<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 31, 1998
---------------------------
Philips International Realty Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 000-23463 13-3963667
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
417 Fifth Avenue, New York, N.Y. 10016
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-545-1100
--------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
1 of 18
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
Current Report
on
Form 8-K
----------------------
Item 2. Acquisition and Disposition of Assets
By Form 10-Q filing for the quarter ended June 30, 1998 and
dated August 13, 1998, Registrant reported the purchase of a
shopping center property in Munsey Park, NY. The undersigned
Registrant hereby supplements such Form 10-Q to include the
financial information set forth in Item 7 below. Capitalized
terms not defined herein have the meanings as set forth in the
Company's Registration Statement on Form S-11 dated May 7,
1998.
The Munsey Park shopping center (the "Property") is located on
Long Island in an affluent, densely populated community
approximately 20 miles from New York City. The Property is
situated at the intersection of Northern Boulevard and
Searingtown Road, directly across from the Americana "Miracle
Mile" shopping corridor, one of the premier retail markets on
Long Island. The fully-occupied center encompasses 77,000
square feet of leasable space and is anchored by Bed Bath &
Beyond and Fresh Fields, a national specialty grocery chain.
The Company acquired the center for a purchase price of
approximately $21.5 million in cash and assumed indebtedness.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) (b) Financial Statements and Pro Forma Financial
Information
The financial statements and pro forma financial information
filed herewith is as follows:
Page
Independent Auditor's Report 5
Statement of Revenues and Certain
Operating Expenses for the Year Ended
December 31, 1997 6
Notes to Statement of Revenues
and Certain Operating Expenses 7
-2-
<PAGE>
Page
Estimates of Net Loss and Funds from
Operations of Munsey Park, NY Property 10
Notes to Estimates of Net Loss and Funds
from Operations of Munsey Park, NY Property 11
Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1998 14
Pro Forma Condensed Consolidated Statement
of Income for the Year Ended December 31, 1997 15
Pro Forma Condensed Consolidated Statement of
Income for the Six Months Ended June 30, 1998 16
Notes to Pro Forma Condensed Consolidated
Financial Statements 17
(c) Exhibits
No exhibits required to be filed herewith.
-3-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
MUNSEY PARK, NY PROPERTY
STATEMENT OF REVENUES AND
CERTAIN OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1997
-4-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Philips International Realty Corp.
New York, New York
We have audited the statement of revenues and certain operating expenses of the
Munsey Park shopping center ("the Property") as described in Note 1, for the
year ended December 31, 1997. The financial statement is the responsibility of
management. Our responsibility is to express an opinion on the financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in Form 8K of Philips
International Realty Corp. and is not intended to be a complete presentation of
the revenues and expenses of the Property.
In our opinion, the financial statement referred to above presents fairly, in
all material aspects, the revenues and certain operating expenses of the
Property as described in Note 1, for the year ended December 31, 1997 in
conformity with generally accepted accounting principles.
Gentile & Pismeny, LLP
Great Neck, New York
August 27, 1998
-5-
<PAGE>
MUNSEY PARK, NY PROPERTY
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
For the year
ended
December 31,
1997
Revenues from rental property $2,960
------
Certain operating expenses:
Property taxes 652
Management fees 33
Common area expenses 296
Professional fees 25
Insurance 24
------
1,030
------
Revenues in excess of certain operating expenses $1,930
======
The accompanying notes and independent auditor's report
should be read in conjuction with this financial statement
-6-
<PAGE>
MUNSEY PARK, NY PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
DECEMBER 31, 1997
Note 1 - Basis of Presentation
Presented herein is the Statement of Revenues and Certain Operating
Expenses related to the operations of the Munsey Park shopping center
(the "Property"), which is located in Munsey Park, Long Island, NY.
The Property was acquired on July 31, 1998. The accompanying
financial statement presents revenues and certain operating expenses of
the prior owner for the year ended December 31, 1997.
The accompanying financial statement has been prepared in
accordance with the applicable rules and regulations of the Securities
and Exchange Commission for the acquisition of real estate properties.
Accordingly, the financial statement excludes certain operating
expenses that may not be comparable to those expected to be incurred in
the future operations of the Property. Expenses excluded consist of
interest, depreciation and certain general and administrative expenses.
Note 2 - Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statement and accompanying notes. Actual results could differ
from those estimates.
Note 3 - Revenue Recognition
The Property is leased to tenants under operating leases. Minimum
rental revenue is recognized on a straight-line basis over the terms of
the respective leases.
Note 4 - Management Agreements
Management services for the Property were provided by Realco Group
Asset Management, Ltd. Fees paid for such service were $33,000 per
annum.
Note 5 - Lease Agreements
The Property is leased to tenants under operating leases. The
minimum rental amounts due under the leases are generally subject to
scheduled fixed increases. Certain leases also require that the tenants
reimburse increases in certain operating costs and real estate taxes.
-7-
<PAGE>
MUNSEY PARK, NY PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
DECEMBER 31, 1997
Note 5 - Lease Agreements (continued)
Minimum rents and expense reimbursements represented 96% of
revenues from rental property for the year ended December 31, 1997.
Approximate future minimum rents to be received over the next five
years and thereafter for leases in effect as of December 31, 1997,
assuming that there are not renewals or extensions of leases, are as
follows (in thousands):
1998 $ 2,242
1999 2,309
2000 2,326
2001 2,448
2002 2,494
Thereafter 12,992
--------
$ 24,811
--------
Note 6 - Concentration of Revenues
The Property is fully leased with four tenants, Bed Bath and Beyond
of Munsey Park, Inc., Fresh Fields Markets, Inc., Benihana of Tokyo,
Inc. and Chase Manhattan Bank, N.A. These tenants account for 42%, 34%,
16% and 8%, respectively, of the total revenue. Any adverse change in
the operating profitability of these tenants may have a material
adverse effect on the Property.
-8-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
MUNSEY PARK, NY PROPERTY
ESTIMATES OF NET LOSS AND FUNDS FROM OPERATIONS
-9-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
ESTIMATES OF NET LOSS AND
FUNDS FROM OPERATIONS
OF
MUNSEY PARK, NY PROPERTY
-------------------
(UNAUDITED)
The following estimate of net loss and funds from operations expected to be
generated from the operation of the Property acquired on July 31, 1998 is based
upon the Statement of Revenues and Certain Operating Expenses for the Year Ended
December 31, 1997. These estimated results do not purport to represent results
of operations for the Property in the future and were prepared on the basis
described in the accompanying notes which should be read in conjunction
herewith.
Estimated Net Loss
Excess of revenues over
certain operating expenses $ 1,930
Less: Depreciation (Note 1) (444)
Mortgage and related interest (Note 1) (1,687)
Incremental management/professional fees (Note 1) (30)
Add: Minority interests (Note 1) 58
--------
Estimated net loss $ (173)
========
Estimated Funds from Operations
Estimated net loss $ (173)
Add: Depreciation 444
Less: Minority interests (58)
-------
Estimated funds from operations $ 213
=======
-10-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
NOTES TO ESTIMATES OF NET LOSS AND
FUNDS FROM OPERATIONS
OF
MUNSEY PARK, NY PROPERTY
---------------------
1. Basis of Presentation
Depreciation has been estimated based upon an allocation of the
Property acquisition cost to land (20%) and building (80%) and assuming
a 39.5 year useful life applied on a straight line method.
Mortgage and related interest represents estimated interest expense,
including the amortization of deferred financing costs, on mortgage
and other debt assumed in connection with the acquisition of the
Property.
Property management services for the Company's shopping centers are
provided pursuant to a Management Agreement by Philips International
Holding Corp., an affiliated entity, for a fee based upon 3% of gross
rental collections.
Minority interests represent the approximate 25% interest held by
minority partners (i.e. Unit holders) in Philips International Realty,
L.P., the Operating Partnership.
No income taxes have been provided because the Company operates so as
to qualify as a real estate investment trust under the provisions of
the Internal Revenue Code. Accordingly, the Company does not pay
Federal income tax providing income distributed to its stockholders
equals at least the amount of its real estate investment trust taxable
income and certain other conditions are met.
2. Acquisition Considerations
In assessing the Property, the Company's management considered the
existing tenant base, which is the primary revenue source, historic
occupancy rates (which was 100% at the date of acquisition), the
competitive nature of the market and comparative rental rates.
Furthermore, current and anticipated maintenance and repair costs, real
estate taxes and capital improvement requirements were evaluated.
Management is not aware of any material factors that would cause the
reported financial information in the accompanying Statement of
Revenues and Certain Operating Expenses and Estimates of Net Loss and
Funds from Operations of the Property to be misleading or not
necessarily indicative of future operating results.
-11-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
AND SUBSIDIARIES
MUNSEY PARK, NY PROPERTY
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-12-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------
The accompanying Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1998 assumes the acquisition of the Property had occurred as of such
date. The accompanying Pro Forma Condensed Consolidated Statements of Income for
the Year Ended December 31, 1997 and the Six Months Ended June 30, 1998 assume
such acquisition had occurred as of January 1, 1997. The pro forma information
is based on the historical operating results for the Company, as adjusted to
give effect to the Formation Transactions, the Offering and the acquisition of
the Property.
The Pro Forma Condensed Consolidated Financial Statements have been
prepared by the management of Philips International Realty Corp. These pro forma
statements may not be indicative of the financial position at June 30, 1998 or
the results of operations that would have actually occurred if the Formation
Transactions, the Offering and the Property acquisition had occurred as of
January 1, 1997. Also, they may not be indicative of the results that may be
achieved in the future. The Pro Forma Condensed Consolidated Financial
Statements should be read in conjunction with the financial information
contained in the Company's Registration Statement on Form S-11 dated May 7,
1998, annual report on Form 10-K for the year ended December 31, 1997 and
quarterly report on Form 10-Q for the period ended June 30, 1998 and the
accompanying notes thereto.
-13-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
HISTORIC MUNSEY PARK PROFORMA
(UNAUDITED) ACQUISITION (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Rental properties - net $ 185,048 $ 21,912 $ 206,960
Cash and cash equivalents 2,152 2,152
Accounts receivable 5,467 5,467
Deferred charges and prepaid expenses 3,630 128 3,758
Other assets 2,540 (369) 2,171
------------ ------------ ------------
Total Assets $ 198,837 $ 21,671 $ 220,508
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages and notes payable $ 71,411 $ 21,671 $ 93,082
Accounts payable and accrued expenses 2,927 2,927
Dividend payable 1,330 1,330
Other Liabilities 1,377 1,377
------------ ------------ ------------
Total Liabilities 77,045 21,671 98,716
------------ ------------ ------------
Minority interests 31,030 31,030
------------ ------------ ------------
Shareholders' Equity
Preferred Stock, $.01 par value; 30,000,000
shares authorized; no shares issued
and outstanding - 0
Common Stock, $.01 par value; 150,000,000
shares authorized; 7,340,474 shares
issued and outstanding 74 74
Additional paid in capital 92,668 92,668
Cumulative distributions in excess of
net income (959) (959)
------------ ------------ ------------
91,783 0 91,783
Stock purchase loan receivable (1,021) (1,021)
------------ ------------ ------------
Total Shareholder' Equity 90,762 0 90,762
------------ ------------ ------------
Total Liabilities and Shareholders' Equity $ 198,837 $ 21,671 $ 220,508
============ ============ ============
</TABLE>
- 14 -
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
FORMATION AS MUNSEY
TRANSACTION OFFERING ADJUSTED PARK PRO FORMA
HISTORIC ADJUSTMENTS ADJUSTMENTS (UNAUDITED) ACQUISITION (UNAUDITED)
-------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from rental property $32,210 $ 538 $ $ 32,748 $ 2,960 $ 35,708
------- ---------- ---------- ----------- ---------- ----------
Expenses:
Operating expenses 4,417 4,417 320 4,737
Real estate taxes 4,682 4,682 652 5,334
Management fees to
affiliates 1,241 (311) 930 88 1,018
Interest expense 15,070 (431) (8,878) 5,761 1,687 7,448
Depreciation and
amortization 4,902 789 5,691 444 6,135
General and administrative expenses 856 1,116 378 2,350 2,350
------- ---------- ---------- ----------- ---------- ----------
31,168 1,163 (8,500) 23,831 3,191 27,022
------- ---------- ---------- ----------- ---------- ----------
Operating income
(loss) 1,042 (625) 8,500 8,917 (231) 8,686
Minority interests - (2,248) (2,248) 58 (2,190)
Equity in income of
investee 339 (339) - -
Other income, net 42 42 42
------- ---------- ---------- ----------- ---------- ----------
Income (loss) before extraordinary items $ 1,423 $ (625) $ 5,913 $ 6,711 $ (173) $ 6,538
======= ========== ========== =========== ========== ==========
Income per share
Basic $ 0.91 $ 0.89
=========== ==========
Diluted $ 0.91 $ 0.89
=========== ==========
</TABLE>
- 15 -
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
AS MUNSEY
OFFERING ADJUSTED PARK PRO FORMA
HISTORIC ADJUSTMENTS (UNAUDITED) ACQUISITION (UNAUDITED)
-------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues from rental property $4,528 $12,224 $16,752 $1,487 $18,239
------ ------ ------ ------ ------
Expenses:
Operating expenses 569 1,505 2,074 154 2,228
Real estate taxes 646 1,748 2,394 364 2,758
Management fees to affiliates 135 363 498 44 542
Interest expense 753 2,205 2,958 843 3,801
Depreciation and amortization 780 2,021 2,801 222 3,023
General and administrative expenses 342 925 1,267 1,267
------ ------ ------ ------ ------
3,225 8,767 11,992 1,627 13,619
------ ------ ------ ------ ------
Operating income (loss) 1,303 3,457 4,760 (140) 4,620
Minority interests (334) (865) (1,199) 35 (1,164)
Preferred units income allocation from
Operating Partnership 63 (63) - -
Equity in net income of Operating Partnership,
as adjusted for the allocation of income to
to preferred units 7 (7) - -
Other income, net 4 4 4
------ ------ ------ ------ ------
Income (loss) before extraordinary items $1,043 $2,522 $3,565 $ (105) $3,460
====== ====== ====== ====== ======
Income per share
Basic $0.48 $0.47
===== =====
Diluted $0.48 $0.47
===== =====
</TABLE>
-16-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
As Adjusted amounts in the accompanying Pro Forma Condensed
Consolidated Statements of Income reflect the historical operating
results for the Company after giving effect to the Formation
Transactions and the Offering. The Pro Forma amounts further adjust
such operating results for the year ended December 31, 1997 and the six
months ended June 30, 1998 to give effect to the July 1998 acquisition
of the Property, as if this purchase had been completed as of January
1, 1997. The accompanying Pro Forma Condensed Consolidated Balance
Sheet assumes the acquisition of the Property had been completed as of
June 30, 1998.
2. Munsey Park Adjustments
The Munsey Park, NY adjustments are based on the Statement of Revenues
and Certain Operating Expenses for the Year Ended December 31, 1997
included elsewhere in this current report on Form 8-K, and the
unaudited interim operating results for the Property for the six-month
period ended June 30, 1998.
Depreciation has been estimated based upon an allocation of the
Property acquisition cost to land (20%) and building (80%) and assuming
a 39.5 year useful life applied on a straight line method.
Mortgage and related interest represents estimated interest expense,
including the amortization of deferred financing costs, on mortgage
and other debt assumed in connection with the acquisition of the
Property.
Property management services for the Company's shopping centers and
provided pursuant to a Management Agreement by Philips International
Holding Corp., an affiliated entity, for a fee based upon 3% of gross
rental collections.
Minority interests represent the approximate 25% interest held by
minority partners (i.e. Unit holders) in Philips International Realty,
LP, the Operating Partnership.
No income taxes have been provided because the Company operates so as
to qualify as a real estate investment trust under the provisions of
the Internal Revenue Code. Accordingly, the Company does not pay
Federal income tax providing income distributed to its stockholders
equals at least the amount of its real estate investment trust taxable
income and certain other conditions are met.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Philips International Realty Corp.
----------------------------------
(Registrant)
Date: October 12, 1998
By: /s/ Brian J. Gallagher
----------------------------
Brian J. Gallagher
Chief Financial Officer
-18-
