-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q6EHNmd+//lFwEg7yDBMYs0iSORKM8LsBDHN0jGN2Hw4uYZAAZzd3fskggcGAiK7 sC/5yIwEQv+doqHuN/f0YQ== 0000898822-97-000205.txt : 19970324 0000898822-97-000205.hdr.sgml : 19970324 ACCESSION NUMBER: 0000898822-97-000205 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19970321 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SANTA ANITA REALTY ENTERPRISES INC CENTRAL INDEX KEY: 0000314661 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 953520818 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-32774 FILM NUMBER: 97560548 BUSINESS ADDRESS: STREET 1: 301 W HUNTINGTON DR STREET 2: STE 405 CITY: ARCADIA STATE: CA ZIP: 91007 BUSINESS PHONE: 8185745550 MAIL ADDRESS: STREET 1: 301 W HUNTINGTON DR STREET 2: STE 405 CITY: ARCADIA STATE: CA ZIP: 91007 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GOTHAM PARTNERS LP /NY/ CENTRAL INDEX KEY: 0000899983 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 237 PARK AVENUE 9TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D/A 1 SCHEDULE 13D AMENDMENT NO. 2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2) Santa Anita Realty Enterprises, Inc. Santa Anita Operating Company (Name of Issuer) Common Stock, $0.10 par value (Title of class of securities) 801209206 801212101 (CUSIP Number) William A. Ackman Gotham Partners 110 East 42nd Street New York, New York 10017 (212) 286-0300 (Name, address and telephone number of person authorized to receive notices and communications) March 17, 1997 (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this Schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with the statement [ ]. Page 1 of 3 Pages This Amendment No. 2 is filed by Gotham Partners, L.P., a New York limited partnership ("Gotham"), and Gotham Partners II, L.P., a New York limited partnership ("Gotham II" and together with Gotham, the "Reporting Persons"), and amends and supplements the following Items of those certain Schedule 13Ds (the "Schedule 13Ds") originally filed on November 21, 1996, in each case by adding the information set forth below. Capi- talized terms used herein without definition shall have the meanings ascribed thereto in the Schedule 13Ds. ITEM 4. PURPOSE OF TRANSACTION. KAI has today filed an amendment to its Schedule 13D, originally filed with the Securities and Exchange Commission on October 24, 1996, which describes certain proposed transactions relating to the Companies. The amendment to the KAI Schedule 13D provides additional detail as to these matters. It is attached as an exhibit hereto and incorporated herein by reference. It is expected, as reported in the amendment to the KAI Schedule 13D, Gotham will purchase certain securities in connection with the transactions described therein. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. The following Exhibits are filed as part of this Schedule 13D: (1) Amendment No. 3 to Schedule 13D, originally filed with the Securities and Exchange Commission on October 24, 1996, by Apollo Real Estate Investment Fund II, L.P., Apollo Real Estate Advisors II, L.P., Koll Arcadia Investors, LLC, and Koll Arcadia, LLC (together with all exhibits thereto). Page 2 of 3 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete, and correct. March 21, 1997 GOTHAM PARTNERS, L.P. By: SECTION H PARTNERS, L.P. its general partner By: KARENINA CORPORATION a general partner of Section H Partners, L.P. By: /s/ William A. Ackman William A. Ackman President GOTHAM PARTNERS II, L.P. By: SECTION H PARTNERS, L.P. its general partner By: KARENINA CORPORATION a general partner of Section H Partners, L.P. By: /s/ William A. Ackman William A. Ackman President Page 3 of 3 Pages EX-99 2 EXHIBIT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 3) Santa Anita Realty Enterprises, Inc. Santa Anita Operating Company (Name of Issuer) Common Stock ------------ (Titles of Classes of Securities) 801209206 801212101 --------------- (CUSIP Numbers) W. Edward Scheetz c/o Apollo Real Estate Advisors, L.P. 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 261-4000 --------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) With a copy to: Patrick J. Foye, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Telephone: (212) 735-2274 March 17, 1997 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check the following box: [ ] Check the following box if a fee is being paid with the statement: [ ] SCHEDULE 13D CUSIP NO. ----------------- - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON APOLLO REAL ESTATE INVESTMENT FUND II, L.P. - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - --------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES --------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 989,900 EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON 0 WITH --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 989,900 - --------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 989,900 - --------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - --------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.6% of Realty; 8.7% of Operating - --------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - --------------------------------------------------------------------------- SCHEDULE 13D CUSIP NO. ----------------- - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON APOLLO REAL ESTATE ADVISORS II, L.P. - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC, OO - --------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES --------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 989,900 EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON 0 WITH --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 989,900 - --------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 989,900 - --------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - --------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.6% of Realty; 8.7% of Operating - --------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - --------------------------------------------------------------------------- SCHEDULE 13D CUSIP NO. ----------------- - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON KOLL ARCADIA INVESTORS, LLC - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - --------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES --------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 989,900 EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON 0 WITH --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 989,900 - --------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 989,900 - --------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - --------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.6% of Realty; 8.7% of Operating - --------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - --------------------------------------------------------------------------- SCHEDULE 13D CUSIP NO. ----------------- - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON KOLL ARCADIA LLC - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - --------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES --------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 989,900 EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON 0 WITH --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 989,900 - --------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 989,900 - --------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - --------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.6% of Realty; 8.7% of Operating - --------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - --------------------------------------------------------------------------- This Amendment No. 3 amends and supplements the following Items of the Schedule 13D, as amended (the "Schedule 13D"), of Apollo Real Estate Advisors II, L.P., Apollo Real Estate Investment Fund II, L.P., Koll Arcadia Investors, LLC and Koll Arcadia LLC filed on October 24, 1996 with the Securities and Exchange Commission with respect to the Paired Common Stock of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company. Unless otherwise indicated, all capitalized terms used but not defined herein have the meanings set forth in the Schedule 13D. Item 4. Purpose of Transaction. Item 4 is hereby amended to include the following: On March 17, 1997, KAI and Colony Capital, Inc. ("Colony") each submitted a formal proposal to recapitalize the Companies (the "Recapitalization"), providing up to $27 per Paired Share in cash to the Companies' stockholders. The proposals of KAI and Colony are separate and independent, and the obligations of KAI and Colony in connection with the proposed Recapitalization are independent obligations and therefore not conditioned on each other. Neither KAI nor Colony have authorized the other to act as its agent and they are not intending to create any agency, partnership or similar relationship between them prior to the consummation of the Recapitalization. KAI's and Colony's offers to consummate the Recapitalization will only remain open through March 28, 1997. Principal terms of proposed Recapitalization include: RECAPITALIZATION CONSIDERATION. In the Recapitalization, the Companies would (i) pay a special cash dividend of $11 per Paired Share to all current shareholders (the "$11 Special Dividend") and (ii) commence a self-tender offer to purchase up to 5,600,000 Paired Shares (the "Self Tender") in which current stockholders of the Companies would have the option, in addition to payment of the $11 Special Dividend, to (x) retain their existing Paired Shares, (y) receive $16 in cash per Paired Share or (z) receive per Paired Share an additional $11 in cash together with one warrant to purchase one Paired Share at $16.25 per Paired Share for a five year period (the "Warrant"). None of KAI, Colony nor any of their affiliates intends to tender any Paired Shares in the Self Tender. In the Recapitalization, KAI and Colony would cause the Companies to distribute up to an aggregate of $232 million to stockholders of the Companies. TRANSACTION STRUCTURE. In connection with the Transaction, two newly formed limited liability companies will be formed by causing (i) Realty to contribute substantially all of its properties and assets, subject to substantially all of its liabilities, to a newly formed limited liability company (the "Realty LLC"), and (ii) Operating and its subsidiaries to contribute substantially all of their properties and operating assets, subject to substantially all of their liabilities, to another limited liability company (the "Operating LLC" and together with Realty LLC, the "LLCs"). In exchange for contributing their assets to the LLCs, the Companies shall receive the number of LLC units equal to the current number of outstanding Paired Shares. Such LLC units would not be publicly traded but would be subject to the same pairing restrictions as the Paired Shares. Substantially all future business activities of the Companies will be conducted through the LLCs as the operating entities. TRANSACTION EQUITY FINANCING. To consummate the Recapitalization, subsequent to the payment of the $11 Special Dividend, (i) KAI would purchase 3,900,000 units of the LLCs (the "LLC Units") at a price equal to $11 per LLC Units, or $42.9 million in the aggregate, and (ii) Colony would purchase 2,600,000 Units, or $28.6 million in the aggregate. The LLC Units would be exchangeable on a one-for-one basis into Paired Shares, subject to REIT ownership limitations. In addition, (i) KAI would purchase 2,076,923 convertible preferred LLC units or shares of convertible preferred stock (the "Preferred LLC Units") at $13 per Unit, or $27 million in the aggregate, and (ii) Colony would purchase 1,384,615 Preferred LLC Units at $13 per Unit, or $18 million in the aggregate. Distributions on the Preferred LLC Units would accrue at 12% per annum for three years and then become payable on a current basis. The Preferred LLC Units would be convertible by the holder into Paired Shares at $13 per share (a conversion ratio of one-to-one) and will be convertible (at a conversion ratio of one-for-one) at the Companies' option on or after the third anniversary of the issuance date. DEBT FINANCING. A nationally recognized financial institution has indicated its interest in loaning up to $135 million to Realty LLC. Such amount will consist of (i) a four year loan of $95 million, with interest floating monthly at a premium over one-month LIBOR, secured by, among other things, a first mortgage lien on the Santa Anita racetrack, improvements (the "Racetrack") and surrounding land (the "Excess Land"); and (ii) a two year loan of up to $40 million, with interest floating monthly at a premium over one-month LIBOR, secured by, among other things, 100% of the proceeds from sales of certain non-core assets of the Company, excluding the Racetrack and Excess Land. Realty would guarantee such loans. STAND-BY PURCHASE. Pursuant to the terms of a letter agreement, dated as of January 28, 1997 (the "Letter Agreement"), by and between Gotham Partners, L.P. ("Gotham") and KAI, Gotham has committed to purchase on a stand-by basis up to 5,600,000 Warrants, for $5 per Warrant, or up to $28 million in the aggregate. Pursuant to the terms of the Letter Agreement, Gotham would purchase from the Companies one Warrant for each Paired Share purchased by the Companies pursuant to the $16 all cash election under the Self-Tender. It is not expected that Gotham would tender any Paired Shares into the Self-Tender. In addition, KAI and Colony have agreed that upon consummation of the Recapitalization they will offer to sell to Gotham in the aggregate (i) 181,818 LLC Units at $11 per LLC Unit, or $2 million in the aggregate, and (ii) 230,769 Preferred LLC Units at $13 per Unit, or $3 million in the aggregate. GOVERNANCE. Following the completion of the Recapitalization, the Boards of Directors of the Companies would consist of nine persons, of whom three would be representatives of KAI, three would be representatives of Colony and three would be independent directors (one of whom is expected to be a representative of Gotham). The LLCs will each have a Board of Member Repre- sentatives which will replicate the composition of the Boards of the Companies. In addition, upon consummation of the Recapitalization, the Companies will appoint certain new executive officers. On March 14, 1997, AREIF II entered into a letter agreement with Colony in connection with the Recapitalization relating to, among other matters, corporate governance issues following consummation of the Recapitalization, a standstill agreement prohibiting additional purchases of the securities of the Companies and the allocation of certain fees and expenses. Item 7. Material to be filed as Exhibits. Item 7 is hereby amended and restated in its entirety as follows: (1) Letter, dated March 14, 1997, from KAI and Colony to the Companies. (2) Press Release, dated March 17, 1997. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 17, 1997 APOLLO REAL ESTATE INVESTMENT FUND II, L.P. By: Apollo Real Estate Advisors II, L.P. Managing Member By: Apollo Real Estate Capital Advisors II, Inc. General Partner By: /s/ Michael D. Weiner ---------------------------------- Name: Michael D. Weiner Title: Vice President, Apollo Real Estate Capital Advisors II, Inc. APOLLO REAL ESTATE ADVISORS II, L.P. By: Apollo Real Estate Capital Advisors II, Inc. General Partner By: /s/ Michael D. Weiner ----------------------------------- Name: Michael D. Weiner Title: Vice President, Apollo Real Estate Capital Advisors II, Inc. KOLL ARCADIA INVESTORS, LLC By: Apollo Arcadia LLC Member By: /s/ Michael D. Weiner ----------------------------------- Name: Michael D. Weiner KOLL ARCADIA LLC By: /s/ James C. Watson ----------------------------------- Name: James C. Watson EXHIBIT 1 - LETTER Koll Arcadia Investors, LLC Colony Capital, Inc. 4343 Von Karman Avenue 1999 Avenue of the Stars Newport Beach, CA 92660 Los Angeles, CA 90067 March 14, 1997 Santa Anita Realty Enterprises, Inc. Santa Anita Operating Company Boards of Directors 285-301 West Huntington Drive Arcadia, California 91066 Gentlemen: On behalf of Koll Arcadia Investors, LLC ("KAI") and Colony Capital, Inc. ("Colony"), enclosed please find copies of a formal proposal from both KAI and Colony relating to their proposed recapitalization (the "Recapitalization Proposal") of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company (together, the "Santa Anita Companies"). We firmly believe that the Recapitalization Proposal provides the stockholders of the Santa Anita Companies with superior value and is in the best long term interest of the Santa Anita Companies. KAI and Colony have each undertaken considerable effort and expense to develop the Recapitalization Proposal. Accordingly, KAI's and Colony's offer to consummate the Recapitalization Proposal shall remain open through March 28, 1997. In addition, the Santa Anita Companies and its affiliates hereby agree that during the 45 day period beginning on the date the Santa Anita Companies execute this letter agreement, they shall not, and they shall use their best efforts to cause their respective officers, employees, agents and financial advisers not to, directly or indirectly, (i) solicit, initiate or encourage the submission of inquiries, proposals or offers from any corporation, partnership, person or other entity or group, other than from KAI and Colony and their respective officers, employees and agents, relating to any acquisition or purchase of any of the assets (other than in the ordinary course of business) of, or any equity interest in, the Santa Anita Companies or any of their affiliates or any merger, consolidation, restructuring, recapitalization or business combination involving the Santa Anita Companies or any of their affiliates, (ii) participate in any discussions or negotiations, including any existing or ongoing discussions and negotiations, regarding the foregoing or furnish to any person or entity information concerning the Santa Anita Companies or any of their affiliates in connection with the foregoing, (iii) authorize any officer or agent to do any of the foregoing or (iv) otherwise cooperate in any way with, or assist, facilitate, encourage, or participate in any effort or attempt by any other person or entity to do or seek any of the foregoing. KAI, Colony and their respective advisors are prepared to meet with you and the Special Committees to answer any additional questions you or the Special Committees may have. Please call Bill Scully at (212) 261-4052 or Kelvin Davis at (310) 282-8820 at your earliest convenience so that we may move the process forward. If you agree with the foregoing, please sign and return two copies of this letter agreement, which will constitute our agreement with respect to the subject matter of this letter agreement. Very truly yours, KOLL ARCADIA INVESTORS, LLC By:_____________________________ Name: Title: COLONY CAPITAL, INC. By:____________________________ Name: Title: Confirmed and agreed to as of the date first above written SANTA ANITA REALTY ENTERPRISES, INC. By:_________________________________ Name: Title: SANTA ANITA OPERATING COMPANY By:__________________________________ Name: Title: cc: Ron D. Sturzenegger, Morgan Stanley & Co. Incorporated TERM SHEET Set forth below are the terms of a proposal by Koll Arcadia Investors, LLC ("KAI") and Colony Investors II, L.P. ("Colony") relating to the recapitalization (the "Transaction") of Santa Anita Realty Enterprises, Inc. ("Realty") and Santa Anita Operating Company ("Operating", and together with Realty, the "Companies"). Although presented together in this term sheet for ease of reference, the obligations of KAI and Colony in connection with the proposed Transaction are independent obligations and neither KAI nor Colony have authorized the other to act as its agent and they are not intending to create any agency, partnership or similar relationship between them prior to the consummation of the Transaction. Transaction Structure: In connection with the Transaction, two newly formed limited liability companies will be formed by causing (i) Realty to contribute substantially all of its properties and assets, subject to substantially all of its liabilities, to a newly formed limited liability company (the "Realty LLC"), and (ii) Operating and its subsidiaries to contribute substantially all of their properties and operating assets, subject to substantially all of their liabilities, to another limited liability company (the "Operating LLC" and together with Realty LLC, the "LLCs"). In exchange for contributing their assets to the LLCs, the Companies shall receive the number of LLC units equal to the current number of outstanding Paired Shares. Such LLC units would not be publicly traded but would be subject to the same pairing restrictions as the Paired Shares. Substantially all future business activities of the Companies will be conducted through the LLCs as the operating entities. Transaction Consideration: In the Transaction, the Companies would (i) pay a special cash dividend of $11 per Paired Share to all current shareholders (the "$11 Special Dividend") and (ii) commence a self-tender offer to purchase up to 5,600,000 Paired Shares (the "Self-Tender") in which current stockholders of the Companies would have the option, in addition to receiving the $11 Special Dividend, to (x) retain their existing Paired Shares, (y) receive $16 in cash per Paired Share or (z) receive per Paired Share an additional $11 in cash together with one warrant to purchase one Paired Share at $16.25 per Paired Share for a five year period (the "Warrant"). None of KAI, Colony nor any of their affiliates intends to tender any Paired Shares in the Self-Tender. In the aggregate, KAI and Colony would cause to be distributed up to $232 million to the shareholders of the Companies. In the event any shareholder does not participate in the Self-Tender and such shareholder does not exchange Paired Shares for units of the LLCs, and, as a result, following the consummation of the Self-Tender, such shareholder's percentage ownership of Paired Shares could cause Realty to fail to qualify or be disqualified as a REIT, then the Companies, pursuant to Section 7.5 of the By-Laws of Realty and Section 6.5 of the By- Laws of Operating, could call for purchase from such shareholder such number of Paired Shares sufficient to maintain or bring the direct or indirect ownership of Paired Shares into conformity with the REIT requirements. Conversion of Paired Shares to Units: Consistent with the REIT qualification requirements, KAI and Colony will each exchange currently owned Paired Shares or Preferred Shares for LLC Units so that neither owns more than 4.9% of the outstanding Paired Shares upon consummation of the Transaction. Transaction Financing: Investment by KAI and Colony (i) KAI would purchase 3,900,000 units of the LLCs (the "LLC Units") at a price equal to $11 per LLC Unit, or $42.9 million in the aggregate, and (ii) Colony would purchase 2,600,000 Units, or $28.6 million in the aggregate. The LLC Units would be exchangeable on a one-for-one basis into Paired Shares, subject to REIT ownership limitations. In addition, (i) KAI would purchase 2,076,923 convertible preferred LLC units or shares of convertible preferred stock (the "Preferred LLC Units") at $13 per unit, or $27 million in the aggregate, and (ii) Colony would purchase 1,384,615 Preferred LLC Units at $13 per unit, or $18 million in the aggregate. Distributions on the Preferred LLC Units would accrue at 12% per annum for three years and then become payable on a current basis. The Preferred LLC Units would be convertible by the holder into Paired Shares at $13 per share (a conversion ratio of one-for-one) and will be convertible (at a conversion ratio of one-for-one) at the Companies' option on or after the third anniversary of the issuance date. Debt Financing A nationally recognized financial institution (the "Financial Institution") has offered to loan up to $135 million to Realty LLC. Such amount will consist of (i) a four year loan of $95 million (the "Racetrack Loan") secured by, among other things, (a) a first mortgage lien on the Santa Anita racetrack, improvements (the "Racetrack") and surrounding land (the "Excess Land"), (b) a first priority lien of all excess cash flow from the racetrack, (c) first priority security interest in all other tangible and intangible property of Realty; and (ii) a two year loan of up to $40 million (the "Non-Core Asset Loan" and together with the Racetrack Loan, the "Loans") secured by, among other things, (a) 100% of the proceeds from sales of certain non-core assets of the Company, excluding the Racetrack and Excess Land (the "Non-Core Assets"), (b) 100% of the cash flow from the Non- Core Assets, (c) 100% of the excess cash flow from the Racetrack, except to the extent required to conform to REIT distribution requirements, and (d) cash on hand at the time of purchase. The interest rate on the Racetrack Loan will float monthly at one-month LIBOR plus 412.5 basis points. The interest rate on the Non-Core Asset Loan will float monthly at one-month LIBOR plus 412.5 basis points during the first year and will float monthly at one- month LIBOR plus 462.5 basis points during the second year. In addition, the Companies will grant the Financial Institution warrants to purchase up to 1,440,000 Paired Shares or a similar number of LLC Units at a strike price equal to $27 per share less any dividends paid to existing stockholders of the Companies contemporaneously with the Transaction. Realty will guarantee the Loans. Stand-By Purchase Pursuant to the terms of a letter agreement, dated as of January 28, 1997 (the "Letter Agreement"), by and between Gotham Partners, L.P. ("Gotham") and KAI, Gotham has committed to purchase on a stand-by basis up to 5,600,000 Warrants, for $5 per Warrant, or up to $28 million in the aggregate. Pursuant to the terms of the Letter Agreement, Gotham would purchase from the Companies one Warrant for each Paired Share purchased by the Companies pursuant to the $16 all cash election under the Self-Tender. It is not expected that Gotham would tender any Paired Shares into the Self-Tender. Tax Treatment: The formation of the LLCs, including Realty's contribution of its core assets (subject to the Racetrack Loan) to Realty LLC, will generally be treated as a tax-free capital contribution to a limited liability company for Federal income tax purposes. After the formation of the LLCs, Realty will hold its LLC units with the same aggregate tax basis applicable to the core assets it contributed to the LLC. Realty's tax basis in its LLC units will not be reduced by the amount of the Loans assumed by Realty LLC in the formation because Realty will guarantee the Loans. Following the formation, Realty LLC will hold the core assets at a tax basis equal to that at which Realty held them prior to the formation. On the occurrence of Realty LLC's sale of the core assets or its payments of principal with respect to the Loans, Realty will realize gain or ordinary income, respectively, in its capacity as a member of the Realty LLC and the guarantor of such debt. Pursuant to the REIT rules, Realty will be required to distribute such gain or income to its shareholders in the year such gain or income is realized. The $11 Special Dividend will be a tax-free return of Realty's current shareholders' basis to the extent Realty has no tax earnings and profits from other sources in the taxable year of the Transaction. To the extent the $11 Special Dividend exceeds a Realty shareholder's basis in its Realty stock, it will be taxable as gain from the sale or exchange of such stock. Such capital gain will be long term if such shareholder held such stock for more than one year prior to the $11 Special Dividend. Each Realty shareholder selling shares pursuant to the Self-Tender will recognize capital gain or loss in an amount equal to the difference between $16 and the tax basis of the stock sold by such shareholder, as adjusted to reflect the effect, if any, of the $11 Special Dividend thereon. Such capital gain will be long term if such shareholder held such stock for more than one year prior to the Self-Tender. Existing Operations/Business Plan: Please see Exhibit A. Future Share Valuation: KAI and Colony expect the post- Transaction value of the Paired Shares to reflect a well communicated strategy to aggressively maximize value in three distinct areas: (i) acquisitions of assets which best utilize the paired share REIT structure and KAI's and Colony's operating expertise, (ii) horse racing efficiencies and (iii) development of excess land owned by Realty. KAI and Colony expect to achieve material improvement in financial performance beginning in 1998, after they have conducted an extensive review of strategic alternatives. See Exhibit B for two summary pro forma scenarios for the Companies through the year 2002 together with relevant material assumptions. KAI and Colony expect the post- Transaction Paired Shares to trade on the basis of anticipated future dividend yields and funds from operations, consistent with valuation parameters for other paired share REITs (see Exhibit B). KAI and Colony do not expect the Companies to pay dividends in excess of those required to maintain REIT status. Governance: Following completion of the Transaction, the Boards of Directors of the Companies would consist of nine persons, of whom three would be representatives of KAI, three would be representatives of Colony and three would be independent directors. The Boards of the Companies will each establish Executive Committees each consisting of three directors, of whom two would be representatives of Apollo and one would be a representative of Colony. The LLCs will each have a Board of Member Representatives which will replicate the composition of the Boards of the Companies, including the establishment of Executive Committees. In addition, upon consummation of the Transaction, the Companies and LLCs will appoint the officers set forth on Exhibit A. Exchange of LLC Units for Paired Shares: KAI and Colony will each have the option at any time after one year to tender all or any of its LLC Units or Preferred LLC Units to Realty and Operating. Tenders will be in pairs representing the same percentage interests in Realty LLC and Operating LLC. If LLC Units or Preferred LLC Units are tendered, the Companies will have the option to deliver, in exchange for such tendered units, either or both of (i) Paired Shares representing ownership of the Companies equivalent to the percentage ownership of the LLCs, as represented by the tendered LLC Units or Preferred LLC Units, or (ii) cash equal to the market value of such Paired Shares; provided, however, that while Realty is a qualified REIT it will not issue in an exchange Paired Shares which would cause any person to own, directly, indirectly or constructively, more than 9.8% of the Paired Shares outstanding at the time of the exchange. Registration Rights: Holders of LLC Units or Preferred LLC Units will have the right to cause resale of the Paired Shares receivable upon an exchange of LLC Units or Preferred LLC Units to be registered under Federal and state securities laws. Transaction Protection: The Companies would agree not to initiate any contact with, solicit, encourage or enter into or continue any discussions, negotiations, understandings or agreements with, anyone other than KAI or Colony (a "Third Party") with respect to, or furnish or disclose any non-public information regarding Realty, Operating or their subsidiaries, including the LLCs, to any Third Party in connection with any competing transaction proposal from a Third Party. Notwithstanding the foregoing, to the extent the Boards of Realty and Operating could be required by their fiduciary duties as determined in good faith on the written advice of the Companies' outside counsel, at any time prior to the approval by the Companies' stockholders of the Transaction, (i) Realty and Operating may, in response to an unsolicited request furnish non-public information with respect to Realty and Operating or their subsidiaries to any Third Party pursuant to a customary confidentiality and standstill agreement and discuss that information but not a Competing Transaction Proposal (as defined in the Amended and Restated Formation Agreement, dated as of October 24, 1996 and as amended as of January 7, 1997 (the "Amended Formation Agreement"), by and among the Companies and Colony) with the Third Party and (ii) upon the receipt by Realty or Operating of a Competing Transaction Proposal from a Third Party, if the Board of each of Realty and Operating has reasonably determined that the transaction contemplated by the Competing Transaction Proposal, if consummated, would constitute an Alternative Transaction (as defined in the Amended Formation Agreement), then Realty and Operating may participate in discussions and negotiations with the Third Party regarding the Competing Transaction Proposal. At least ten business days prior to entering into definitive agreements with respect to an Alternative Transaction, Realty and Operating will deliver an Alternative Transaction Notice to KAI and Colony advising both of the determination by the Boards of Directors of the Companies that the transaction contemplated by the Competing Transaction Proposal would constitute an Alternative Transaction, which notice will include a summary of the Alternative Transaction. During such ten business day period, KAI and Colony may propose an improved transaction to the Companies. Termination Fees/Expenses: If prior to the approval of the stockholders of the Companies of the Transaction (i) Realty and Operating have delivered an Alternative Transaction Notice to KAI and Colony as provided for above, (ii) the terms of the Alternative Transaction are not modified in a manner adverse to Realty or Operating and (iii) Realty and Operating have paid a termination fee equal to $6 million to each of KAI and Colony and reimbursed KAI's and Colony's expenses related to the Transaction (including, without limitation, fees and disbursements of its counsel, accountants and other financial, legal, accounting or other advisors and out-of-pocket expenses) up to $1 million each, then Realty and Operating may terminate their agreement with KAI and Colony and enter into an agreement with the Qualified Third Party (as defined in the Amended Formation Agreement) with respect to the Alternative Transaction described in the Alternative Transaction Notice provided to KAI and Colony as described above. Representations and The Companies will make customary Warranties: representations relating to, among other things, organization, capitalization, authority to enter into agreements, financial statements, consents and approvals, litigation, absence of any material adverse change, undisclosed liabilities, SEC documents, REIT qualification, absence of zoning or title conditions relating to properties, environmental matters, tax matters (including filing and payment of all applicable federal, state and local taxes), compliance with laws (including, without limitation, California law applicable to racetracks and the rules and regulations of the CHRB). Diligence Completed: KAI and Colony have completed significant due diligence on the Companies, including a review of company-supplied documents available in the "war room" as of December 1996. KAI and Colony have not reviewed additional documentation provided as per the revised index dated January 16, 1997 and received January 27, 1997 but believe that we could do so within 10 business days of entering into exclusive negotiations. The information most pertinent to valuation issues which has not been received involves taxes (further detail on basis for owned assets and partnership properties) and operational data regarding horse racing. Although it appears that some of this data may have been provided in the data room recently, it is likely that KAI and Colony will require access to additional detailed information and to management responsible for racing operations to complete our analysis of the racing revenue and expense structure. Upon entering into exclusive negotiations, KAI and Colony will complete their remaining due diligence on an expedited schedule, predicated of course, upon the full cooperation of the companies and their respective personnel. Authorizations: This proposal is not subject to further internal approvals by KAI, Apollo or Koll, or by Colony or any of its affiliates. Conditions of Consummation of the Transaction is Closing/Approvals: subject to the satisfaction of the following conditions: - No misrepresentation or breach of covenants and warranties; - No material adverse change in business of the Companies; - Receipt of legal opinion from counsel of the Companies regarding, among other things, REIT qualification; - No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Transaction shall be in effect; - All consents of government and regulatory authorities obtained; - All other necessary consents from other parties to all material contracts, leases, agreements and permits; - Execution of definitive documentation relating to the Transaction and the transactions contemplated thereby; - Transaction (including election of KAI and Colony director nominees) shall have received requisite shareholder approval; - Rights under the Rights Agreement, dated as of June 15, 1989, among Realty, Operating and Union Bank, as rights agent (the "Rights Agreement"), shall not have become exercisable; and - Operating and Operating LLC will qualify as "operating companies" within the meaning of Department of Labor Regulations, and Realty LLC will qualify as a "real estate operating company" within the meaning of Department of Labor Regulations. Existing Termination Consistent with the terms of the Fees/Expenses: Amended Formation Agreement prior to executing definitive documentation relating to the Transaction, the Companies shall pay Colony the Termination Fee and Colony's Transaction Expenses as set forth in the Amended Formation Agreement. Public Announcements: All announcements regarding any agreed transaction will be upon joint approval of the parties, subject to each party's legal obligations to make public announcements as required by events. Other Terms and The Companies will amend the Rights Conditions: Agreement to permit the commencement and closing of the transactions which are the subject of the Transaction without any such event or the passage of time resulting in the occurrence of the Distribution Date (as defined in the Rights Agreement). Within thirty days of executing definitive documentation relating to the Transaction, Realty and Operating shall (i) prepare and file with the SEC a joint proxy statement to solicit proxies in connection with a special meeting of shareholders of the Companies to vote on the Transaction and (ii) call a stockholders meeting for the purpose of, among other things, approving the Transaction and electing the KAI and Colony director nominees. The Companies shall grant Koll Arcadia LLC options to purchase approximately 3% of the post- Recapitalization Paired Shares or LLC Units at an agreed exercise price on the date of the grant increasing on a formula basis over time. Other Considerations/Information: The Companies will indemnify officers and directors of the Companies and the LLCs and vigorously defend any litigation relating to the Transaction. Independent Proposals: The proposals of KAI and Colony are separate and independent. All negotiations relating to this Transaction shall involve both KAI and Colony. EXHIBIT 2 - PRESS RELEASE FOR IMMEDIATE RELEASE Contact: Owen Blicksilver For KAI and Colony 212-303-7603 Koll Arcadia Investors, Colony Capital Announce Proposal To Recapitalize Santa Anita Companies; Investors Would Acquire 70% Stake NEW YORK/LOS ANGELES, March 17 -- Koll Arcadia Investors (KAI) and Colony Capital, Inc. today each announced a proposal to recapitalize the Santa Anita Companies (NYSE: SAR), a "paired share" REIT based in Arcadia, CA. The proposal by KAI, would provide up to $27 per share in cash to Santa Anita Companies' stockholders. Under the terms of the proposal, KAI and Colony would contribute an aggregate of $116.5 million in new equity capital and would cause the Santa Anita Companies to distribute a special dividend of $11 per common share to all shareholders from the proceeds of a new financing. In addition, approximately $61.5 million of the $116.5 million would be used to fund a self-tender for 5.6 million SAR shares in which existing shareholders would be given the option to receive $16 in cash (in addition to the $11 per share special dividend) for each share acquired in the tender, or $11 in cash plus a warrant valued at $5. Gotham Partners, L.P. has agreed to act as a standby purchaser to acquire warrants from the Companies for stockholders choosing the cash option. Accordingly, the KAI/Colony proposal will result in the distribution of more than $230 million to Santa Anita stockholders. KAI and Colony would own approximately 70% of the recapitalized Companies following the transaction, and will receive a majority of seats on the Boards of Directors. Gotham Partners, L.P., will also have a representative on the Boards. Representatives of KAI and Colony said "we believe it is in the best interests of all the shareholders for the two largest shareholders of Santa Anita to participate in the recapitalization of the Companies. We both have significant investments in the Companies and believe our organizations possess complementary strengths, in terms of capital and transaction opportunities, and share a common vision to foster the growth of Santa Anita into a major enterprise. Each of our organizations looks forward to bringing the recapitalization process to a timely conclusion and getting to the business of maximizing shareholder values." The representatives added that "by coordinating the resources of KAI and Colony, this new proposal improves on KAI's most recent offer, through the commitment of an additional $25 million of equity capital and the sponsorship of another major shareholder. This additional equity will enhance the Companies' ability to immediately embark upon accretive acquisitions." KAI is an investment partnership comprised of principals of the Koll Companies and Apollo Real Estate Investors II, L.P., a $570 million equity fund. KAI had previously made a recapitalization proposal to the Companies and owns approximately 8.7% of the paired common stock of the Companies. Colony Capital, Inc. is a Los Angeles-based investment firm which invests on behalf of Colony Investors II, L.P., a $625 million equity fund. Colony had previously announced a planned strategic alliance with the Companies and owns approximately 8.0% of the paired stock of the Companies on a fully diluted basis. Gotham Partners, L.P. is a New York-based investment fund and 5% shareholder of the Companies, which agreed to act as standby purchaser of warrants as part of KAI's previous offer. # # # -----END PRIVACY-ENHANCED MESSAGE-----