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Paullus counteroffered in a December 15, 1988, letter, which
proposed a restructured transaction under which Shen would
acquire Ridgemark’s assets except the land, facilities, and
equipment of Ridgemark Golf and Country Club. Specifically,
Ridgemark offered to sell the unit 10 property for a price of $10
million, with Shen assuming the responsibility of completing the
improvements related to the subdivision of the property into
buildable lots. An alternative offer for $11,500,000 was made
under which Ridgemark would complete the improvements. The
letter offered the unit 10 property for sale upon the terms and
conditions specified, which included Ridgemark’s tax-free
exchange requirement. The schematics associated with the offer
included the statement that the proposed transaction appeared to
qualify for a section 1031 exchange. On December 21, 1988,
Paullus sent a completed draft of the letter and schematic of the
proposed transaction. Ridgemark obtained the approval of the
final subdivision map and constructed certain offsite
improvements for the unit 10 property because Shen, through
assignees, wanted to be able to build houses and sell lots as
soon as possible after closing.
On January 9, 1989, Ridgemark’s board of directors removed
the restriction that preferred4 memberships in Ridgemark Golf and
4 The preferred memberships (class A) entitled those members
to full privileges of the recreational facility.
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