<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHILIPS INTERNATIONAL REALTY CORP.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
------------------------
To Our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Philips International Realty Corp. (the "Company") will be held at
Republic National Bank, 452 Fifth Avenue, New York, New York on May 20, 1999 at
2:00 p.m. for the following purposes:
1. The election of two persons to the Board of Directors of the
Company, each to serve a three-year term or until their respective
successors are elected and qualified.
2. Ratification of the appointment of Ernst & Young LLP, independent
accountants, as the Company's independent accountants for the ensuing year.
The enclosed Proxy Statement includes information relating to these
proposals. Additional purposes of the Annual Meeting are to transact such other
business as may properly come before the Annual Meeting.
All shareholders of record as of the close of business on March 31, 1999
are entitled to notice of and to vote at the Annual Meeting. At least a majority
of the outstanding shares of common stock of the Company present in person or by
proxy is required for a quorum.
By Order of the Board of Directors
/s/ SHEILA LEVINE
--------------------------
Sheila Levine
Secretary
April 20, 1999
New York, New York
THE BOARD OF DIRECTORS APPRECIATES AND ENCOURAGES YOUR PARTICIPATION IN THE
COMPANY'S ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. ACCORDINGLY, PLEASE SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY, IF YOU WISH, AND
VOTE IN PERSON. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET
FORTH IN THE PROXY STATEMENT.
<PAGE>
MAILED TO SHAREHOLDERS ON OR ABOUT APRIL 20, 1999
PHILIPS INTERNATIONAL REALTY CORP.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of Philips International
Realty Corp., a Maryland corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company (the "Board of Directors")
of proxies in the accompanying form for use in voting at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on Thursday,
May 20, 1999, at 2:00 p.m., local time, at Republic National Bank, 452 Fifth
Avenue, New York, New York, and any adjournment or postponement thereof.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to the Company (to
the attention of Sheila Levine, the Company's Secretary) a written notice of
revocation or a properly executed proxy bearing a later date, or by attending
the Annual Meeting and voting in person.
SOLICITATION AND VOTING PROCEDURES
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's common stock, par value $.01 per share (the "Common Stock"). The
Company may conduct further solicitation personally, telephonically or by
facsimile through its officers, directors and regular employees, none of whom
would receive additional compensation for assisting with the solicitation.
The presence at the Annual Meeting of a majority of the outstanding shares
of Common Stock of the Company, represented either in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting. The
close of business at March 31, 1999 has been fixed as the record date (the
"Record Date") for determining the holders of shares of Common Stock entitled to
notice of and to vote at the Annual Meeting. Each share of Common Stock
outstanding on the Record Date is entitled to one vote on all matters. As of the
Record Date, there were 7,340,474 shares of Common Stock outstanding.
Shareholder votes will be tabulated by the persons appointed by the Board
of Directors to act as inspectors of election for the Annual Meeting. The New
York Stock Exchange permits member organizations to give proxies, if no
instructions have been received from beneficial owners, to vote as to the
election of directors and also on matters of the type contained in Proposal No.
2. Shares represented by a properly executed and delivered proxy will be voted
at the Annual Meeting and, when instructions have been given by the shareholder,
will be voted in accordance with those instructions. If no instructions are
given on a properly executed and delivered proxy, the shares will be voted FOR
the election of each of the two nominees for director named below and FOR
Proposal No. 2. Abstentions and broker non-votes will each be counted as present
for purposes of determining the presence of a quorum. Abstentions and broker
non-votes will have no effect on the outcome of the election of directors or
Proposal No. 2.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth information as of March 1, 1999 with respect
to each person who is known by the Company, in reliance on Schedules 13D and 13G
filed with the Securities and Exchange Commission (the "SEC"), to own
beneficially more than 5% of the Company's outstanding shares of Common Stock.
Except as otherwise noted below, all shares of Common Stock are owned
beneficially by the individual listed with sole voting and/or investment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF SHARES
NAME OF OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER OWNERSHIP (%)
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
The Philips Group(1)....................................................... 2,334,118 25.03%(1)(2)
Heitman/PRA Securities Advisors LLC(3)..................................... 878,972 11.97%(2)
Amvescap PLC(4)............................................................ 826,640 11.26%(2)
Scudder Kemper Investments (5) ............................................ 452,670 6.17%(2)
Capital Growth Management Limited Partnership(6)........................... 405,000 5.52%(2)
</TABLE>
- ------------------------
(1) Address: 417 Fifth Avenue, New York, New York 10016. The Philips Group (not
a legal entity) is composed of certain directors and executive officers of
the Company and their immediate families and related trusts. Share
information is furnished in reliance on the Schedule 13G dated February 16,
1999 of The Philips Group filed with the SEC, which represents holdings as
of December 31, 1998. This number represents shares for which The Philips
Group has shared dispositive and voting power, and includes limited
partnership Units redeemable for shares of Common Stock and vested options
to purchase shares of Common Stock.
(2) The total number of shares outstanding used in calculating this percentage
does not include 2,472,395 shares reserved for issuance upon redemption or
conversion of outstanding units of limited partnership interest ("Units") in
Philips International Realty L.P., a Delaware limited partnership (the
"Operating Partnership") through which the Company conducts its real estate
activities, or 852,550 shares reserved for issuance upon the exercise of
stock options (the "Options") granted or reserved for possible grant to
certain employees and directors of the Company, except in all cases where
such Units are owned by the reporting person or group. Of the 2,472,395
shares reserved for issuance upon redemption of outstanding Units, 1,873,289
shares, or 19% of the total number of shares outstanding or reserved for
issuance, are reserved for issuance upon redemption or conversion of
outstanding Units that are owned by executive officers, directors, their
immediate family members and related trusts. Of the 852,550 shares reserved
for issuance upon the exercise of stock options, 510,000 shares, or 60% of
the total number of shares reserved for issuance, are reserved for the
exercise of options held by executive officers and directors. This
information is as of March 1, 1999.
(3) Address: 180 North LaSalle Street, Suite 3600, Chicago, IL 60601.
Heitman/PRA Securities Advisors LLC ("Heitman") takes the position that such
shares are held for investment advisory clients and that Heitman disclaims
beneficial ownership of those shares. Share information is furnished in
reliance on Amendment No. 1 to Schedule 13G filed February 16, 1999 with the
SEC, which represents holdings as of December 31, 1998. This number includes
867,772 shares for which Heitman has sole dispositive and voting power.
(4) Address: 11 Devonshire Square, London, England EC2M 4YR. Amvescap PLC takes
the position, however, that the reporting persons filing Schedule 13G hold
the shares of the Company on behalf of other persons who have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of such securities. The reporting persons expressly
disclaim beneficial ownership of such shares. Share information is furnished
in reliance on Schedule 13G filed February 10, 1999 with the SEC, which
represents holdings as of December 31, 1998.
(5) Address: 345 Park Avenue, New York, New York 10154. Share information is
furnished in reliance on Schedule 13G filed February 12, 1999 with the SEC,
which represents holdings as of December 31, 1998.
(6) Address: One International Place, Boston, Massachusetts, 02110. Capital
Growth Management Limited Partnership ("CGM") takes the position, however,
that since such shares are held for investment advisory clients, they do not
constitute a "group" under the applicable rules of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and accordingly, CGM is not
required to file a Schedule 13G or
2
<PAGE>
Schedule 13D with respect to the Company's Common Stock. Share information
is furnished in reliance on Schedule 13G filed February 8, 1999 with the SEC
which represents holdings as of December 31, 1998.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation divides the
Company's Board of Directors into three classes, with the members of each such
class serving staggered three-year terms.
The Board of Directors presently consists of seven members as follows:
Class I directors, Louis J. Petra and Elise Jaffe, whose terms expire in 1999
(and if re-elected at the Annual Meeting, in 2002); Class II directors, Sheila
Levine and A.F. Petrocelli, whose terms expire in 2000; and Class III directors,
Philip Pilevsky, Robert Grimes and Arnold S. Penner, whose terms expire in 2001.
At the Annual Meeting, the shareholders will elect two directors to serve
as Class I directors. The Class I directors who are elected at the Annual
Meeting will serve until the Annual Meeting of Stockholders to be held in 2002
and until such directors' respective successors are elected or appointed and
qualify or until any such director's earlier resignation or removal. The Board
of Directors believes that nominees Louis J. Petra and Elise Jaffe will stand
for election and will, if elected, serve as such Class I directors. However, in
the event any nominee is unable or unwilling to serve as a Class I director at
the time of the Annual Meeting, the proxies may be voted for the balance of
those nominees named and for any substitute nominee designated by the present
Board of Directors or the proxy holders to fill such vacancy or for the balance
of those nominees named without nomination of a substitute, or the Board of
Directors may be reduced in number in accordance with the By-laws of the
Company.
The affirmative vote of a plurality of all the votes cast at the Annual
Meeting, assuming a quorum is present, is necessary for the election of a
director. For purposes of the election of directors, abstentions will not be
counted as votes cast and will have no effect on the result of the vote.
Louis J. Petra, director nominee, was appointed as a Director of the
Company effective December 31, 1997. Mr. Petra is the Company's President and a
member of its Board of Directors. Prior to joining the Company, he served as
Chief Financial Officer, Vice President and Treasurer of Kimco Realty
Corporation, a public REIT, 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
shopping center industry and the REIT industry. 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.
Elise Jaffe, director nominee, was appointed as a Director of the Company
effective December 31, 1997. 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, Inc. 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 from Tufts University with a Bachelor of Arts in
English and Psychology.
Unless marked to the contrary, proxies received will be voted FOR THE
ELECTION OF ALL NOMINEES NAMED ABOVE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
NAMED ABOVE.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information as of March 31, 1999 for (i) the
members of the present Board of Directors, (ii) the executive officers of the
Company and (iii) the directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
PERCENTAGE
OF SHARES
OUTSTANDING
PERCENTAGE (ON A
OF SHARES FULLY-
FIRST TERM NUMBER OF OUTSTANDING DILUTED
NAME AND POSITION(1) AGE ELECTED EXPIRES SHARES(2) (%)(3) BASIS) %(4)
- ------------------------------------------------- --- ------- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Philip Pilevsky, Chairman of the Board of
Directors and Chief Executive Officer.......... 52 1997 2001 1,964,986(7) 21.9 19.7
Louis J. Petra, President and Director........... 45 1997 1999 57,143(8) * *
Sheila Levine, Chief Operating Officer, Executive
Vice President, Secretary and Director(5)...... 41 1997 2000 231,684(9) 3.1 1.7
Brian J. Gallagher, Chief Financial Officer and
Acquisitions Director.......................... 42 1997 N/A 12,620(10) * *
Elise Jaffe, Director(6)......................... 43 1997 1999 4,333(11) * *
Robert S. Grimes, Director(5).................... 54 1997 2001 16,133(12) * *
Arnold S. Penner, Director(5).................... 62 1997 2001 13,333(13) * *
A. F. Petrocelli(6).............................. 55 1997 2000 60,433(14) * *
--------- ----- -----
All directors and executive officers as a group.. -- -- -- 2,360,465 25.6 23.6
--------- ----- -----
--------- ----- -----
</TABLE>
- ------------------
* Beneficial Ownership of less than 1 percent is omitted.
(1) Certain executive officers and directors of the Company beneficially own in
the aggregate, approximately 17.7 percent of the partnership interests in
the Operating Partnership, in which the Company has a 74.8 percent general
partnership interest and the aggregate limited partners' interest is 25.2
percent. The limited partners of the Operating Partnership share with the
Company, as general partner, in the net income or loss and any
distributions of the Operating Partnership. Pursuant to the partnership
agreement of the Operating Partnership, limited partnership interests are
redeemable into shares of Common Stock on a one-for-one basis; such Units
will be redeemed, at the Company's option and in its sole discretion,
either for shares of Common Stock on a one-for-one basis (subject to
certain anti-dilution adjustments and exceptions) and/or cash (based on the
fair market value of an equivalent number of shares of Common Stock at the
time of redemption).
(2) Except as otherwise noted below, all shares of Common Stock are owned
beneficially by the individual listed with sole voting and/or investment
power.
(3) Assumes redemption of only the limited partnership interests in the
Operating Partnership beneficially owned by such owner into shares of
Common Stock and the exercise of vested options held only by such owner.
(4) Assumes the redemption of all outstanding limited partnership interests in
the Operating Partnership into shares of Common Stock and the exercise of
all vested options.
(5) Member of the Compensation Committee of the Board of Directors.
(6) Member of the Audit Committee of the Board of Directors.
(7) Includes 344,127 shares of Common Stock, 80,000 vested Options and
1,540,859 Units.
(8) Includes 57,143 shares of Common Stock.
(9) Includes 2,800 shares of Common Stock, 33,333 vested Options and 195,551
Units.
(10) Includes 4,287 Shares of Common Stock and 8,333 vested Options.
4
<PAGE>
(11) Includes 1,000 shares of Common Stock and 3,333 vested Options.
(12) Includes 12,800 shares of Common Stock and 3,333 vested Options. (11,400
shares of Common Stock were purchased by SEJ Properties, L.P. of which
Mr. Grimes is the President/Treasurer and a shareholder of the general
partner, SEJ Properties, Inc. 1,400 shares of Common Stock were purchased
by Mr. Grimes' spouse, Ellen Grimes.)
(13) Includes 10,000 shares of Common Stock and 3,333 vested Options.
(14) Includes 57,100 shares of Common Stock and 3,333 vested Options.
Biographical information concerning the director nominees is set forth
above under the caption "Proposal No. 1--Election of Directors." Biographical
information concerning the remaining directors and executive officers is set
forth below.
Philip Pilevsky is Chairman of the Board, Chief Executive Officer and a
Director of the Company, and 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 26 years,
including the development, leasing, management, operation, acquisition and
disposition of commercial properties. Together with Ms. Levine, he 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 the Company with strategic leadership and a broadly-based
network of relationships. Outside the real estate industry he 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.
Sheila Levine is Chief Operating Officer, Executive Vice President,
Secretary and a Director of the Company, and has served as Chief Operating
Officer and Executive Vice President of Philips International Holding Corp.
Ms. Levine oversees the daily operations of the Company including acquisitions,
development, property management, finance and asset management, construction,
leasing and marketing for each property in the Company's portfolio. Ms. Levine
is also responsible for overseeing 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 Mr. Pilevsky.
Brian J. Gallagher is Chief Financial Officer, Acquisitions Director and
Treasurer of the Company, and served from March 1989 until December 31, 1997 as
the Director of Finance of Philips International Holding Corp. Mr. Gallagher is
primarily responsible for capital deployment and capital management of the
Company, 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 the
Company, Mr. Gallagher held positions in commercial real estate finance with
Credit Alliance Corporation and National Westminister Bank USA where he was
responsible for project finance and major account relationships. He received a
Bachelor of Science and a Master's Degree in City and Regional Planning from
Ohio State University.
Arnold S. Penner is a Director of the Company. For the past thirty years
Mr. Penner has been active in the real estate market as a real estate broker and
investor in a diverse portfolio of properties, including office buildings,
retail properties and parking facilities. Mr. Penner is a Director of United
Capital Corp. ("United Capital"), 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.
A.F. Petrocelli is a Director of the Company. He has served as Chairman of
the Board and Chief Executive Officer of United Capital 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.
5
<PAGE>
Robert S. Grimes is a Director of the Company. He has served as President
of RS Grimes Co., Inc., an investment company, since September 1987. Mr. Grimes
has also 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors and executive officers of the Company (or members of
their immediate families or related trusts) and persons who hold more than 5% of
the outstanding shares of Common Stock (or Units in the Operating Partnership)
had direct or indirect interests in certain transactions of the Company or the
Operating Partnership in the last fiscal year as follows:
o Management Agreement. Pursuant to a Management Agreement, under the
direction of the executive officers, Philips International Holding Corp.
("PIHC"), an affiliated entity, provides property management and leasing
services for the Company's interests in 26 retail properties (each a "Property"
and collectively the "Properties") including, among other things,
(i) operating, leasing and maintaining the Properties; (ii) the collection of
rents; and (iii) overseeing the construction of improvements and additions to
the Properties. PIHC receives a management fee from the Company equal to 3% of
gross rental collections received from the Properties, leasing commissions (not
to exceed local current market rates) and a construction supervisory fee (up to
10% of the cost of a project) with regard to tenant improvements and
construction matters relating to the Properties. In addition, PIHC is reimbursed
for out-of-pocket expenses.
The Management Agreement has an initial term of three years, commencing
December 31, 1997, subject to automatic one-year renewals. The Management
Agreement may be terminated by the Company, at any time, (i) in whole or in
part, upon thirty days' written notice, in the event that the Company elects to
perform one or more of such management functions on an 'in-house' basis (with a
commensurate reduction in fees), and (ii) in whole, immediately, upon the
occurrence of certain other events, including upon the gross negligence or
willful misconduct of PIHC, or if all or substantially all of the Properties are
sold.
This agreement enables the Company to utilize PIHC's infrastructure on a
cost-effective basis. Going forward, the Company is committed to internalize
property management functions as its portfolio grows. Based on the Company's
current business plan, the Company expects to become a fully integrated,
self-managed operation by May 2000. PIHC is owned and controlled by
Mr. Pilevsky and Ms. Levine who have agreed not to receive any remuneration or
consideration of any kind in connection with the Company's integration of
property management services.
The Company has granted options under the Stock Option Plan to certain
senior employees of PIHC who are actively involved in the management of the
Properties and whom the Company anticipates will join the Company upon
integration of the property management services. Fees paid by the Company to
PIHC pursuant to the Management Agreement totaled $1,440,553 during 1998.
o Non-Competition Agreement. Mr. Pilevsky, Ms. Levine and PIHC have agreed
pursuant to the Non-Competition Agreement to conduct all their future retail
shopping center activities through the Company, except for their activities with
respect to the Excluded Properties and retail properties under 10,000 square
feet. The Non-Competition Agreement is in effect until such time as (i) neither
Mr. Pilevsky nor Ms. Levine owns beneficially more than 15% of the outstanding
shares of Common Stock (including interests redeemable therefor) and (ii) one
year has lapsed since the Management Agreement has been terminated and neither
Mr. Pilevsky nor Ms. Levine is a director or executive officer of the Company.
In addition, in the event that at any time after December 31, 2002, Ms. Levine
is neither a director or executive officer of the Company for at least one year,
nor owns beneficially more than five percent of the outstanding shares of Common
Stock (including interests redeemable therefor), then the Non-Competition
Agreement will terminate as to Ms. Levine.
o Formation Transactions. In connection with the formation transactions
pursuant to which the Properties, or partnership or membership interests in the
Properties were contributed to the Operating Partnership in exchange for Units
(the "Formation Transactions"), 1,540,859 Units were issued to Mr. Pilevsky and
195,551
6
<PAGE>
Units were issued to Ms. Levine. Certain of these Units were pledged by
Mr. Pilevsky and Ms. Levine to Prudential Securities Corporation and Chase
Manhattan Bank. The security interests in these Units were released upon the
Company entering into a $100 million senior revolving credit facility with
Prudential Securities Credit Corporation upon the consummation of the Company's
initial public offering in May 1998 (the "Offering").
o Excluded Properties. Mr. Pilevsky and Ms. Levine have economic interests
in certain retail properties which were not transferred to the Company in the
Formation Transactions (the "Excluded Properties"). The Excluded Properties were
not included in the Company's portfolio either because of the inability to
obtain necessary partnership and lender consents or because the asset profile
was inconsistent with the Company's criteria. The Excluded Properties consist of
6 properties aggregating approximately .9 million square feet of gross leasable
area ("GLA") located outside the Company's existing markets and 21 properties
aggregating approximately 1.9 million square feet of GLA and two development
sites located within the Company's existing markets (in each case excluding
non-retail properties and retail properties with less than 10,000 leasable
square feet). The Company believes that only two Excluded Properties, located in
Uniondale and Massapequa, New York, are potentially competitive with two
Properties (specifically, with Merrick Commons and Meadowbrook Commons,
respectively). These properties were not included in the Company's portfolio
because partnership consents could not be obtained. Twelve of the Excluded
Properties are managed by PIHC.
o Mr. Pilevsky, Ms. Levine and PIHC will conduct all their future retail
shopping center activities in accordance with the Non-Competition Agreement. In
addition, Mr. Pilevsky has granted the Company a right of first refusal on the
sale or transfer by Mr. Pilevsky of his partnership interest in any of the
Excluded Properties, except for a transfer of Mr. Pilevsky's interest to an
existing partner of such property or a family member, or a sale of the entire
property, in which case Mr. Pilevsky will use reasonable efforts to cause such
property to be offered to the Company.
o Other Matters. Jeffrey Levine, the husband of Ms. Levine, is a partner
at the accounting firm of Chassin Levine Rosen & Company, LLP which firm has in
the past provided accounting and consulting services with respect to the
entities owning certain of the Properties and is likely to provide similar
services to the Company and PIHC in the future. During the year ended December
31, 1998, the entities owning the Properties paid an aggregate of approximately
$654,000 in fees to Chassin Levine Rosen & Company, LLP.
Elise Jaffe, a Director of the Company, is also the Senior Executive Vice
President of Real Estate for Dress Barn, Inc., a tenant of certain of the
Properties and of certain of the Excluded Properties. During the year ended
December 31, 1998, Dress Barn, Inc. paid an aggregate of approximately $478,000
in rent under leases for certain of the Properties.
At the Offering, pursuant to the Petra Employment Agreement and the
Gallagher Employment Agreement, the Company made a non-recourse loan to each of
Messrs. Petra and Gallagher in the amounts of $1,000,000 and $50,000,
respectively, the proceeds of which were simultaneously used by each of Messrs.
Petra and Gallagher to purchase newly issued Common Stock at the public offering
price. These loans will be forgiven in equal installments pursuant to the terms
of the respective employment agreements.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than 10% of the Company's Common
Stock to file initial reports of ownership and reports of changes of ownership
(Forms 3, 4 and 5) of the Common Stock with the SEC and the New York Stock
Exchange. Officers, directors and greater than 10% holders are required by SEC
regulations to furnish the Company with copies of such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company, the Company believes that during
1998, its officers, directors and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements.
7
<PAGE>
MEETINGS OF COMMITTEES AND THE BOARD OF DIRECTORS
During 1998, the Board of Directors met 5 times. No director attended fewer
than 75 percent of the aggregate of (1) the total number of meetings of the
Board of Directors and (2) the total number of meetings held by all committees
of the Board of Directors on which he served.
The Board of Directors has two committees: the Audit Committee and the
Compensation Committee. All members of these committees attended each of their
respective meetings held during 1998. The Board of Directors does not have a
nominating committee or a committee performing the functions of a nominating
committee. Although there are no formal procedures for stockholders to make
recommendations for committee appointments or recommendations for nominees to
the Board of Directors, the Board of Directors will consider recommendations
from stockholders, which should be addressed to Sheila Levine, the Company's
Secretary, at the Company's address set forth on the first page of this Proxy
Statement.
The Audit Committee consists of Mr. Petrocelli and Ms. Jaffe. The Audit
Committee makes recommendations concerning the engagement of independent
accountants, reviews with the independent accountants the scope and results of
the audit engagement, approves professional services provided by the independent
accountants, reviews the independence of the independent accountants, considers
the range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee met once during 1998.
The Compensation Committee consists of Ms. Levine, Mr. Penner and
Mr. Grimes. The Compensation Committee establishes remuneration levels for
executive officers of the Company and implements incentive programs, including
administration of the Company's Stock Option Plan. The Compensation Committee
met once during 1998.
COMPENSATION OF DIRECTORS
Directors' Fees. Each director who is not an executive officer of the
Company is paid $10,000 per year, plus (i) $750 for attendance in person at each
meeting of the full Board of Directors, (ii) $500 for attendance in person at
each meeting of a committee thereof, if such meeting is held on a day other than
the day of a full Board meeting, and (iii) $250 for each telephonic meeting
participation. Each director who is not an executive officer of the Company has
also received a grant of options to purchase 10,000 shares of Common Stock at
$17.50 per share under the Stock Option Plan, which options vest in three equal
installments on January 1, 1999, 2000 and 2001. Executive officers of the
Company are not compensated for their services as directors. Each director will
be reimbursed for expenses relating to attendance at meetings of the Board of
Directors or any committee thereof. During 1998, Elise Jaffe, Robert S. Grimes,
Arnold S. Penner, and A.F. Petrocelli received directors' fees in the amounts of
$13,250, $13,250, $13,250 and $12,500, respectively.
Stock Option Plan. Pursuant to the 1997 Stock Option and Long-Term
Incentive Plan (the "Stock Option Plan"), each non-employee director was granted
a non-qualified option to purchase 10,000 shares of Common Stock in connection
with the director's initial appointment to the Board of Directors. These grants
under the Stock Option Plan were made at an exercise price equal to the "fair
market value" (as defined under the Stock Option Plan) at the time of the grant
of the shares of Common Stock subject to such option. The Compensation Committee
may make additional discretionary option grants to eligible directors,
consistent with the terms of the Plan. In 1998, Philip Pilevsky was granted
240,000 options at an exercise price of $17.50 per share, and Louis J. Petra and
Sheila Levine were granted 100,000 options at an exercise price of $17.50 per
share. A.F. Petrocelli, Elise Jaffe, Robert Grimes and Arnold S. Penner were
each granted 10,000 options at an exercise price of $17.50 per share.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer and the three other executive
officers of the Company (collectively, the "Named Executive Officers") for the
period July 16, 1997 (date of incorporation) through December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ----------- --------
--------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(2) AWARD(S)($) OPTIONS/SAR'S(#) PAYOUT
- --------------------------------------- ---- -------- -------- ------------------ ----------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip Pilevsky,
Chief Executive Officer.............. 1998 (4) 0 0 240,000(3) 0
1997 (4) 0 0 0 0
Louis J. Petra,
President(2)......................... 1998 175,000 0 0 100,000(3) 0
1997 57,211 0 0 0 0
Sheila Levine,
Chief Operating Officer, Executive
Vice President and Secretary......... 1998 175,000 0 0 100,000(3) 0
1997 (5) 0 0 0 0
Brian J. Gallagher,
Chief Financial Officer,
Acquisitions Director and
Treasurer(2)......................... 1998 150,000 0 0 100,000(3) 0
1997 (5) 0 0 0 0
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION($)
- --------------------------------------- ---------------
<S> <C>
Philip Pilevsky,
Chief Executive Officer.............. 0
0
Louis J. Petra,
President(2)......................... 0
0
Sheila Levine,
Chief Operating Officer, Executive
Vice President and Secretary......... 0
0
Brian J. Gallagher,
Chief Financial Officer,
Acquisitions Director and
Treasurer(2)......................... 0
0
</TABLE>
- ------------------
(1) The annual compensation portion of this table includes the dollar value of
regular annual payments of base salary, bonus & any other annual
compensation earned by each named executive officer during the year
indicated.
(2) In connection with their respective employment agreements, the Company made
non-recourse stock acquisition loans (the "Stock Acquisition Loans") to
Louis J. Petra, and Brian J. Gallagher, in the amounts of $1,000,000, and
$50,000, respectively, the proceeds of which were simultaneously used by
each of Louis J. Petra and Brian J. Gallagher to purchase 57,143 and 2,857
shares of Common Stock, respectively, from the Company. The Stock
Acquisition Loans are to be forgiven in installments under certain terms and
conditions, including the continued employment of each such executive with
the Company. Such employment agreements provide that the forgiveness of the
Stock Acquisition Loans is to be accelerated upon a change in control or, in
the case of Louis J. Petra, also upon termination of his employment by the
Company other than for cause or Mr. Petra's termination of his employment
for good reason.
(3) Represents an option to purchase shares of Common Stock at an exercise price
of $17.50 per share.
(4) Philip Pilevsky, Chairman of the Board of Directors and Chief Executive
Officer, did not receive compensation from the Company in consideration for
services rendered in such capacities during calendar years 1998 and 1997.
(5) Sheila Levine and Brian J. Gallagher entered into employment agreements with
the Company effective December 31, 1997. Accordingly, those executive
officers did not receive compensation from the Company during calendar year
1997.
9
<PAGE>
OPTION PLANS
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES IN EXERCISE TERM
OPTIONS FISCAL OR BASE EXPIRATION ---------------------------
NAME GRANTED(#)(2) 1998(%) ($/SH)(3) DATE(4) 5%($) 10%($)
- -------------------------------------------- ------------- ------------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Philip Pilevsky,
Chief Executive Officer(5)................ 240,000 36.7% 17.50 12/31/07 2,642,400 6,693,600
Louis J. Petra,
President(6).............................. 100,000 15.3% 17.50 12/31/07 1,101,000 2,789,000
Sheila Levine,
Chief Operating Officer, Executive Vice
President and Secretary(7)................ 100,000 15.3% 17.50 12/31/07 1,101,000 2,789,000
Brian J. Gallagher,
Chief Financial Officer, Acquisitions
Director and Treasurer(7)................. 25,000 3.8% 17.50 12/31/07 275,250 697,250
</TABLE>
- ------------------
(1) The Company has not, to date, granted any stock appreciation rights under
the Stock Option Plan.
(2) The Company has established the Stock Option Plan for the purpose of
attracting and retaining officers, directors and employees. Options granted
under the Stock Option Plan are exercisable for shares of Common Stock.
(3) The exercise price of all options is equal to the public offering price of
$17.50 per share. As of the Record Date, the closing stock price was $14.19
per share.
(4) Each option granted in 1998 has a ten-year term.
(5) Options will vest 33 1/3% on January 1 of each of 1999, 2000 and 2001.
(6) Options will vest 25% on December 31 of each of 1999, 2000, 2001 and 2002.
(7) Options will vest 33 1/3% on December 31 of each of 1998, 1999 and 2000.
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS AT
ACQUIRED VALUE YEAR-END (#) FISCAL YEAR-END ($)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip Pilevsky............. 0 0 80,000 160,000 0 0
Louis J. Petra.............. 0 0 0 100,000 0 0
Sheila Levine............... 0 0 33,333 66,667 0 0
Brian J. Gallagher.......... 0 0 8,333 16,667 0 0
</TABLE>
10
<PAGE>
EMPLOYMENT CONTRACTS; TERMINATION OF EMPLOYMENT
Louis J. Petra Employment Agreement. Mr. Petra entered into an employment
agreement with the Company (the "Petra Employment Agreement"), effective as of
September 2, 1997, providing for a term of five years four months. Mr. Petra's
initial base salary is $175,000, with an increase to $200,000 for the 2001
calendar year and $225,000 for the 2002 calendar year. Mr. Petra is also
entitled to receive a portion of the Company's annual bonus pool to be
determined in the discretion of the Board of Directors. On January 1, 1998,
Mr. Petra received options to purchase 100,000 shares of Common Stock under the
Stock Option Plan, with 25% of the options vesting on December 31 of each of
1999, 2000, 2001 and 2002. In addition, the Company loaned on a non-recourse
basis to Mr. Petra $1,000,000 (the "Petra Loan"), the proceeds of which were
used to simultaneously purchase newly issued Common Stock at $17.50 per share.
The Petra Loan will be forgiven in two $500,000 installments on December 31,
2000 and December 31, 2002. Mr. Petra is entitled to receive dividends on the
Common Stock purchased with the proceeds of the Petra Loan, net of interest
which accrues on the outstanding balance of such loan at 6% per annum. Either
party may terminate the Petra Employment Agreement on or after December 31,
2000, in which event Mr. Petra will receive his accrued but unpaid salary
through his termination date, the balance of his options will fully vest, a pro
rata portion (based upon the number of days Mr. Petra's employment was extended
beyond December 31, 2000) of the $500,000 outstanding balance of the Petra Loan
will be forgiven and the balance, if any, will be immediately payable. If the
Company terminates Mr. Petra's employment other than for cause, or if Mr. Petra
terminates his employment for good reason, in either case between June 1, 1998
and December 31, 2000, Mr. Petra will be entitled to continuation of his salary
through December 31, 2000, a pro rata bonus payment and forgiveness of $500,000
of the Petra Loan and the balance, if any, will be immediately payable. In
addition, all options and restricted share awards will vest and the
non-competition provisions will no longer apply. If Mr. Petra is employed on the
date of a change in control, the outstanding balance of the Petra Loan will be
forgiven, all options and restricted share awards will vest and the
non-competition provisions will no longer apply. If such a change in control
occurs between June 1, 1998 and December 31, 2000 and Mr. Petra's employment is
terminated by the Company or its successor on or after the date of the change in
control, Mr. Petra will also be entitled to receive a pro rata bonus payment and
continuation of his salary through December 31, 2000. Mr. Petra is subject to a
non-compete agreement during his employment period and for a period of one year
following termination of his employment by the Company for cause or by
Mr. Petra without good reason.
Sheila Levine Employment Agreement. Ms. Levine entered into an employment
agreement with the Company (the "Levine Employment Agreement"), effective as of
consummation of the Formation Transactions, providing for an initial term of
three years, subject to automatic one-year extensions. Ms. Levine's annual base
salary is $175,000, with annual increases in the discretion of the Board of
Directors or Compensation Committee of the Board of Directors. Ms. Levine is
also entitled to receive a minimum of 25% of the annual bonus pool, with the
amount of the Company's annual bonus pool to be determined in the discretion of
the Board of Directors. In addition, on January 1, 1998, the Company issued
options which entitle Ms. Levine to acquire 100,000 shares of Common Stock under
the Stock Option Plan, which options vest 33 1/3% on December 31 of each of
1998, 1999 and 2000. If the Company terminates Ms. Levine's employment other
than for cause, if Ms. Levine terminates her employment for good reason or if
there is a change in control, Ms. Levine will be entitled to her annual base
salary and bonus through the end of the contractual employment period. In
addition, in such event, all options and restricted share awards will vest.
Ms. Levine is subject to the Non-Competition Agreement.
Brian J. Gallagher Employment Agreement. The Company entered into an
employment agreement with Mr. Gallagher (the "Gallagher Employment Agreement"),
effective as of consummation of the Formation Transactions, providing for, among
other things: (i) a three year term and an initial base salary of $150,000; (ii)
a minimum of 10% of the annual bonus pool, with the amount of the Company's
annual bonus pool to be determined in the discretion of the Board of Directors;
and (iii) the grant of options to acquire 25,000 shares of Common Stock under
the Stock Option Plan, which options vest 33 1/3% on December 31 of each of
1998, 1999 and 2000. In addition, at the Offering, the Company loaned on a
non-recourse basis to Mr. Gallagher $50,000 (the "Gallagher Loan"), the proceeds
of which we used to simultaneously purchase newly issued Common Stock at the
public offering price. The Gallagher Loan will be forgiven in three installments
of $16,666 on January 1, 1999, January 1, 2000 and on December 31, 2000. In the
event Mr. Gallagher or the Company
11
<PAGE>
terminates his employment during the employment term or there is a Change of
Control (as defined in the Gallagher Employment Agreement), the balance of the
Gallagher Loan shall be forgiven.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no interlocking relationships involving the Company's Board of
Directors which require disclosure under the executive compensation rules of the
Securities Exchange Commission.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph which follows shall not be deemed to be incorporated by
reference into any such filings.
Executive Compensation Philosophy. The Compensation Committee will
annually consider the appropriate combination of cash and option-based
compensation and weigh the competitiveness of the Company's overall compensation
arrangements in relation to comparable real estate investment trusts. From time
to time, the Compensation Committee may retain compensation and other management
consultants to assist with, among other things, structuring the Company's
various compensation programs and determining appropriate levels of salary,
bonus and other compensatory awards payable to the Company's executive officers
and key employees, as well as to guide the Company in the development of
near-term and long-term individual performance objectives necessary to achieve
long-term profitability.
The Compensation Committee believes that a fundamental goal of the
Company's executive compensation program should be to provide incentives to
create value for the Company's stockholders.
Base Salaries. The base compensation levels for the Company's executive
officers in 1998 were set to compensate the executive officers for the functions
they perform as well as to be consideration for certain non-competition
provisions in the agreements. While no specific formula was used to determine
base compensation levels for the Company's executive officers, the Company
believes that the base salaries are generally in line with those of other
publicly held real estate investment trusts the Company has reviewed, some of
which entities are included in the NAREIT Equity REIT Index. Base salaries will
be reviewed annually and may be increased by the Compensation Committee in
accordance with certain criteria determined primarily on the basis of growth of
revenues and funds from operations per share of Common Stock and on the basis of
certain other factors, which include (i) individual performance, (ii) the
functions performed by the executive officer, and (iii) changes in the
compensation peer group in which the Company competes for executive talent. The
weight given such factors by the Compensation Committee may vary from individual
to individual.
Annual Bonus Compensation. The Company's intention to award annual cash
bonuses is designed to specifically relate executive pay to Company and
individual performance. As a pay-for-performance program, cash bonuses provide
financial rewards for the achievement of substantive Company and personal
objectives. Actual awards will be based primarily on actual Company performance.
Stock Option Plan. Awards are granted under the Stock Option Plan based on
a number of factors, including (i) the executive officer's or key employee's
position in the Company, (ii) his or her performance and responsibilities, (iii)
the extent to which he or she already holds an equity stake in the Company, (iv)
equity participation levels of comparable executives and key employees at other
companies in the compensation peer group, and (v) individual contribution to the
success of the Company's financial performance. However, the Stock Option Plan
does not provide any formulated method for weighing these factors, and a
decision to grant an award is based primarily upon the Compensation Committee's
evaluation of the past as well as the future anticipated performance and
responsibilities of the individual in question. In conjunction with the
Offering, the following options were issued during 1998 to employees at the
exercise price of $17.50: Philip Pilevsky (240,000), Louis J. Petra (100,000),
Sheila Levine (100,000), Brian J. Gallagher (25,000) and Andrew Aberham (5,000).
The Company's Stock Option Plan relates closely to traditional forms of
equity-oriented compensation in the commercial real estate industry. The purpose
of the option grants is to aid the Company in attracting and
12
<PAGE>
retaining quality employees, all advancing the interest of the Company's
stockholders, by offering employees an incentive to maximize their efforts to
promote the Company's economic performance. In addition, to assist the Company
in retaining employees and encouraging them to seek long-term appreciation in
the value of the Company's stock, options generally are not exercisable
immediately upon grant, but instead vest over a period of years. Accordingly, an
employee must remain with the company for a period of years to enjoy the full
economic benefit of an option.
401(k) Savings Plan. Effective upon consummation of the Formation
Transactions, the Company established a 401(k) Savings and Retirement Plan (the
"401(k) Plan") to cover eligible employees of the Company and any designated
affiliates.
The 401(k) Plan permits eligible employees of the Company (and any
designated affiliate) to defer up to 15% of their annual compensation, subject
to certain limitations imposed by the Code. The employees' elective deferrals
are immediately fully vested and non-forfeitable upon contribution to the 401(k)
Plan. The Company currently does not intend to make matching contributions to
the 401(k) Plan; however, it reserves the right to make matching contributions
and/or discretionary profit sharing contributions in the future.
The 401(k) Plan is designed to qualify under Section 401 of the Internal
Revenue Code of 1986, as amended, so that contributions by employees or by the
Company to the 401(k) Plan, and income earned thereon, will not be taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by the
Company, if any, will be deductible by the Company when made.
Chief Executive Officer Compensation. Philip Pilevsky, Chairman of the
Board of Directors and Chief Executive Officer of the Company, does not
currently receive any renumeration for services performed in such capacities.
Mr. Pilevsky is, however, a substantial shareholder of the Company and Unit
holder of the Operating Partnership and receives dividends and distributions in
respect of these equity interests as may be declared from time to time by the
Board generally with regard to all shares of Common Stock and Units then
outstanding. In addition, Mr. Pilevsky received options to purchase 240,000
shares of Common Stock at an exercise price of $17.50 per share under the Stock
Option Plan during 1998. The Board of Directors deemed such option grant
appropriate in light of Mr. Pilvesky's expected substantial contribution to the
Company's growth and success in the future.
Compensation Committee of the
Board of Directors
SHEILA LEVINE
ARNOLD S. PENNER
ROBERT S. GRIMES
13
<PAGE>
PERFORMANCE GRAPH
Trading of the Company's Common Stock commenced on May 8, 1998, on a when
issued basis. The following graph compares total stockholder returns from
May 8, 1998 through December 31, 1998 to the Standard & Poor's 500 Stock Index
("S&P 500") and to the National Association of Real Estate Investment Trusts,
Inc.'s Equity REIT (excluding Health Care REITs) Total Return Index ("NAREIT").
The graph assumes that the value of the investment in the Company's Common Stock
and in the S&P 500 and NAREIT indices was $100 at May 8, 1998 and that all
dividends have been reinvested. The Common Stock price on May 8, 1998 (on which
the graph is based) and the initial public offering price of the Common Stock
was $17.50.
The stockholder return shown on the following graph is not necessarily
indicative of future performance. The Company does not believe that the graph is
particularly meaningful in that it covers a short period of time.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
PHILIPS INTERNATIONAL REALTY CORP.,
THE S&P 500 INDEX AND THE NAREIT EQUITY REIT INDEX
[GRAPH APPEARS HERE]
PHILIPS
INTERNATIONAL
NAREIT S&P 500 REALTY CORP.,
8-May-98 100 100 100
30-Jun-98 98 103 93
30-Sep-98 88 92 88
31-Dec-98 86 112 90
14
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Ernst & Young LLP served as the Company's independent accountants for the
year ended December 31, 1998 and has been appointed by the Board of Directors to
continue as the Company's independent accountants for the year ending
December 31, 1999. In the event that ratification of this appointment of
auditors is not approved by the affirmative vote of a majority of votes cast on
the matter, then the appointment of independent accountants will be reconsidered
by the Board of Directors. A representative of Ernst & Young LLP is expected to
be present at the annual meeting. The representative will have an opportunity to
make a statement and will be able to respond to appropriate questions.
Unless marked to the contrary, proxies received will be voted FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE YEAR ENDING DECEMBER 31, 1999.
SHAREHOLDER PROPOSALS
To be considered for presentation at the annual meeting of the Company's
shareholders to be held in 2000, a shareholder proposal must be received by
Sheila Levine, Secretary, Philips International Realty Corp., 417 Fifth Avenue,
New York, New York 10016, no later than January 21, 2000.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
to the annual meeting. If any other business is property brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof and in accordance with the judgments of the persons voting
the proxies.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ SHEILA LEVINE
--------------------------
Sheila Levine
Secretary
Date: April 20, 1999
New York, New York
15
