficiaries a statement of
their pro rata share of the items of income, gain, loss, deduction and credit
(if any) of the Liquidating Trust to be included on their tax returns.
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Stockholders of the Company are urged to consult with their tax advisers
as to the tax consequences to them of the establishment and operation of, and
distributions, if any, by, the Liquidating Trust.
There are a number of important factors that could cause actual events to
differ materially from those indicated in this letter. If the board of directors
of the Company should determine to extend the Record Date beyond April 15, 2004,
the Company will issue a press release announcing such date. For additional
information regarding the Company's Plan of Liquidation, please see the periodic
reports and proxy statements that the Company has filed with the Securities and
Exchange Commission in accordance with the requirements of the Securities
Exchange Act of 1934. The SEC maintains a website at xxx.xxx.xxx, which contains
copies of these reports and proxy statements. Also, see the attached "Questions
and Answers about the Company's Liquidation." If you have any further questions
with respect to the foregoing, please contact Xxxxxxx Xxxxxxx at (000) 000-0000.
Sincerely,
Xxxxxxx X. Xxxxxx
President
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Questions and Answers about the Company's Liquidation
The following are some of the questions you may have as a stockholder of the
Company, and answers to those questions, in connection with the liquidation and
dissolution of the Company and the related transfer of its assets and
liabilities to a liquidating trust.
Q: What is the purpose of the Liquidating Trust?
A: The purpose of the Liquidating Trust is to wind up the Company's affairs
and liquidate the Company's assets, including, but not limited to, the
sale of its remaining assets, to make appropriate provision for the
Company's remaining obligations and to make distributions to the Company's
former stockholders of available liquidation proceeds.
Q: What will I receive in connection with the establishment of the
Liquidating Trust?
A: Under the terms of the proposed liquidating trust agreement, on or about
April 16, 2004, if you are a stockholder of record of the Company on April
16, 2004, you automatically will become the holder of one unit of
beneficial interest ("Unit") in the Liquidating Trust for each share of
the Company common stock then held of record by you. After such date, all
outstanding shares of the Company's common stock automatically will be
deemed cancelled. As long as you are a stockholder of record of the
Company on April 15, 2004, you will not be required to take any action to
receive your Units. You do not need to, and should not, send in your stock
certificates.
Q: What is the last date upon which I can buy or sell the Company's stock?
A: April 15, 2004. This will be the last day of trading of the Company's
common stock on the American Stock Exchange, and the Company's stock
transfer books will be closed as of the close of business on such date.
Q: Will I be able to transfer, sell or otherwise dispose of my interest in
Units?
A: Generally, if you become a beneficiary of the Liquidating Trust, you will
not be able to transfer your Units and you will not have authority or
power to sell, assign, transfer, encumber or in any other manner dispose
of your beneficial interest in Units. However, beneficial interests in
Units will be assignable or transferable by will, intestate succession or
operation of law, and the executor or administrator of the estate of a
holder may mortgage, pledge, grant a security interest in, hypothecate or
otherwise encumber Units held by the estate of such person if necessary in
order to borrow money to pay estate, succession or inheritance taxes or
the expenses of administering the estate of such person, upon written
notice to, and written consent of, the Trustee.
Q: When will I receive distributions from the Liquidating Trust?
A: It is expected that from time to time the Liquidating Trust will make cash
distributions to beneficiaries, after providing for appropriate reserves
for liabilities (including contingent liabilities) assumed by the
Liquidating Trust. Because we cannot be certain about the precise net
realizable value of our assets and the ultimate amount of our liabilities,
we are not able to predict accurately the aggregate cash amounts which
will ultimately be distributed to you or the timing of any such
distributions.
The amount and timing of remaining distributions will be determined by the
Trustee of the Liquidating Trust based on funds available, net proceeds
realized from the remaining assets, the timing of asset sales, whether the
Trust's total assets exceed total liabilities at such time, whether the
Trust has provided for the level of reserves deemed necessary or
appropriate and other considerations.
Q: What are the federal income tax consequences to me of the establishment of
the Liquidating Trust?
A: You will be deemed to have received a pro rata share of the assets
transferred by the Company to the Liquidating Trust, subject to a pro rata
share of the Company's liabilities assumed by the Liquidating Trust, and
will be required to take into account a pro rata share of the Liquidating
Trust's items of income, gain, loss, deduction or credit, regardless of
the amount or timing of distributions made by the Liquidating Trust to
you. Distributions, if any, in the Liquidating Trust to beneficiaries
generally will not be taxable to such beneficiaries.
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The Trustee will furnish to you a statement of your pro rata share of the
assets transferred by the Company to the Liquidating Trust, less your pro
rata share of the Company's liabilities assumed by the Liquidating Trust.
On a yearly basis, the Trustee also will furnish to you a statement of
your pro rata share of the items of income, gain, loss, deduction and
credit (if any) of the Liquidating Trust to be included on your tax
returns.
You are urged to consult with your tax adviser as to the tax consequences
to you of the establishment and operation of, and distributions, if any,
by, the Liquidating Trust.
Q: Who will maintain records of how many Units I own and my address?
A: The Trustee of the Liquidating Trust will maintain a record of the name
and address of each beneficiary and such beneficiary's aggregate Units in
the Liquidating Trust.
Q: Will I receive notice when I become a beneficial owner of Units?
A: Shortly after April 16, 2004, the Trustee of the Liquidating Trust will
mail to each owner of a beneficial interest in Units a notice indicating
how many Units such person beneficially owns and containing other relevant
information, including information as to how you can contact the Trustee.
Q: Who can help answer my additional questions?
A: For additional information regarding the Company's Plan of Liquidation,
please see the periodic reports and proxy statements that the Company has
filed with the Securities and Exchange Commission in accordance with the
requirements of the Securities Exchange Act of 1934. The SEC maintains a
website at xxx.xxx.xxx, which contains copies of these reports and proxy
statements. If you have any further questions with respect to the
foregoing, please contact Xxxxxxx Xxxxxxx at (000) 000-0000.
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