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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHILIPS INTERNATIONAL REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 13-3963667
(STATE OR OTHER JURISDICTION OF (I.R.S EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
417 FIFTH AVENUE, NEW YORK, NEW YORK 10016
(212) 545-1100 (ZIP CODE)
(ADDRESS, INCLUDING TELEPHONE NUMBER,
OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
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THE 1997 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
(FULL TITLE OF THE PLANS)
------------------------
Copies to:
<TABLE>
<S> <C>
PHILIP PILEVSKY JONATHAN A. BERNSTEIN, ESQ.
CHIEF EXECUTIVE OFFICER BLAKE HORNICK, ESQ.
PHILIPS INTERNATIONAL REALTY CORP. PRYOR CASHMAN SHERMAN & FLYNN LLP
417 FIFTH AVENUE 410 PARK AVENUE
NEW YORK, NEW YORK 10016 NEW YORK, NEW YORK 10022
(212) 545-1100 (212) 421-4100
</TABLE>
(NAMES, ADDRESSES AND TELEPHONE NUMBERS OF AGENTS FOR SERVICE)
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
TITLE OF AMOUNT OF MAXIMUM OFFERING PROPOSED
SECURITIES TO SHARES TO BE PRICE MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED* PER SHARE** OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock ($0.01 par value).... 852,550 $14.53125 $12,381,617 $3,754.13
</TABLE>
* All the securities registered hereby are issuable under the Plan.
** Estimated solely for the purpose of calculating the registration fee and
computed in accordance with Rule 457(c) under the Securities Act of 1933,
upon the basis of the average of the high and low prices reported in the
consolidated reporting system as of February 8, 1999.
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EXPLANATORY NOTES
Included on the immediately following pages is a "reoffer prospectus."
Selling shareholders can use this document in connection with the reoffer and
resale of restricted securities pursuant to Philips International Realty Corp.'s
1997 Stock Option and Long-Term Incentive Plan.
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PROSPECTUS
852,550 SHARES
PHILIPS INTERNATIONAL REALTY CORP.
COMMON STOCK
------------------------
We, Philips International Realty Corp., a Maryland Corporation, are a
self-advised real estate investment trust. The persons listed as our selling
shareholders in this prospectus are offering and selling up to 852,550 shares of
our common stock. We will issue these shares of our common stock to such selling
shareholders upon their exercise of options now or hereafter granted. All net
proceeds from the sale of the shares of common stock offered by this prospectus
will go to the selling shareholders. We will not receive any proceeds from such
sales.
The selling shareholders may offer their shares of common stock through
public or private transactions, in the over-the-counter markets, on any
exchanges on which our common stock is traded at the time of sale, at prevailing
market prices or at privately negotiated prices. The selling shareholders may
engage brokers or dealers who may receive commissions or discounts from the
selling shareholders. We will pay substantially all of the expenses incident to
the registration of such shares, except for the selling commissions.
Our common stock is listed on the New York Stock Exchange under the ticker
symbol "PHR." The closing price of our common stock on February 8, 1999, was
$14.375 per share.
------------------------
SEE "RISK FACTORS" AT PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
MATERIAL FACTORS WHICH YOU SHOULD CONSIDER BEFORE INVESTING IN THE COMMON STOCK
OFFERED BY THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR HAS DETERMINED IF
THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is February 10, 1999.
<PAGE>
You should rely only on the information contained in this document or that
which we have referred you to. We have not authorized anyone to provide you with
information that is different. We are not offering to sell or to buy the common
stock offered in this document to any person unauthorized or prohibited to do
so. You should not think that the delivery of this prospectus nor any sale made
in connection with this common stock, under any circumstances, implies that the
information contained in this document is correct as of any time after the date
of this prospectus.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the Securities and Exchange Commission at 1-800-732-0330 for further
information on the operation of such public reference room. You also can request
copies of such documents, upon payment of a duplicating fee, by writing to the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 or obtain copies of such documents from the Securities and Exchange
Commission's web site at http://www.sec.gov. In addition, our common stock is
listed on the New York Stock Exchange (the "NYSE"), and similar information
concerning us can be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
We have filed with the Securities and Exchange Commission a registration
statement (of which this prospectus is a part) under the Securities Act of 1933,
as amended, with respect to the securities being offered. This prospectus does
not contain all of the information set forth in the registration statement. We
have omitted certain portions as permitted by the rules and regulations of the
Securities and Exchange Commission. Statements contained in this prospectus as
to the contents of any contract or other document are not necessarily complete,
and in each instance we refer you to the copy of such contract or other document
filed as an exhibit to the registration statement. Each such statement is
qualified in all respects by such reference and the exhibits and schedules to
the registration statement. For further information regarding us and the
securities being offered, please read the registration statement and such
exhibits and schedules which may be obtained from the Securities and Exchange
Commission at its principal office in Washington, D.C. upon payment of the fees
prescribed by the Securities and Exchange Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is considered to be part of this
prospectus and information that we file later with the Securities and Exchange
Commission automatically will update and supersede such information. We
incorporate by reference the documents listed below and any future filings we
make with the Securities and Exchange Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended:
a. Our Annual Report on Form 10-K (File No. 0-23463) for the fiscal year
ended December 31, 1997;
b. Our Quarterly Reports on Form 10-Q (File No. 0-23463) for the fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998;
c. Our Current Reports on Form 8-K (File No. 0-23463), dated December 31,
1997, and Form 8-K (File No. 1-14095), dated July 31, 1998;
d. The description of the common stock and the description of certain
provisions of Maryland Law and our articles of incorporation and bylaws,
both contained in our registration statement on Form 8-A, dated May 6,
1998.
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You may request a copy of these filings (including exhibits to such filings
that we have specifically incorporated by reference in such filings), at no
cost, by writing or telephoning our executive offices at the following address:
Philips International Realty Corp.
Attention: Chief Financial Officer
417 Fifth Avenue
New York, New York 10016
(212) 545-1100
You should rely only on the information provided or incorporated by
reference in this prospectus or any related supplement. We have not authorized
anyone else to provide you with different information. The selling shareholders
will not make an offer of these shares in any state that prohibits such an
offer. You should not assume that the information in this prospectus or any
supplement is accurate as of any date other than the date on the cover page of
such documents.
INFORMATION ABOUT PHILIPS INTERNATIONAL REALTY CORP.
We, Philips International Realty Corp., are a self-advised real estate
investment trust formed to continue and expand the shopping center business of
certain affiliated companies owned or controlled by Philip Pilevsky known as the
Philips Group. We own, acquire for redevelopment, and develop neighborhood and
community shopping centers predominantly located in two major, densely
populated, east coast metropolitan regions: (i) the New York, northern New
Jersey, Long Island and Connecticut consolidated metropolitan statistical area
(the "New York CMSA") and (ii) the Miami-Fort Lauderdale consolidated
metropolitan statistical area (the "Miami CMSA").
Philip Pilevsky, Chairman of the board of directors and chief executive
officer, leads our management team whose executive officers have an average of
approximately 16 years experience in acquiring, redeveloping and developing
retail properties. The Philips International Realty Corp. and Philips Group have
acquired, redeveloped and/or developed a total of 70 retail properties
encompassing over 5.4 million square feet within the New York CMSA and Miami
CMSA markets. Mr. Pilevsky and the other executive officers and directors
beneficially own, in the aggregate, approximately 22.6% of our outstanding
common stock (or units redeemable therefor).
On May 13, 1998, we completed a primary public stock offering of 7,200,000
shares of common stock at $17.50. Our common stock is listed on the New York
Stock Exchange under the ticker symbol "PHR."
Our strategy is to acquire for redevelopment and develop quality
neighborhood and community shopping centers, located in demographically strong,
under-stored markets which serve the daily needs of the surrounding community.
Twenty-one (21) of our properties are anchored by national or regional
supermarkets or discount department stores such as Publix Supermarkets, Inc.,
Winn-Dixie Stores, Inc., and Wauldbaum/APW Supermarkets, Inc. and Kmart. Our
portfolio consists of interests in 26 properties encompassing 3.8 million square
feet of gross leasable area. Approximately 70% of our gross leasable area is
located in the New York CMSA and the Miami CMSA markets. We believe the strength
of these grocery and discount retailers, as well as other key anchor tenants,
provide our properties with consistent consumer traffic and enables us to
attract additional quality anchor retailers, as well as quality national,
regional and local non-anchor retailers. As of December 31, 1998, our properties
were 94% leased to 392 tenants.
To ensure that we qualify as a REIT, the transfer of shares of our capital
stock including the common stock, is subject to certain restrictions. Ownership
of capital stock by any single person is limited to 8.0 percent of the value of
such capital stock, subject to certain exceptions. Our articles of incorporation
provide that any purported transfer in violation of the above-described
ownership limitations shall be void ab initio.
All of our interests in our properties are held by, and our operations are
conducted through, Philips International Realty, L.P., a Delaware limited
partnership. As of December 31, 1998, we were the beneficial owners of
approximately 74.8 percent of Philips International Realty, L.P., and are its
sole general partner.
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We were incorporated in Maryland on July 16, 1997. Our executive offices
are located at 417 Fifth Avenue, New York, New York 10016, and our telephone
number is (212) 545-1100.
RISK FACTORS
An investment in our common stock involves various risks. You should
carefully consider the following risk factors and other information in this
prospectus before deciding to invest in our common stock.
DEPENDENCE ON CERTAIN MARKET REGIONS AND PROPERTIES.
Dependence on Certain Market Regions. Thirteen of our properties are
located in either of the following major east coast metropolitan regions:
(1) the New York, northern New Jersey, Long Island and Connecticut metropolitan
market area or (2) the Miami-Fort Lauderdale metropolitan market area. As of
December 31, 1998, the total weighted average annualized base rent due under
leases with tenants at properties located in such areas represented 84% of our
total annualized base rents due under all of our leases. Adverse economic
developments in these states could adversely impact the operations of our
properties and, therefore, our profitability. Since our portfolio consists
primarily of retail properties (as compared to a more diversified portfolio), a
decline in the economy or a decline in the demand for retail space may adversely
affect our ability to make distributions.
Dependence on Certain Properties. As of December 31, 1998, the total
annualized base rent due under leases with tenants at four of our properties
located in Hialeah, Florida represented 35% of our total annualized base rents
due under all of our leases. Adverse economic developments or a decline in
consumer demand for shopping centers in this area or at these four properties
could disproportionately and adversely affect our ability to make distributions.
CONFLICTS OF INTEREST.
Potential Conflicts With Management. Our executive officers, including
Mr. Philip Pilevsky and Ms. Sheila Levine, direct our day-to-day operations.
Philips International Holding Corp., a corporation that Mr. Pilevsky and
Ms. Levine own, manages such day-to-day operations pursuant to a management
agreement dated December 31, 1997 among us, Philips International Realty. L.P.
and Philips International Holding Corp. Mr. Pilevsky also has several other real
estate holdings and activities that are not part of our company. A limited
number of such holdings are retail properties that may compete with our
properties. Personnel of Philips International Holding Corp. will spend some of
their time managing the holdings of Mr. Pilevsky. This will prevent such
personnel from devoting their efforts full-time to managing our properties. The
failure of the such personnel to adequately serve us could adversely affect our
business.
Potential Conflicts With Other Real Estate Activities. In connection with
our and Philip International Realty, L.P.'s formation in December 1997, we
acquired twelve of our thirteen properties from holders of units of the Philips
International Realty, L.P. Certain of these holders, including Mr. Pilevsky and
Ms. Levine, continue to hold significant interests in real properties (including
retail properties that may compete with our properties) that they owned but did
not transfer to us at such time. While an amended and restated non-competition
agreement dated as of December 31, 1997 among us, Philips International Realty,
L.P., Philips International Holding Co., Mr. Pilevsky and Ms. Levine prevents
Mr. Pilevsky, Ms. Levine and Philips International Holding Corp. from acquiring,
operating and managing or developing certain retail shopping center properties
other than through us, it does not restrict their activities with respect to
retail properties they owned but did not transfer to us at the time of our
formation. As a result, Mr. Pilevsky will devote his professional time to
overseeing the management of our properties as well as overseeing the management
of other properties. The failure of Mr. Pilevsky to adequately serve us could
adversely affect our business.
Potential Conflicts With Holders of Units of Philips International Realty,
L.P. Holders of units of Philips International Realty, L.P., including
Mr. Pilevsky and Ms. Levine, may have interests that conflict with our and our
shareholders' interests. If we (1) sell or refinance certain properties or (2)
reduce indebtedness encumbering such properties, holders of units (particularly
Mr. Pilevsky and Ms. Levine who
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previously held interests in our properties) may suffer worse tax consequences
than we or our shareholders may suffer. To avoid such consequences,
Mr. Pilevsky and Ms. Levine, as executive officers and directors of our company,
could (1) influence our board of directors not to sell or refinance a property
even though such sale or refinancing might otherwise benefit us or (2) cause us
to refinance a property at a higher level of debt than would be in our best
interest.
REAL ESTATE INVESTMENT CONSIDERATIONS.
General. Our ability to make distributions to our shareholders depends on
the ability of our properties to generate funds (including earned income and
capital appreciation) in excess of operating expenses (including scheduled
principal payments on debt and capital expenditure requirements). Events or
conditions that are beyond our control may adversely affect funds from
operations and the value of our properties. Such events or conditions could
include:
o changes in the general economic climate;
o material and adverse changes in capital market availability of debt
and/or equity;
o changes in local conditions such as oversupply of space or a reduction in
demand for rental space;
o decreased attractiveness of our properties to potential tenants;
o competition from other available space;
o our inability to provide adequate maintenance;
o increased operating costs, including insurance premiums and real estate
taxes, due to inflation and other factors which may not necessarily be
offset by increased rents;
o changes in laws and regulations (including tax, environmental and housing
laws and regulations) and agency or court interpretations of such laws
and regulations and the related costs of compliance;
o changes in interest rate levels and the availability of financing;
o the inability of a significant number of tenants to pay rent;
o our inability to rent space on favorable terms; and
o civil unrest, earthquakes and other natural disasters that may result in
uninsured losses.
Financially Distressed Tenants May Reduce Our Cash Flow. A tenant may
default or file for bankruptcy at any time. If a tenant defaults, we may
experience delays and incur substantial costs in enforcing our rights as
landlord and protecting our investments. If a tenant files for bankruptcy, a
potential court judgment rejecting and terminating such tenant's lease could
reduce our cash flow available for distribution. Two of our anchor tenants,
Caldor Inc. and Bradlees Stores Inc., currently operate under the protection of
the bankruptcy laws. Caldor Inc. leases 94,393 square feet at Elm Plaza Shopping
Center and 86,830 square feet at Branhaven Plaza and Bradlees Stores Inc. leases
60,000 square feet at Foxboro Plaza. Termination of any of such leases could
temporarily interrupt our rental income from (1) the tenant of the affected
space and (2) other tenants at the property whose income depends upon the
tenant's presence as an anchor store at such property.
Illiquidity of Real Estate Limits Our Ability to Act Quickly. Real estate
investments are relatively illiquid. Such illiquidity may limit our ability to
vary our portfolio quickly in response to changes in economic and other
conditions. If we want to sell a property, we might not be able to dispose of
such property in the time period we desire, and the sales price of such property
might not recoup or exceed the amount of our investment. The prohibition in the
Internal Revenue Code of 1986, as amended (the "Code"), and related regulations
on a REIT holding property for sale also may restrict our ability to sell
property. Such limitations on our ability to sell our investments could
adversely affect our ability to make distributions.
Americans With Disabilities Act Compliance Could Be Costly. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public accommodations
and commercial facilities must meet certain federal requirements related to
access and use by disabled persons. Compliance with the ADA requirements could
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involve removal of structural barriers to certain disabled persons' accesses.
Other federal, state and local laws may require modifications to or restrict
further renovations of our properties with respect to such accesses. Although we
believe that our properties are substantially in compliance with present
requirements, noncompliance with the ADA or related laws or regulations could
result in the United States government imposing fines or private litigants being
awarded damages against us. Such costs may adversely affect our ability to make
distributions.
Environmental Regulations Could Subject Us to Liability. Various federal,
state and local laws and regulations subject property owners or operators to
liability for the costs of removal or remediation of certain hazardous or toxic
substances located on or in the property. These laws often impose liability
without regard to whether the owner or operator was responsible for or even knew
of the presence of such substances. The presence of or failure to properly
remediate hazardous or toxic substances may adversely affect our ability to
rent, sell or borrow against contaminated property. Various laws and regulations
also impose on persons who arrange for the disposal or treatment of hazardous or
toxic substances at another location liability for the costs of removal or
remediation of such substances at the disposal or treatment facility. These laws
often impose liability whether or not the person arranging for such disposal
ever owned or operated the disposal facility. Certain other environmental laws
and regulations impose liability on owners or operators of property for injuries
relating to the release of asbestos-containing materials into the air. As owners
and operators of property and as potential arrangers for hazardous substance
disposal, we may be liable under such laws and regulations for removal or
remediation costs, governmental penalties, property damage, personal injuries
and related expenses. Payment of such costs and expenses could adversely affect
our ability to make distributions.
Within the last two years, independent environmental consultants completed
a "Phase I" environmental assessment of our properties. Although this
environmental assessment did not reveal any environmental liability that could
materially affect our financial condition or results of operations, you should
consider that (1) such assessment involved general inspections without soil
sampling or ground water analysis and may not have revealed all environmental
liabilities, (2) future laws, ordinances or regulations could impose material
environmental liability on us and (3) acts by tenants or other third parties and
the condition of land near our properties (such as the presence of underground
storage tanks) could adversely affect the condition of our properties and
subject us to environmental liability.
Competition Within Our Markets Could Reduce Our Cash Flow. Retailers at
our properties face increasing competition from other forms of retailing such as
catalogues, discount shopping clubs and telemarketing. We face increasing
competition for prospective tenants with landlords of shopping center properties
that may be newer in appearance, better located or better maintained than our
properties. Such competition may reduce our cash flow and adversely affect our
ability to make distributions by:
o interfering with our ability to attract and retain tenants in our
properties or in properties we develop or acquire;
o increasing vacancies which lowers market rental rates and limits our
ability to negotiate rental rates; and
o adversely affecting our ability to minimize expenses of operation.
Risks of Redevelopment and Development Projects. As part of our strategy,
we actively pursue (1) redevelopment projects and (2) development projects. In
addition to the risks involved in the ownership and operation of established
retail properties, included among the risks of redevelopment or development
projects that may adversely affect our cash available for distribution are the
following:
o failure to complete construction on schedule or within budget may
increase debt service expense and construction costs;
o we may incur predevelopment costs for projects we do not complete;
o inadequate occupancy or rental rates of a completed project may affect
our ability to pay operating expenses or earn our targeted rate of return
on our investment;
o an unsuccessful project could cause our losses to exceed our investment
in such project;
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o financing for redevelopment and newly developed projects may not be
available to us on favorable terms;
o long-term financing may not be available upon completion of construction;
and
o our distribution of 95% of our REIT taxable income (to maintain our
qualification as a REIT) will limit our ability to finance acquisitions
or new developments with income or cash flow from operations.
Risks of Uninsured Losses. We carry comprehensive liability, fire, flood,
extended coverage and rental loss insurance. Our insurance policies contain
specifications, limits and deductibles comparable to those typically contained
in policies covering similar properties. We also carry owner's title insurance
policies on all of our properties for amounts that may be less than the full
value of our properties. If an uninsured loss or a loss from a title defect to a
property in excess of insured limits occurs, we could lose all or part of our
investment in and anticipated profits and cash flows from such property. In the
case of a title defect, we could remain obligated for any recourse mortgage
indebtedness or other financial obligations related to such property. Any of
such losses could adversely affect our ability to make distributions.
REAL ESTATE FINANCING RISKS.
Debt Financing and Debt Maturities. We are subject to the risks normally
associated with debt financing, including the following:
o our cash flow may be insufficient to meet required payments of principal
and interest;
o payments of principal and interest on borrowings may leave us with
insufficient cash resources to pay operating expenses;
o we may not be able to refinance indebtedness on our properties at
maturity;
o the terms of refinancing may not be as favorable as the terms of the
related indebtedness; and
o we could become more highly leveraged (because our policies and
organizational documents do not limit the amount of debt, ratio of debt
to total market capitalization or percentage of indebtedness we may
incur) and, therefore, default on our obligations and debt service
requirements.
As of December 31, 1998, we had outstanding an aggregate of approximately
$137.5 million of primarily mortgage indebtedness (including borrowings under
our senior revolving credit facility with Prudential Securities Credit
Corporation). As of December 31, 1998, we had outstanding an aggregate of
approximately $52.5 million under our senior revolving credit facility with
Prudential Securities Credit Corporation.
Inability to Refinance Indebtedness May Reduce Cash Flow. Because we may
not be able to pay all of our mortgage indebtedness prior to maturity with our
internally generated cash, we may need to repay such debt through refinancings
and/or equity offerings. If we are unable to refinance our indebtedness on
acceptable terms, or at all, events or conditions that may adversely affect our
cash flow and ability to make distributions include the following:
o we may need to dispose of one or more of our properties upon
disadvantageous terms;
o prevailing interest rates or other factors at the time of refinancing
could increase interest rates and, therefore, our interest expense;
o if we mortgage property to secure payment of indebtedness and are unable
to meet mortgage payments, the mortgagee could foreclose upon such
property or appoint a receiver to receive an assignment of our rents and
leases;
o certain of our mortgages encumbering properties have "cross default" or
"cross collateralization" provisions that entitle the secured lender to
certain remedies (including foreclosure) against more than one property;
and
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o foreclosures upon mortgaged property could create taxable income without
accompanying cash proceeds and, therefore, hinder our ability to meet the
REIT distribution requirements of the Code.
Risk of Rising Interest Rates May Increase Costs. Advances under our
$100 million senior revolving credit facility with Prudential Securities Credit
Corporation will bear interest at rates ranging from 1.25% to 1.75% over the
30-day London Interbank Offered Rate based on the level of borrowings
outstanding relative to collateral value. We may incur additional debt in the
future that also bears interest at variable rates. Variable rate debt creates
higher debt service requirements if market interest rates increase. Higher debt
service requirements could adversely affect our cash flow and ability to make
distributions or cause us to default under certain debt covenants.
DEPENDENCE ON KEY PERSONNEL. We are dependent upon our executive officers
for strategic business direction and real estate experience. While we believe
that we could find replacements for these key personnel, loss of their services
could adversely affect our operations. We cannot assure you that any of our
executive officers will remain with us. We have entered into employment
agreements with Louis J. Petra, Sheila Levine and Brian J. Gallagher. Although
we do not expect to enter into an employment agreement with Philip Pilevsky,
Mr. Pilevsky has a significant ownership interest in our company. We also have
entered into a non-competition agreement with each of Mr. Pilevsky and
Ms. Levine that prevents them from engaging in certain retail real estate
activities.
DISRUPTION IN OPERATIONS DUE TO YEAR 2000 PROBLEMS. The Year 2000 issue
concerns the potential exposures related to the automated generation of business
and financial misinformation resulting from the application of computer programs
which have been written using two digits, rather than four, to define the
applicable year of business transactions. We recognize the importance of
minimizing the frequency and significance of any disruptions in our business and
financial affairs that may occur as a result of Year 2000, and have adopted a
comprehensive compliance program designed to achieve this objective.
Our program encompasses the following:
o the assessment and modification, as necessary, of our internal
information technology systems that may be affected by the Year 2000
problem;
o the identification and interrogation of third parties, including tenants,
vendors, contractors and joint venture partners, to enable us to evaluate
and appropriately respond to the state of preparedness by such parties to
address Year 2000 problems; and
o the assessment of property operating systems to avert operational
malfunctions associated with Year 2000.
Our execution of our Year 2000 program is proceeding on schedule. Our
principal property management systems are licensed from and maintained by a
third party software development company which has modified its real estate
products to address the Year 2000 issue. Our expenditures on the initiatives to
date have been nominal, and our management does not anticipate any significant
future costs or problems associated with becoming Year 2000 compliant.
The failure to correct a material Year 2000 problems could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third parties, we are unable to determine at this time
whether the consequences of failing to adequately address all Year 2000 concerns
will have a material impact on our results of operations, liquidity or financial
condition. We expect our Year 2000 program to significantly reduce our level of
uncertainty about the Year 2000 problem. We believe that, with appropriate
modification of our information and operating systems and completion of the
program as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
Certain statements in this Year 2000 issue discussion regarding our efforts
to become Year 2000 compliant, the timing thereof and costs associated therewith
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although we believe the statements and
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projections are based upon reasonable assumptions, actual results may differ
from those that we have projected.
INABILITY TO MAKE REQUIRED DISTRIBUTIONS TO SHAREHOLDERS COULD AFFECT REIT
STATUS. For the Internal Revenue Service to treat us as a real estate
investment trust under the Internal Revenue Code, we must distribute to our
shareholders at least 95% of our real estate investment trust taxable income
each year. We cannot assure you that we will satisfy the annual distribution
requirement to qualify as a real estate investment trust.
Reliance on Board of Directors to Determine Distributions. Much of our
income will consist of our allocable share of the income of Philips
International Realty, L.P. and much of our cash flow will consist of
distributions from Philips International Realty, L.P. Our board of directors
will determine distributions by Philips International Realty, L.P. In making
such determination, the board of directors may consider many factors, including
the following:
o the amount of cash available for distribution;
o Philips International Realty, L.P.'s financial condition;
o Philips International Realty, L.P.'s capital expenditure requirements;
o the annual distribution requirement under the real estate investment
trust provisions of the Internal Revenue Code; and
o such other factors as our board of directors deems relevant.
Risk of Borrowing Funds to Meet Distribution Requirements. We may need to
borrow funds on a short-term or long-term basis to meet the distribution
requirements for real estate investment trust qualification even if the then
prevailing market conditions are not favorable for borrowings. Our need to
borrow such funds depends on (1) differences in timing between the receipt of
income and the payment of expenses in arriving at taxable income (of us or
Philips International Realty, L.P.) and (2) the effect of nondeductible capital
expenditures, the creation of reserves or required debt amortization payments.
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION. Our failure to qualify as a real estate investment trust
for federal income tax purposes could adversely affect our financial and other
conditions.
Tax Liabilities as a Consequence of Failure to Qualify as a REIT. We have
operated so as to qualify as a real estate investment trust for federal income
tax purposes since our taxable year ended December 31, 1997. Although we believe
we will continue to operate in such manner, we cannot guarantee you that we
will. Qualification as a real estate investment trust depends on our meeting
various requirements (some on an annual and quarterly basis) established under
highly technical and complex tax provisions of the Internal Revenue Code.
Because few judicial or administrative interpretations of such provisions exist
and qualification determinations are fact sensitive, we cannot assure you that
we will qualify as a real estate investment trust for any taxable year.
If we fail to qualify as a real estate investment trust in any taxable
year, we will be subject to the following:
o we will not be allowed a deduction for distributions to shareholders;
o we will be subject to federal income tax at regular corporate rates,
including any alternative minimum tax, if applicable; and
o unless we are entitled to relief under certain statutory provisions, we
will not be permitted to qualify as a real estate investment trust for
the four taxable years following the year during which we were
disqualified.
A loss of real estate investment trust status would reduce our net earnings
available for investment or distribution to our shareholders. Failure to qualify
as a real estate investment trust also would eliminate the requirement that
distributions to our shareholders be made.
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Other Tax Liabilities. Even if we qualify as a real estate investment
trust, we are subject to certain federal, state and local taxes on our income
and property and, in some circumstances, certain other state taxes.
Risk of Changes in the Tax Law Applicable to REITs. Since the Internal
Revenue Service, the United States Treasury Department and Congress frequently
review federal income tax legislation, we cannot predict whether, when or to
what extent new federal tax laws, regulations, interpretations or rulings will
be adopted. Any of such legislative action may prospectively or retroactively
modify our tax treatment and, therefore, may adversely affect taxation of us or
our shareholders.
CERTAIN PROVISIONS MAY INHIBIT CHANGES IN CONTROL. Certain provisions of
the Maryland General Corporation Law, our articles of incorporation, our by-laws
and Philips International Realty, L.P.'s partnership agreement may (1) inhibit a
change in control of our company, (2) inhibit the removal of existing management
or (3) prevent us from paying you a premium for your shares of our common stock
over the then-prevailing market prices.
Staggered Board of Directors. We divide our board of directors into three
classes serving staggered three-year terms. This may inhibit a change in control
of our company.
New Classes and Series. Under our articles of incorporation, our board of
directors may create new classes and series of securities and establish
preferences and rights of such classes and series. Our issuance of additional
classes or series of our capital stock may inhibit a change of control of our
company.
Ownership Limit. Under our articles of incorporation and certain
resolutions of our board of directors, no one may acquire or own more than 8% of
the outstanding shares of our capital stock (except for Mr. Pilevsky who may own
up to 17.5% of such shares) and no one may own or acquire shares of any class of
our capital stock that would (1) cause five or fewer persons to own more than
50% in value of our shares of capital stock or (2) otherwise cause us to fail to
qualify as a REIT. See "Description of Securities--Ownership Limit." Such
ownership limit may:
o discourage a change of control of our company;
o deter tender offers for our capital stock that you may find attractive;
or
o limit your opportunity to receive a premium for your capital stock that
might otherwise exist if an investor attempted to assemble a block of
capital stock in excess of the ownership limit or to effect a change in
control of our company.
Rights of Limited Partners. Under Philips International Realty, L.P.'s
partnership agreement, we may not engage in any of the following transactions
unless all limited partners of Philips International Realty, L.P. will receive
(or have the right to receive) for each unit an amount of cash, securities or
other property equal to the product of (1) the number of shares of our common
stock for which each unit is redeemable and (2) the greatest amount of cash,
securities or other property paid to the holder of shares of common stock
pursuant to the terms of such transaction:
o a merger, consolidation or other combination with or into another person
o a sale of all or substantially all of our assets; or
o any reclassification, recapitalization or change of our outstanding
equity interests.
If, in connection with any of the above transactions, the holders of outstanding
shares of our common stock accepts a purchase, tender or exchange offer, each
holder of units of Philips International Realty L.P. will receive (or have the
right to receive) the greatest amount of cash, securities or other property
which such holder would have received had it (1) exercised its right to
redemption and (2) received shares of common stock in exchange for its units
immediately prior to the expiration of such purchase, tender or exchange offer
and then accepted such purchase, tender or exchange offer.
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OUR BOARD OF DIRECTORS MAY CHANGE INVESTMENT AND FINANCING POLICIES WITHOUT
YOUR VOTE.
General. Our board of directors determines (1) our investment and
financing policies, (2) our growth strategy, and (3) our debt, capitalization,
distribution and operating policies. At any time and without your approval, the
board of directors may revise or amend these policies and strategies. Such
changes could adversely affect our financial condition or results of operations,
and, therefore, our ability to make distributions.
Issuance of Additional Securities. You do not have any preemptive right to
acquire any common stock or other equity or debt securities we may offer. Any
such issuance of securities could dilute your investment.
Risks Involved in Acquisitions Through Partnerships or Joint Ventures. We
may invest in properties through partnerships or joint ventures. Partnership or
joint venture investments may involve risks not involved with direct
acquisitions that include the following:
o a co-venturer or partner in an investment may become bankrupt;
o a co-venturer's or partner's economic or business interests or goals may
conflict with our interests or goals;
o a co-venturer or partner may act contrarily to our instructions,
requests, policies or objectives; and
o our articles of incorporation do not limit the amount we may invest in
such joint ventures or partnerships.
Risks of Investing in Securities of Entities Owning Real Estate. We may
acquire securities of entities that own real estate. Because of ownership limits
and gross income requirements we must meet to maintain our REIT qualification,
we may not be able to control (1) the ownership, operation and management of the
underlying real estate or (2) the distributions with respect to such securities.
Our lack of control could adversely affect our ability to make required
distributions.
Risks of Investing in Mortgages. We may invest in mortgages. Investments
in mortgages may include the following risks that may adversely affect our
ability to make distributions:
o borrowers may be unable to make debt service payments or pay principal
when due;
o the principal of the mortgage note securing a property may exceed the
value of the mortgaged property; and
o interest rates payable on the mortgages may be lower than our cost of
funds to acquire such mortgages.
ADVERSE EFFECT OF INCREASING MARKET INTEREST RATE LEVELS ON PRICE OF COMMON
STOCK. The annual distribution rate on the price paid for shares of our common
stock (compared to rates on alternative investments) may influence the public
market price of our common stock. An increase in general interest rate levels
may lead purchasers of our common stock to demand a higher annual distribution
rate. Such demands could adversely affect the market price of our common stock.
USE OF PROCEEDS
We are registering the shares of common stock offered by this prospectus
for the account of the selling shareholders identified in the section of this
prospectus entitled "Selling Shareholders." All of the net proceeds from the
sale of the common stock will go to the shareholders who offer and sell their
shares of such stock. We will not receive any part of the proceeds from the sale
of such shares.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our articles of incorporation and bylaws contain certain provisions to
indemnify our directors and officers against liability incurred by them as a
result of their services in those capacities. Insofar as indemnification for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), may be permitted to our directors, officers or controlling
persons pursuant to the above provisions, we have
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been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act, and is therefore
unenforceable.
SELLING SHAREHOLDERS
The selling shareholders are persons listed in the table below who may
acquire the common stock offered by this prospectus pursuant to our 1997 Stock
Option and Long Term Incentive Plan. Each selling shareholder will receive all
of the net proceeds from the sale of his or her shares of common stock offered
by this prospectus.
The following table sets forth, as of the date of this prospectus, certain
information regarding the selling shareholders' ownership of our common stock.
This offering will not affect (i) the number of shares of common stock or common
stock equivalents outstanding or (ii) the number of shares of common stock or
percentage of ownership which persons, other than the selling shareholders,
beneficially own. Because the selling shareholders may sell all or a part of
their shares of common stock pursuant to this prospectus and this offering is
not being underwritten on a firm commitment basis, we cannot estimate the number
and percentage of shares of common stock that the selling shareholders will hold
at the end of the offering covered by this prospectus.
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THE SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OWNED REGISTERED NUMBER OF SHARES TO BE
NAME AND POSITION WITH US PRIOR TO OFFERING(3) HEREBY(4) OWNED AFTER OFFERING(5)
- ------------------------------------------------ -------------------- ------------------- -----------------------
<S> <C> <C> <C>
Philip Pilevsky, Chairman of the Board, Chief
Executive Officer and Director(1)............. 2,124,986 240,000 1,884,986
Louis J. Petra, President and Director.......... 157,143 100,000 57,143
Sheila Levine, Chief Operating Officer,
Executive V.P. and Director(2)................ 239,925 100,000 139,925
Brian Gallagher, Chief Financial Officer and
Acquisitions Director......................... 29,287 25,000 4,287
Andrew Aberham, Leasing Director................ 5,000 5,000 0
A.F. Petrocelli, Director....................... 67,100 10,000 57,100
Elise Jaffe, Director........................... 11,000 10,000 1,000
Robert S. Grimes, Director...................... 22,800 10,000 12,800
Arnold S. Penner, Director...................... 20,000 10,000 10,000
Management Company Employees.................... 136,000 136,000 0
Other Employees................................. 8,000 8,000 0
---------- ------- ---------
Total........................................... 2,821,241 654,000 2,167,241
---------- ------- ---------
---------- ------- ---------
</TABLE>
- ------------------
(1) Does not include shares of common stock held by Merrick Holiday Corp., of
which Philip Pilevsky owns 100%.
(2) Does not include shares of common stock held by Palm Mile Corp., of which
Sheila Levine owns 100%.
(3) Includes shares of common stock, shares of common stock underlying options
and shares of common stock underlying units.
(4) These options were issued as of January 1, 1998 and generally will vest,
one-third (1/3) on each of January 1, 1999, January 1, 2000 and January 1,
2001, subject to certain exceptions.
(5) Assumes all shares registered hereunder will be sold. If and when the
selling shareholders have exercised all their respective options for shares
of our common stock, the following selling shareholders will own greater
than 1.0% of our common stock: Philip Pilevsky will own 18.0% of
our common stock and Sheila Levine will own 1.3% of our common stock.
Information regarding certain selling shareholder's current relationship
with us or our predecessors and affiliates and such relationships, if any,
within the past three years is set forth below.
Philip Pilevsky is our chief executive officer and chairman of our board of
directors. Mr. Pilevsky has served as chief executive officer and president of
Philips International Holding Corp. since its formation in 1982. Mr. Pilevsky
has been involved in the real estate business for 25 years, including the
development, leasing, management, operation, acquisition and disposition of
commercial properties. He and Ms. Levine founded the entities that now comprise
Philips International Holding Corp. and its affiliates. Mr. Pilevsky is a
nationally recognized member of the real estate community, providing us with
strategic leadership and a broadly-based network of relationships. Outside the
real estate industry, Mr. Pilevsky is renowned as an educator, author in the
field of international relations and frequent commentator for Fox 5 and CNBC.
Mr. Pilevsky received a Bachelor of Arts degree from C.W. Post College and a
Masters Degree of Arts and a Masters Degree of Education from Columbia
University. Mr. Pilevsky is the brother of Sheila Levine.
Louis J. Petra is our president and a member of our board of directors.
Before joining us, Mr. Petra served as chief financial officer, vice president
and treasurer of Kimco Realty Corporation, a public real estate investment
trust, from July 1984 through June 1997. Mr. Petra has extensive experience in
the financial management, administration and control of public and private real
estate companies, with particular knowledge of the
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shopping center and the REIT industries. Mr. Petra received a Bachelor of
Science in accounting from St. John's University and is a member of the American
Institute of Certified Public Accountants and the New York State Society of
Certified Public Accountants.
Sheila Levine is our chief operating officer, executive vice president and
a member of our board of directors. Ms. Levine has served as chief operating
officer and executive vice president of Philips International Holding Corp.
Ms. Levine oversees our daily operations including acquisitions, development,
property management, finance and asset management, construction, leasing and
marketing for each property in our portfolio. Ms. Levine also oversees property
development, which entails setting the management direction from
pre-construction planning to the marketing and leasing strategies. She has been
involved in the real estate business for 18 years and, together with
Mr. Pilevsky, founded the entities that now comprise Philips International
Holding Corp. and its affiliates. Ms. Levine received a Bachelor of Science in
Business Administration from Hofstra University's School of Business.
Ms. Levine is the sister of Philip Pilevsky.
Brian J. Gallagher is our chief financial officer and acquisitions
director. Mr. Gallagher served from March 1989 until December 31, 1997 as the
director of finance of Philips International Holding Corp. Mr. Gallagher is
primarily responsible for our capital deployment and capital management,
including obtaining financing and structuring and negotiating acquisitions and
joint ventures. Since joining the Philips group, he has been responsible for
transactions valued at over $1 billion. Prior to joining us, Mr. Gallagher held
positions in commercial real estate finance with Credit Alliance Corporation and
National Westminster Bank USA where he was responsible for project finance and
major account relationships. He received a Bachelor of Science and a Masters
Degree in city and regional planning from Ohio State University.
Andrew Aberham is our leasing director. Mr. Aberham's responsibilities
include the marketing, development and leasing of the Philips group retail
portfolio since 1995, including leasing and negotiating over 300 retail lease
transactions. From 1986 to 1995, Mr. Aberham served as leasing director for BLDG
Management Co., Inc., during which time he negotiated over 500 lease
transactions, leasing more than 2.5 million square feet. Mr. Aberham received a
Bachelor of Arts degree from the State University of New York at Oneonta, and
has received additional degrees in real estate investment and construction
management from New York University.
Elise Jaffe in a member of our board of directors. Ms. Jaffe has served
since 1994 as senior vice president of Real Estate for Dress Barn, Inc., a major
women's apparel retailer owning approximately 725 stores within the United
States. She has been with Dress Barn for 16 years and serves on its executive
committee. Ms. Jaffe is on the advisory board of the International Council of
Shopping Centers/Value Retail News and is vice president and the treasurer of
the Paul Taylor Dance Foundation. Ms. Jaffe graduated magna cum laude from Tufts
University with a Bachelor of Arts in English and Psychology.
A.F. Petrocelli is a member of our board of directors. Mr. Petrocelli
served as chairman of the board and chief executive officer of United Capital
Corp. since December 1987 and president since 1991. Mr. Petrocelli currently
owns over 65% of United Capital and has been a director of United Capital since
1981. Mr. Petrocelli also serves on the board of directors of Prime Hospitality
Corp., a New York Stock Exchange listed company, Nathan's Famous Inc., Metex
Corporation and Boyar Value Fund, Inc.
Robert S. Grimes is a member of our board of directors. Mr. Grimes has
served as president of RS Grimes Co., Inc., an investment company, since
September 1987. Mr. Grimes also has been a director and executive vice president
of Autobytel.com, Inc. since July 1996. From April 1981 to March 1987,
Mr. Grimes was a partner with the investment firm of Cowen & Company.
Mr. Grimes holds a Bachelor of Science from Wharton School of Commerce and
Finance at the University of Pennsylvania and an L.L.B. from the University of
Pennsylvania Law School.
Arnold S. Penner is a member of our board of directors. Mr. Penner has been
active in the real estate market as a broker and investor in a diverse portfolio
of properties for the last thirty years, including office buildings, retail
properties and parking facilities. Mr. Penner is a director of United Capital
Corp., an American Stock Exchange-listed company specializing in the investment
and management of real estate assets and the manufacturing and sale of antenna
and transformer products to a global customer base. Mr. Penner also is involved
with several philanthropic organizations devoted to children's education.
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PLAN OF DISTRIBUTION
The selling shareholders received options that were issued as of
January 1, 1998 and generally will vest, one-third ( 1/3) on each of January 1,
1999, January 1, 2000 and January 1, 2001, subject to certain exceptions. Once
the selling shareholders have exercised their options for shares of common
stock, the selling shareholders may from time to time offer and sell their
shares of common stock offered by this prospectus. We have registered their
shares for resale to provide them with freely tradable securities. However,
registration does not necessarily mean that they will offer and sell any of
their shares.
OFFER AND SALE OF SHARES
The selling shareholders, or their pledgees, donees, transferees or other
successors in interest, may offer and sell their shares of common stock in the
following manner:
o on the New York Stock Exchange or other exchanges on which the common
stock is traded at the time of sale;
o in the over-the-counter market or otherwise at prices and at terms then
prevailing or at prices related to the then current market price; or
o in negotiated transactions.
The selling shareholders, or their pledgees, donees, transferees or other
successors in interest, may sell their shares of common stock in one or more of
the following transactions:
o a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o a broker or dealer may purchase as principal and resell such shares for
its own account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of the exchange;
and
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
The selling shareholders may accept and, together with any agent of the selling
shareholders, reject in whole or in part any proposed purchase of the shares of
common stock offered by this prospectus.
BROKERS AND DEALERS
Selling Through Brokers and Dealers. The selling shareholders may select
brokers or dealers to sell their shares of common stock. Brokers or dealers that
are chosen by the selling shareholders may arrange for other brokers or dealers
to participate in selling such shares. The selling shareholders may give such
brokers or dealers commissions or discounts in amounts to be negotiated
immediately before any sale. In connection with such sales, these brokers or
dealers, any other participating brokers or dealers, and certain pledgees,
donees, transferees and other successors in interest, may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act. In
addition, any securities covered by this prospectus that qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under that rule rather
than under the rules set out in this document.
Supplemental Prospectus Regarding Material Arrangements. If and when a
selling shareholder notifies us that he, she or it has entered into a material
arrangement with a broker or dealer for the sale of his, her or its shares of
common stock offered by this prospectus through a block trade, special offering,
exchange or secondary distribution or a purchase by a broker or dealer, we will
file a supplemental prospectus, if required, pursuant to Rule 424(c) under the
Securities Act. The supplemental prospectus will provide: (1) the name(s) of
each such selling shareholder(s) and of the participating broker-dealer(s);
(2) the number of shares of common stock involved; (3) the price at which such
shares were sold; (4) the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable; (5) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated
by reference in this prospectus; and (6) other facts material to the
transaction.
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Commissions. The selling shareholders will pay any sales commissions or
other seller's compensation applicable to such transactions.
SUPPLEMENTAL PROSPECTUS REGARDING SALES
To the extent required, we will set forth in a prospectus supplement
accompanying this prospectus or, if appropriate, in a post-effective amendment,
the following information: (1) the amount of the shares of common stock to be
sold; (2) purchase prices; (3) public offering prices; (4) the names of any
agents, dealers or underwriters; and (5) any applicable commissions or discounts
with respect to a particular offer. The selling shareholders and agents who
execute orders on their behalf may be deemed to be "underwriters" as that term
is defined in Section 2(11) of the Securities Act. A portion of any proceeds of
sales and discounts, commissions or other seller's compensation may be deemed to
be underwriting compensation for purposes of the Securities Act.
COMPLIANCE WITH STATE SECURITIES LAWS
We have not registered or qualified the shares of common stock offered by
this prospectus under the laws of any country, other than the United States. In
certain states, the selling shareholders may not offer or sell their shares of
common stock unless (1) we have registered or qualified such shares for sale in
such states; or (2) we have complied with an available exemption from
registration or qualification. Also, in certain states, to comply with such
states' securities laws, the selling shareholders can offer and sell their
shares of common stock only through registered or licensed brokers or dealers.
LIMITATIONS IMPOSED BY EXCHANGE ACT RULES AND REGULATIONS
Certain provisions of the Exchange Act of 1934, as amended, and the related
rules and regulations will apply to the selling shareholders and any other
person engaged in a distribution of shares of the common stock. Such provisions
may (1) limit the timing of purchases and sales of any of the shares of common
stock by the selling shareholders or such other person; (2) affect the
marketability of such stock; and (3) affect the brokers' and dealers'
market-making activities with respect to such stock.
PAYMENT OF INCIDENTAL EXPENSES
We will pay substantially all of the expenses related to the registration
of the shares of common stock offered by this prospectus. We estimate such
expenses to be approximately $43,754.13.
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DESCRIPTION OF COMMON STOCK
AUTHORIZED CAPITAL STOCK
Pursuant to our articles of incorporation, we have the authority to issue
150,000,000 shares of common stock, par value $.01 per share, and 30,000,000
shares of preferred stock, par value $.01 per share. At February 8, 1999,
7,340,474 shares of common stock were issued and outstanding, and no shares of
preferred stock were issued and outstanding.
COMMON STOCK
We have set forth below a description of certain general terms and
provisions of the common stock. The statements below describing the common stock
are in all respects subject to and qualified in their entirety by reference to
the applicable provisions of our article of incorporation and bylaws.
Voting, Dividend and Other Rights. Each outstanding share of common stock
entitles the holder to one vote on all matters presented to stockholders for a
vote, subject to the provisions of our articles of incorporation regarding the
restrictions on transfer of such stock, discussed in "Restrictions On Transfer"
below. You, as a holder of shares of common stock, do not have any cumulative
voting rights. This means that the holders of a majority of the outstanding
shares of common stock can elect all of the directors then standing for election
and the holders of the remaining shares will not be able to elect any directors.
You, as a holder of shares of common stock, do not have preemptive rights to
subscribe for any of our securities. All shares of common stock will, when
issued, be duly authorized, fully paid, and nonassessable. We may pay
distributions to you if and when our board of directors declares such dividends
out of legally available funds.
Rights Upon Liquidation. Under Maryland law, you, as stockholders,
generally are not liable for our debts or obligations. Upon our liquidation,
subject to the rights of any holders of preferred stock to receive preferential
distributions, you, as a holder of common stock, may participate pro rata in the
assets remaining after payment of, or adequate provision for, all of our known
debts and liabilities. Such debts and liabilities may arise from our status as
general partner of Philips International Realty, L.P.
Ownership Limit. Under our articles of incorporation, with certain
exceptions, no person may own, or be deemed to own by virtue of the attribution
rules of the Internal Revenue Code of 1986, as amended (the "Code"), more than
8.0% of the value of our issued and outstanding shares of capital stock. See
"Restrictions On Transfer" below.
Transfer Agent. Boston EquiServe is the registrar and transfer agent for
our common stock.
RESTRICTIONS ON TRANSFER
Ownership Limit. For us to qualify as a REIT under the Internal Revenue
Code, we must meet the following requirements concerning the ownership of
outstanding shares of our capital stock:
o five or fewer individuals (as defined in the Code to include certain
entities) may not collectively own, directly or indirectly, more than
50% of the value of our outstanding capital stock during the last
half of a taxable year; and
o at least 100 persons during at least 335 days of a taxable year or during
a proportionate part of a shorter taxable year must beneficially own our
capital stock.
Further, under our articles of incorporation, subject to certain exceptions, no
holder of shares of our capital stock may own, or be deemed to own by virtue of
the attribution rules of the Code, more than 6.5% by value of our outstanding
capital stock. Our articles of incorporation authorizes our board of directors
to, by resolution, increase such percentage up to 9.8%. Our board of directors
has by resolution set the ownership limit at 8.0% of the issued and outstanding
shares of capital stock. Such limit will be referred to in this prospectus as
the "Ownership Limit."
Exemption from Ownership Limit Upon Waiver by Board of Directors. Our
board of directors may exempt a person from the Ownership Limit if the board of
directors or our tax counsel is satisfied that such ownership will not then or
in the future jeopardize our status as a REIT. To obtain such exemption, the
intended transferee of shares of our capital stock must (1) give us written
notice of the proposed transfer and
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(2) furnish such opinions of counsel, affidavits, undertakings, agreements and
information as the board of directors may require no later than the 15th day
before any transfer which could cause the intended transferee's direct or
beneficial ownership of shares to exceed the Ownership Limit. If the board of
directors decides that it is no longer in our best interests to continue to
qualify as a REIT, then the restrictions on transferability and ownership will
not apply.
Exemption from Ownership Limit for Philip Pilevsky. Our board of directors
has exempted Mr. Pilevsky from the Ownership Limit. The board of directors has
set Mr. Pilevsky's ownership limit at 17.5% of the issued and outstanding
shares of our capital stock.
Null and Void Transfers. A transfer of shares of capital stock shall be
null and void and the intended transferee of such shares will not acquire any
rights in such shares if the transfer would:
o create a direct or indirect ownership of shares of stock in excess of the
Ownership Limit;
o result in the shares of stock being owned by fewer than 100 persons; or
o result in our being "closely held" within the meaning of
Section 856(h) of the Code.
Shares Transferred in Excess of Ownership Limit. We will automatically
deem shares of capital stock transferred to a shareholder in excess of the
Ownership Limit as shares of excess stock. By operation of law, we will
automatically transfer such shares to the trustee of a trust for the exclusive
benefit of one or more charitable organizations (as described in 170(b)(1)(A),
170(c)(2) and 501(c)(3) of the Code) that we select. We will deem the trustee of
such trust to own such shares for the benefit of the charitable beneficiary on
the date of the violative transfer to the original transferee-shareholder. Any
such transfer is subject to several provisions, including but not limited to the
following:
o we will rescind as void ab initio any dividend or distribution we have
authorized and declared but not paid to the original
transferee-shareholder and we will pay such sum to the trustee for the
benefit of the charitable beneficiary;
o we will rescind as void ab initio any vote cast by an original
transferee-shareholder prior to the discovery of the violative transfer;
o while the excess shares are held in trust and subject to the restriction
that we have not already taken irreversible action, we will deem the
original transferee-shareholder as having given an irrevocable proxy to
the trustee to vote such shares for the benefit of the charitable
beneficiary; and
o we may require the trustee to sell, subject to certain pricing and timing
restrictions, the excess stock to a person or entity whose ownership of
the shares of our capital stock would be permitted or to us.
Certificate Legend Referring to Restrictions. All certificates
representing shares of our common stock will bear a legend referring to the
restrictions described in the above section entitled "Restrictions on
Transfer--Null and Void Transfer."
Required Disclosures by Shareholders. Every shareholder must, upon our
demand, provide in writing information that we may request to determine the
effect of such shareholder's direct, indirect and constructive ownership of such
shares on our status as a REIT.
Effect of Ownership Limits on Control of Our Company. The ownership
limitations set forth in this prospectus may prevent, defer or delay the
acquisition of control of our company without the consent of the board of
directors.
18
<PAGE>
LEGAL MATTERS
Our counsel, Pryor Cashman Sherman & Flynn LLP, New York, New York will
issue an opinion to us regarding certain legal matters in connection with this
offering, including the validity of the issuance of the common stock offered by
this prospectus.
EXPERTS
Ernst & Young LLP, independent auditors, have audited (i) our financial
statements and schedule as of December 31,1997 and for the period from July 16,
1997 (inception) to December 31, 1997; (ii) the balance sheet of Philips
International Realty L.P. as of December 31, 1997; (iii) the balance sheet of
the Property Partnerships as of December 31, 1997; (iv) the combined financial
statements of the Philips Company as of December 31, 1996 and for each of the
three years in the period ended December 31, 1997; and (v) the combined
statement of revenue and certain expenses of the Merrick Commons and Mill Basin
Properties, included in our Annual report on form 10-K for the year ended
December 31, 1997, as set forth in their reports which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's reports, given on their authority as experts in accounting
and auditing. We have incorporated by reference in this prospectus the combined
financial statements of the Munsey Park Shopping Center for the year ended
December 31, 1997, in our Current Report on Form 8-K dated July 31, 1998, in
reliance on the reports of Gentile, Pismeny & Brengle, LLP, independent
auditors, given on the authority of said firm as experts in auditing and
accounting.
19
<PAGE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WHICH
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. WE ARE NOT OFFERING TO SELL OR TO BUY THE COMMON
STOCK OFFERED IN THIS DOCUMENT TO ANY PERSON UNAUTHORIZED OR PROHIBITED TO DO
SO. YOU SHOULD NOT THINK THAT THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
IN CONNECTION WITH THIS COMMON STOCK, UNDER ANY CIRCUMSTANCES, IMPLIES THAT THE
INFORMATION CONTAINED IN THIS DOCUMENT IS CORRECT AS OF ANY TIME AFTER THE DATE
OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
Information About Philips International Realty
Corp......................................... 3
Risk Factors................................... 4
Use of Proceeds................................ 11
Indemnification for Securities Act
Liabilities.................................. 11
Selling Shareholders........................... 12
Plan of Distribution........................... 15
Description of Common Stock.................... 17
Legal Matters.................................. 19
Experts........................................ 19
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852,550 SHARES
PHILIPS INTERNATIONAL
REALTY CORP.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
FEBRUARY 10, 1999
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------------------------------------------------------
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference in this
registration statement:
a. Our Annual Report on Form 10-K (File No. 0-23463) for the fiscal year
ended December 31, 1997;
b. Our Quarterly Reports on Form 10-Q (File No. 0-23463) for the fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998;
c. Our Current Reports on Form 8-K (File No. 0-23463), dated December 31,
1997, and Form 8-K (File No. 1-14095), dated July 31, 1998;
d. The description of the common stock and the description of certain
provisions of Maryland Law and our articles of incorporation and bylaws,
both contained in our registration statement on Form 8-A, dated May 6,
1998.
All documents subsequently filed by the Company with the Securities and
Exchange Commission pursuant to Section 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our officers and directors are indemnified under Maryland law, the articles
of incorporation and the Amended and Restated Agreement of Limited Partnership
of Philips International Realty, L.P., against certain liabilities. The articles
of incorporation require us to indemnify our directors and officers to the
fullest extent permitted from time to time by the laws of the State of Maryland.
The bylaws contain provisions which implement the indemnification provisions of
the articles of incorporation.
The Maryland General Corporation Law ("MGCL") permits a corporation to
indemnify its directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those capacities unless it is established that the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty, or the director or officer actually received an improper
personal benefit in money, property or services, or in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful, or the director or officer was adjudged to be liable
to the corporation for the act or omission. No amendment of our articles of
incorporation shall limit or eliminate the right to indemnification provided
with respect to acts or omissions occurring prior to such amendment or repeal.
Maryland law permits us to provide indemnification to an officer to the same
extent as a director, although additional indemnification may be provided if the
officer is not also a director.
The MGCL permits the articles of incorporation of a Maryland corporation to
include a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, with specified exceptions.
The MGCL does not, however, permit the liability of directors and officers to
the corporation or its stockholders to be limited to the extent that (1) it is
proved that the person actually received an improper benefit or profit in money,
property or services (to the extent such benefit or profit was received) or
(2) a judgment or other final adjudication adverse to such person is entered in
a proceeding based on a finding that the person's
II-1
<PAGE>
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the proceeding. Our
articles of incorporation contain a provision consistent with the MGCL. No
amendment of the articles of incorporation shall limit or eliminate the
limitation of liability with respect to acts or omissions occurring prior to
such amendment or repeal.
The Partnership Agreement of Philips International Realty, L.P. also
provides for indemnification of us and our officers and directors to the same
extent indemnification is provided to our officers and directors in our articles
of incorporation, and limits the liability of us and our officers and directors
to Philips International Realty, L.P. and its partners to the same extent
liability of our officers and directors to our stockholders is limited under our
articles of incorporation.
In addition, the Delaware Revised Limited Partnership Act provides that a
limited partner has the power to indemnify and hold harmless any partner or
other person from and against any and all claims and demands whatsoever, subject
to such standards and restrictions, if any, as are set forth in its partnership
agreement.
We have entered into indemnification agreements with each of our directors
and officers. The indemnification agreements require, among other things, that
we indemnify our directors and officers to the fullest extent permitted by law,
and advance to the directors and officers all related expenses, subject to
reimbursement if it is subsequently determined that indemnification is not
permitted. We also must indemnify and advance all expenses incurred by directors
and officers seeking to enforce their rights under the indemnification
agreements, and cover directors and officers under our directors' and officers'
liability insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions of the articles
of incorporation and the bylaws and the Partnership Agreement of Philips
International Realty, L.P., it provides greater assurance to directors and
officers that indemnification will be available, because, as a contract, it
cannot be modified unilaterally in the future by the board of directors or by
the stockholders to eliminate the rights it provides.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable
ITEM 8. EXHIBITS.
<TABLE>
<S> <C>
4.1 Form of Common Stock certificate(1)
5.1 Opinion of Pryor Cashman Sherman & Flynn LLP
23.1 Consent of Pryor Cashman Sherman & Flynn LLP (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Gentile, Pismeny & Brengel, LLP
</TABLE>
- ------------------
(1) Incorporated herein by reference to Exhibit 3.5 to our registration
statement on Form S-11 filed with the Securities and Exchange Commission on
April 17, 1998.
ITEM 9. UNDERTAKINGS.
We, the undersigned registrant, hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material
change to such information in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
We hereby further undertake that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of our annual reports
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
We hereby further undertake that:
(1) For the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance under Rule 430A and
contained in a form of prospectus filed by us pursuant to
Rule 424(b)(1) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement at the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by
one of our directors, officers or controlling persons in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by us is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on this 10th day of February, 1999.
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ PHILIP PILEVSKY
----------------------------------
Philip Pilevsky
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ PHILIP PILEVSKY Director, Chief Executive Officer and February 10, 1999
- ------------------------------------------ Chairman of the Board
Philip Pilevsky
/s/ LOUIS J. PETRA Director and President February 10, 1999
- ------------------------------------------
Louis J. Petra
/s/ SHEILA LEVINE Director, Chief Operating Officer, February 10, 1999
- ------------------------------------------ Executive Vice President and Secretary
Sheila Levine
/s/ BRIAN J. GALLAGHER Chief Financial Officer, Acquisitions February 10, 1999
- ------------------------------------------ Director and Treasurer
Brian J. Gallagher
/s/ ARNOLD S. PENNER Director February 10, 1999
- ------------------------------------------
Arnold S. Penner
/s/ A.F. PETROCELLI Director February 10, 1999
- ------------------------------------------
A. F. Petrocelli
/s/ ELISE JAFFE Director February 10, 1999
- ------------------------------------------
Elise Jaffe
/s/ ROBERT S. GRIMES Director February 10, 1999
- ------------------------------------------
Robert S. Grimes
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
4.1 Form of Common Stock Certificate(1)
5.1 Opinion of Pryor Cashman Sherman & Flynn LLP
23.1 Consent of Pryor Cashman Sherman & Flynn LLP (included as part of Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Gentile, Pismeny & Brengel, LLP
</TABLE>
- ------------------
(1) Incorporated herein by reference to Exhibit 3.5 to our registration
statement on Form S-11 filed with the Securities and Exchange Commission on
April 17, 1998.
<PAGE>
EXHIBIT 5.1
[Letterhead of Pryor Cashman Sherman & Flynn LLP]
February 10, 1999
Philips International Realty Corp.
417 Fifth Avenue
New York, New York 10016
Gentlemen and Ladies:
We refer to the Registration Statement on Form S-8 (the "Registration
Statement") to be filed by you with the Securities and Exchange Commission with
respect to the registration under the Securities Act of 1933, as amended (the
"Act"), of 852,550 shares (the "Shares"), $.01 par value per share, of the
common stock of Philips International Realty Corp. (the "Company"), for delivery
under the Company's 1997 Stock Option and Long Term Incentive Plan
(collectively, the "Plan").
We are qualified to practice law in the State of New York. We express no
opinion as to, and, for the purposes of the opinion set forth herein, we have
conducted no investigation of, and do not purport to be experts on, any laws
other than the laws of the State of New York, the Maryland General Corporation
Law and the federal laws of the United States of America.
We have examined such documents as we considered necessary for the purposes
of this opinion. Based on such examination, it is our opinion that the Shares
have been duly authorized and, upon issuance in accordance with the Plan, will
be legally issued, fully-paid and non-assessable under the laws of the State of
Maryland (the state of incorporation of the Company).
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ PRYOR CASHMAN SHERMAN & FLYNN LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Expert" and to the
use of our reports dated March 6, 1998, in the Registration Statement on Form
S-8 No. and the related Prospectus of Philips International Realty
Corp. (the "Company") for the registration of 852,550 shares of common stock.
We also consent to the incorporation by reference therein of our reports dated
(i) March 6, 1998, with respect to the financial statements and schedule of
Philips International Realty Corporation for the period of July 16, 1997
(inception) to December 31, 1997; (ii) March 6, 1998 with respect to the balance
sheet of Philips International Realty L.P. as of December 31, 1997;
(iv) March 6, 1998 with respect to the combined financial statements of the
Philips Company as of December 31, 1996 and for the related combined statements
of income, owners deficit and cash flows for each of the three years in the
period ended December 31, 1997; and (v) March 6, 1998 with respect to the
combined statements of revenues and certain expenses of the Merrick Commons and
Mill Basin Plaza Properties included in the Annual Report (Form 10-K) for 1997
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
- -----------------------------------
Ernst & Young LLP
New York, New York
February 10, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form S-8, File No. , and the related
Prospectus of Philips International Realty Corp. for the registration of 852,550
shares of its common stock and to the incorporation by reference therein of our
report dated August 27, 1998, with respect to the statement of revenue and
certain operating expenses of Munsey Park Shopping Center.
/s/ GENTILE, PISMENY & BRENGEL, LLP
Great Neck, New York
February 10, 1999
