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To: Shareholders of 350 Bleecker Street Apartment Corp.

From: Kenneth B. Newman, Managing Partner of Bleecker Charles Company.

On behalf of Bleecker Charles Company ("the Sponsor"), I respond to Mark Lilien's June 22, 1999 letter to the shareholders and the two June 22 letters from Walter Goldsmith of Friedman, Krauss & Zlotolow respectively to me and the shareholders ("Goldsmith Letters").

Once you weed out the emotional rhetoric and undeserved personal attacks on my character, the Goldsmith Letters are devoid of substance. At worst, they present an inaccurate picture of the risks, in litigation or otherwise, of terminating the Master Lease as it relates to the garage. Insofar as they address the right to terminate the Master Lease, they are simply and demonstrably wrong.

What the Lawyers and Other Professionals Will Cost

The Goldsmith Letters also confirm that any attempt to terminate the lease will be very costly for the cooperative and the shareholders.

The letters indicate that, regardless of whether under a contingency plan or an hourly rate, legal fees alone could well range from $200,000 to 5500,000. These amounts do not include litigation disbursements, which could also be substantial and possibly as high as $20,000.

The estimates provided by the Goldsmith Letters do not include (a) the costs of accountants, (b) the legal costs of defending a foreclosure of the NCCB Mortgage and/or its renegotiation if it is called and recast (see below), and (c) the legal costs of defending litigation by, or renegotiating with, the garage operator. These costs could easily total another $100,000.

The Master Lease Still Cannot Be Terminated under the Federal Act

The Goldsmith Letters are manifestly incorrect about the Sponsor's ability to prevail in litigation on this issue.

The Second Circuit is the Ultimate law-giver under the Federal Act for cases in New York. It has held specifically that a garage lease is terminable under the Federal Act only if the leased facility provides a service primarily for the benefit of unit owners at the time of termination. West 14th Street Commereial Corp. v. 5 West 14th Owners Corp., 815 F.2d 188, 198-99 (2d Cir. 1987). Moreover, the Second Circuit has held that, although the facility under lease may be owned by the cooperative and be potentially usable primarily for unit owners, the actual use at the time of an attempted termination is controlling. Crowell Associates v. Oliver Cromwell Owners, Inc., 941 F.2d 107, 111-12 (2d Cir. 1991).

As noted in my June 17, 1999 letter, the garage primarily serves the general public by any measure. The Sponsor believes that it can prove that substantially less than 50% of garage revenues are derived from residents of the building. Moreover, less than 15% of the spaces in the garage are used by building residents, many of whom are not even unit owners and therefore do not count under the "primarily serving" test. The garage simply does not serve primarily the unit owners at this time. Thus, under Second Circuit standards, the lease simply does not now fall, and has never fallen, within the category of garage leases that are subject to termination under the Federal Act.

The Goldsmith Letters do not refute the Sponsor's assertions that the statutory two-year window period in which the garage lease could be terminated under the Federal Act expired in July 1992. The referenced New York State regulations terminated the Sponsor's control over expenses of the cooperative, regardless of any contrary provision in the By-Laws. The cases cited in the Goldsmith Letters reveal that to be the case.

The assertion in the Goldsmith Letters that the Sponsor exercised this power in 1997 is simply inaccurate. I challenge any of the proponents of the Lilien resolutions to provide proof to that effect.

Thus, the only remaining basis for a claim of special developer control is the Sponsor's right to consent as to certain amendments to the By-Laws. I repeat that no New York state or federal court has ever found that special developer control exists where that type of by-law provision is the only remaining basis for asserting such control. Moreover, the libelous and inaccurate assertion that my conduct could affect the termination period is ridiculous since this assertion presupposes that there was an open-and-shut case for termination under Federal Act. The truth is that there is no case of any bona fide value.

You Could Still Be Charged with the Sponsor's Litigation Costs

The unit owners simply have no case under the Federal Act. They are now on notice of clear defenses to any such claim. The Sponsor will act on that notice to recover its litigation costs under the Federal Act. Moreover, the Sponsor will actively seek to have those costs passed only to unit owners who vote in favor of a wrongful termination of the Master Lease.

The What If Scenarios Revisted

The Goldsmith Letters cursorily address the harmful consequences to the unit owners and the cooperative arising from any attempted termination of the lease for the garage, if such termination were found to be lawful.

The Goldsmith Letters suggest possible methods for avoiding the shareholders' loss of their tax deductions, but do not provide any meaningful information about precise solutions, their costs and other consequences, or whether those solutions are workable here. Indeed, neither the Goldsmith Letters nor the advocates of the Lilien Notice have provided a concrete plan for assuring that you will maintain your tax deductions.

The Goldsmith Letters also do not deal with the adverse effects of the defaults under the NCCB Mortgage. NCCB apparently has not been contacted. NCCB has certainly not consented to the loss of its current collateral. Because mortgage interest rates have risen significantly since the rate on the mortgage was fixed and are now rising rapidly in the face of expected Federal Reserve rate hikes, NCCB has every reason to call the loan. If NCCB does not insist upon being paid out completely, as it may because of ongoing litigation involving uncertain consequences to its borrower, NCCB clearly will insist upon refinancing with upfront and closing costs and at a higher interest rate. Every 1% point increase costs the cooperative $34,000 per year, every 2% point increase $68,000 per year and every 3% point increase more than $100,000 per year. If the principal amortization period is reduced, the cooperative will have additional cash flow burdens.

The termination proposals make no sense. If you have any questions that you would like to address to me personally about them, please feel free to call or write.

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