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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/x/ 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:
Common Stock, $0.01 par value, of Philips International Realty
Corp.
(2) Aggregate number of securities to which transaction applies:
7,340,474 shares of Philips International common stock plus
707,500 shares underlying outstanding options to purchase shares
of Philips International common stock.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: The filing fee was determined
based upon (a) the product of 7,340,474 shares of Philips
International common stock and the projected liquidation payment
of $18.25 per share in cash and (b) the difference between $18.25
per share and the exercise price per share of each of the 707,500
options to purchase shares of Philips International common stock.
In accordance with Rule 0-11 under the Securities Exchange Act of
1934, as amended, the filing fee was determined by multiplying
the amount calculated pursuant to the preceding sentence by 1/50
of one percent.
(4) Proposed maximum aggregate value of transaction: $134,543,801.
(5) Total fee paid: $26,909.
/x/ 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:
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PHILIPS INTERNATIONAL REALTY CORP.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
September 8, 2000
Dear Philips International Stockholder:
We invite you to attend a special meeting of stockholders of Philips
International Realty Corp. to be held at HSBC Bank, 452 Fifth Avenue, 11th
Floor, New York, New York 10018, on October 10, 2000, at 3:00 p.m., local time.
At the special meeting, we will ask you to approve two proposals. We will
ask you to approve an amendment to the company's charter to reduce the
affirmative stockholder vote required to approve an extraordinary corporate
action, such as a merger, consolidation, sale of all or substantially all of the
assets or dissolution of the company, from two-thirds to a majority of all votes
entitled to be cast on the action by the holders of our stock. In addition, we
will ask you to approve a plan of liquidation of the company, pursuant to which
we intend to: (1) dispose of all our assets for cash and/or the redemption of
units in our affiliated operating partnership in a series of transactions,
(2) pay or provide for our liabilities and expenses, (3) distribute the net
proceeds of the liquidation to you and our other stockholders and (4) wind up
our operations and dissolve. If the plan of liquidation is approved, we expect
to distribute to our stockholders in two or more distributions approximately
$18.25 in cash in the aggregate for each share of our common stock they own.
We recently have sold seven of our shopping centers to Kimco Income
Operating Partnership, L.P. for cash and the assumption of indebtedness, and, in
connection with our plan to liquidate, we have (1) entered into a definitive
agreement to transfer our interests in eight shopping centers to Kimco for cash
and the assumption of indebtedness and (2) entered into definitive agreements to
transfer our interests in four shopping centers and two redevelopment
properties, subject to certain indebtedness, to Philip Pilevsky, our chairman
and chief executive officer, and certain of his family members in exchange for
cash and the redemption of their units in our affiliated operating partnership.
We also expect to enter into agreements to sell our remaining properties for
cash shortly.
We cannot complete the transactions contemplated by the plan of liquidation
unless specified conditions are satisfied, including obtaining the approval of
our stockholders. If the proposed charter amendment is approved, then approval
of the plan of liquidation will require the affirmative vote of a majority of
all votes entitled to be cast by the holders of our common stock. If the charter
amendment is not approved, then approval of the plan of liquidation will require
the affirmative vote of two-thirds of all votes entitled to be cast by our
stockholders.
A special committee consisting of the four independent members of our board
of directors carefully reviewed and considered the terms and conditions of the
plan of liquidation and the transactions contemplated by the plan of liquidation
as well as other alternatives available to us. Based on its review, the special
committee unanimously determined that the terms of the plan of liquidation and
the transactions contemplated by the plan of liquidation are fair to and in the
best interests of us and our equity owners. In making this determination, the
special committee considered, among other things, an opinion received from
Prudential Securities Incorporated, one of our independent financial advisors,
to the effect that the consideration to be received by us in the Kimco
transactions is fair to us from a financial point of view, and an opinion
received from Houlihan Lokey Howard & Zukin Financial Advisors, Inc., another of
our independent financial advisors, to the effect that the aggregate
consideration to be received by us in the Pilevsky Group transaction is fair to
us from a financial point of view and that the aggregate consideration to be
received by our stockholders and the unitholders in connection with the over-all
transaction is fair to our stockholders and the unitholders from a financial
point of view.
OUR BOARD OF DIRECTORS, TAKING INTO ACCOUNT THE UNANIMOUS RECOMMENDATION OF
THE SPECIAL COMMITTEE, UNANIMOUSLY DETERMINED THAT THE PLAN OF LIQUIDATION
(INCLUDING THE KIMCO TRANSACTION AND THE PILEVSKY GROUP TRANSACTION) IS FAIR TO
AND IN THE BEST INTERESTS OF US AND OUR STOCKHOLDERS AND UNANIMOUSLY APPROVED
THE PLAN OF LIQUIDATION. OUR BOARD ALSO UNANIMOUSLY DETERMINED THAT THE PROPOSED
CHARTER AMENDMENT IS IN THE BEST INTERESTS OF US AND OUR STOCKHOLDERS.
ACCORDINGLY, OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
EACH PROPOSAL.
<PAGE>
The attached notice of special meeting and proxy statement explain the
proposals and provide specific information concerning the special meeting.
Please read these materials (including the appendices) carefully.
Your vote is important. Whether or not you plan to attend the special
meeting, you should complete, sign, date and promptly return the enclosed proxy
card to ensure that your shares will be represented at the meeting. If you
attend the special meeting and wish to vote in person, you may withdraw your
proxy and do so.
If you have any questions regarding the proposals, please call Morrow &
Co., Inc., our proxy solicitors, toll-free at 1-800-662-5200 or collect at (212)
754-8000 or our investor relations department at (212) 545-1100.
Very truly yours,
/s/ LOUIS J. PETRA
Louis J. Petra
President
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THIS TRANSACTION OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This proxy statement is dated September 8, 2000 and was first mailed to our
stockholders on or about September 8, 2000.
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
---------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 10, 2000
---------------------------------
To the Stockholders of Philips International Realty Corp.:
A special meeting of stockholders of Philips International Realty Corp.
will be held at 3:00 p.m., local time, on October 10, 2000, at HSBC Bank, 452
Fifth Avenue, 11th Floor, New York, New York 10018, for the following purposes:
1. To consider and vote upon a proposal to amend our charter to reduce the
affirmative stockholder vote required to approve an extraordinary
corporate action, such as a merger, consolidation, sale of all or
substantially all of the assets or dissolution of the company, from
two-thirds to a majority of all votes entitled to be cast on the action
by the holders of our stock. In the attached proxy statement, we refer
to this proposed amendment as the "charter amendment" and this proposal
as the "charter amendment proposal";
2. To consider and vote upon a proposal to approve a plan of liquidation of
the company, pursuant to which we will, among other things,
(a) transfer our interests in our affiliates that own eight shopping
centers to Kimco Income Operating Partnership, L.P. for cash and the
assumption of indebtedness, (b) transfer our interests in the entities
that own four shopping centers and two redevelopment properties, subject
to certain indebtedness, to Philip Pilevsky, our chief executive
officer, and certain of his affiliates and family members in exchange
for cash and the redemption of units in our affiliated operating
partnership, (c) sell our remaining assets for cash, (d) pay or provide
for our liabilities and expenses, (e) distribute the net proceeds of the
liquidation to you in two or more liquidating distributions of
approximately $18.25 in cash in the aggregate for each share of our
common stock you own and (f) wind up our operations and dissolve, all in
accordance with the plan of liquidation attached to the proxy statement
as Exhibit A. In the proxy statement, we refer to this proposal as the
"plan of liquidation" and the transactions contemplated by the plan of
liquidation as the "liquidation"; and
3. To transact any other business that may properly come before the meeting
or any adjournment or postponement of the meeting.
The board of directors does not know of or expect any other business to be
transacted at the special meeting. The board of directors has fixed the close of
business on August 15, 2000 as the record date for determining stockholders
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the meeting. To make it easier for you to vote, we are making
available Internet and telephone voting. The instructions attached to your proxy
card describe how to use these convenient new services. Of course, if you
prefer, you can vote by mail by completing your proxy card and returning it in
the enclosed postage-paid envelope.
Whether or not you plan to attend the special meeting, you should complete,
sign, date and promptly return the enclosed proxy card, or promptly vote by
Internet or telephone, to ensure that your shares will be represented at the
meeting. If you attend the special meeting and wish to vote in person, you may
withdraw your proxy and vote in person. You should not send any certificates
representing common stock with your proxy card.
By Order of the Board of Directors,
/s/ SHEILA LEVINE
Sheila Levine
Secretary
Dated: September 8, 2000
<PAGE>
MAILED TO STOCKHOLDERS
ON OR ABOUT SEPTEMBER 8, 2000
PHILIPS INTERNATIONAL REALTY CORP.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
---------------------------------
PROXY STATEMENT
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS.................................................................. 1
SUMMARY.................................................................................................... 4
The Parties.............................................................................................. 4
The Special Meeting...................................................................................... 5
The Charter Amendment Proposal........................................................................... 5
The Plan of Liquidation.................................................................................. 5
The Kimco Transaction.................................................................................... 7
The Prior Kimco Transaction.............................................................................. 7
The Pilevsky Group Transaction........................................................................... 7
The Other Transactions................................................................................... 8
Selected Historical Financial Data of Philips International.............................................. 9
THE SPECIAL MEETING........................................................................................ 10
Date, Time and Place of the Special Meeting.............................................................. 10
Purpose of the Special Meeting........................................................................... 10
Record Date; Quorum; Outstanding Common Stock Entitled to Vote........................................... 10
Voting Rights............................................................................................ 10
Voting and Revocation of Proxies......................................................................... 10
Solicitation of Proxies.................................................................................. 11
Other Matters............................................................................................ 11
THE CHARTER AMENDMENT PROPOSAL............................................................................. 12
Background............................................................................................... 12
The Charter Amendment and its Effects.................................................................... 12
Vote Required and Board of Directors' Recommendation..................................................... 13
SPECIAL FACTORS RELATING TO THE PLAN OF LIQUIDATION........................................................ 14
Background of the Plan of Liquidation.................................................................... 14
Recommendations of the Special Committee and the Board of Directors;
Reasons for the Liquidation........................................................................... 17
Fairness Opinions of Prudential Securities and Houlihan Lokey............................................ 20
Purpose of the Liquidation; Certain Effects of the Liquidation........................................... 31
Interests in the Liquidation That Differ From Your Interests............................................. 31
Prior Kimco Transaction.................................................................................. 32
Plans for Philips International and the Properties After the Liquidation;
Liquidation Procedures................................................................................ 32
Appraisal Rights of Stockholders......................................................................... 33
THE PLAN OF LIQUIDATION.................................................................................... 34
The Plan of Liquidation.................................................................................. 34
The Pilevsky Group Transaction........................................................................... 42
The Other Transactions................................................................................... 45
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES..................................................... 46
United States Federal Income Tax Consequences to the Company and Our Stockholders........................ 46
United States Federal Income Tax Consequences to Non-U.S. Stockholders................................... 48
State and Local Taxes.................................................................................... 49
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PARTIES TO THE LIQUIDATION TRANSACTIONS.................................................................... 49
Philips International Realty Corp........................................................................ 49
Kimco Income Operating Partnership, L.P.................................................................. 50
The Pilevsky Group....................................................................................... 50
SECURITY OWNERSHIP OF CERTAIN DIRECTORS AND EXECUTIVE OFFICERS............................................. 51
VOTING SECURTIES AND PRINCIPAL HOLDERS..................................................................... 52
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.................................................................. 53
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................................................. 54
OTHER INFORMATION.......................................................................................... 55
Proposals by Stockholders of Philips International....................................................... 55
Independent Auditors..................................................................................... 55
Where You Can Find More Information...................................................................... 55
Incorporation by Reference............................................................................... 55
EXHIBIT A: Plan of Liquidation and Dissolution............................................................ A-1
EXHIBIT B: Opinion of Prudential Securities Incorporated.................................................. B-1
EXHIBIT C: Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc............................... C-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: At the special meeting, we will ask you to vote
upon an amendment to the company's charter to
reduce the affirmative stockholder vote required
to approve an extraordinary corporate action,
such as a merger, consolidation, sale of all or
substantially all of the assets or a dissolution
of the company, from two-thirds to a majority of
all votes entitled to be cast on the action by
the holders of our stock. In addition, we will
ask you to approve a plan of liquidation of the
company, pursuant to which we will, among other
things, transfer our interests in our affiliates
that own eight shopping centers located mainly in
the New York metropolitan area to Kimco Income
Operating Partnership, L.P. for cash and the
assumption of indebtedness, transfer our in-
terests in four contiguous shopping centers in
Hialeah, Florida and two redevelopment proper-
ties, subject to certain indebtedness, to Philip
Pilevsky, our chief executive officer, and
certain of his affiliates and family members in
exchange for cash and the redemption of units in
our affiliated operating partnership, sell our
remaining assets for cash, pay or provide for our
liabilities and expenses, distribute the net
proceeds of the liquidation to you and our other
stockholders, wind up our operations and
dissolve.
Q: WHAT WILL I RECEIVE IN THE LIQUIDATION?
A: We currently expect that you will receive in two
or more liquidating distributions approximately
$18.25 in the aggregate in cash for each share of
our common stock that you own (assuming that you
hold your shares through the completion of the
liquidation). The $18.25 per share expected to be
paid in the liquidation represents a premium over
the highest price at which our common stock has
historically traded, including a 16.8% premium
over the $15.63 closing price of our common stock
on October 12, 1999, the day before we publicly
announced our decision to explore strategic
alternatives, and an 18.7% premium over the
average daily closing price of $15.37 from
January 1, 1999 through October 12, 1999. The
amount you will receive in the liquidation is
subject to the amount reserved to pay or provide
for our liabilities and expenses and the amount
received in the liquidation of our real estate
assets that we have listed for sale but are not
currently subject to definitive sale agreements.
Q. HOW MANY LIQUIDATING DISTRIBUTIONS DO YOU
ANTICIPATE MAKING?
A: We currently estimate that the aggregate
distribution to our stockholders will be $18.25
in cash per share of our common stock, subject to
the accuracy of our estimated expenses and
liabilities. We anticipate making two or more
liquidating distributions to you. We expect that
you will receive a significant portion of the
estimated $18.25 in cash per share in the initial
distribution, which we will make as soon as
practicable after the approval of the plan of
liquidation, completion of the Kimco transaction
and the Pilevsky Group transaction (as each is
defined under the heading "Summary"), payment of
our known debts and liabilities and establishment
of a reserve to cover contingent liabilities and
anticipated expenses in connection with the
liquidation. We expect to make a final
distribution, including any funds remaining in
the reserve fund after we pay or provide for any
contingent liabilities or future expenses, as
promptly as reasonably possible thereafter. The
actual amounts and times of the liquidating
distributions will be determined by our board in
its discretion. If you transfer your shares
during the liquidation, the right to receive
liquidating distributions will transfer with
those shares.
Q: WHAT WILL HAPPEN TO MY REGULAR QUARTERLY
DIVIDEND?
A: If stockholders approve the plan of liquidation,
we expect to make, in lieu of the regular
quarterly dividend, two or more liquidating
distributions as soon as practicable. Our board
intends to suspend the payment of quarterly
dividends beginning in the third quarter 2000,
pending the outcome of the special meeting.
Q: WHAT IS THE BOARD'S RECOMMENDATION AS TO THE PLAN
OF LIQUIDATION?
A: Our board has unanimously determined that the
plan of liquidation is fair to you and in your
and our best interests and recommends that you
vote "FOR" approval of the plan of liquidation.
In making this determination, our board took into
1
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account the unanimous recommendation of a special
committee, consisting of all four independent
members of our board, following the special
committee's review and evaluation of the fairness
of the plan of liquidation. The special committee
and our board considered the opinion of our
financial advisor, Prudential Securities
Incorporated, to the effect that the aggregate
consideration to be received by us in the
transactions contemplated by the agreements we
entered into with Kimco on April 28, 2000, as
amended, is fair to us from a financial point of
view. The special committee and our board also
considered the opinion of our financial advisor,
Houlihan Lokey Howard & Zukin Financial Advisors,
Inc., to the effect that (1) the aggregate
consideration to be received by us in the
transactions contemplated by the agreements we
entered into with Philip Pilevsky, our chairman
and chief executive officer, and certain of his
affiliates and family members on April 28, 2000
is fair to us from a financial point of view and
(2) that the aggregate consideration to be
received by you and the unitholders in connection
with the over-all transaction is fair to you and
the unitholders from a financial point of view.
Q. WHAT WILL HAPPEN IF THE PLAN OF LIQUIDATION IS
NOT APPROVED BY STOCKHOLDERS?
A: We will continue to operate as a publicly owned
real estate investment trust. We may, however,
owe Kimco Income Operating Partnership, L.P. a
termination fee not to exceed approximately $4.0
million.
Q: WHAT EFFECT WILL THE CHARTER AMENDMENT HAVE ON
THE COMPANY?
A: If the charter amendment is approved, we plan to
immediately file articles of amendment setting
forth the charter amendment with the State
Department of Assessments and Taxation of
Maryland. We expect that the vote on the plan of
liquidation will take place immediately
subsequent to this filing, in which case the
stockholder vote required for approval of
extraordinary corporate actions, including the
plan of liquidation, will be reduced from two-
thirds to a majority of all votes entitled to be
cast on the action by the holders of our stock.
Q: WHAT IS THE BOARD'S RECOMMENDATION AS TO THE
CHARTER AMENDMENT?
A: Our board has unanimously determined that the
charter amendment is in your and our best
interests and recommends that you vote "FOR"
approval of the charter amendment proposal.
Q: WHAT VOTE OF STOCKHOLDERS IS REQUIRED TO APPROVE
THE PROPOSALS?
A: The charter amendment proposal must be approved
by the affirmative vote of a majority of all
votes entitled to be cast by the holders of our
common stock. If the charter amendment proposal
is approved, we plan to immediately file articles
of amendment setting forth the charter amendment
with the State Department of Assessments and
Taxation of Maryland. We expect that the vote on
the plan of liquidation will take place
immediately subsequent to this filing, in which
case approval of the plan of liquidation will
require the affirmative vote of a majority of all
votes entitled to be cast by the holders of our
common stock. If the charter amendment proposal
is not approved, or if the articles of amendment
are not filed prior to the vote on the plan of
liquidation, approval of the plan of liquidation
will require the affirmative vote of two-thirds
of all votes entitled to be cast by the holders
of our common stock.
Q: WHAT DO I NEED TO DO NOW?
A: You should complete, date and sign your proxy
card and mail it in the enclosed return envelope,
or vote your shares by Internet or telephone, as
soon as possible so that your shares may be
represented at the special meeting, even if you
plan to attend the meeting in person.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY
SIGNED PROXY CARD?
A: Yes. You can change your vote by sending in a
later dated, signed proxy card or a written
revocation before the special meeting or by
attending the special meeting and voting in
person. Your attendance at the meeting will not,
by itself, revoke your proxy. If you have
instructed a broker to vote your shares, you must
follow the directions received from your broker
to change those instructions.
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Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY
BROKER, WILL MY BROKER VOTE MY SHARES FOR ME?
A: Your broker will vote your shares only if you
provide instructions on how to vote. You should
follow the procedures provided by your broker
regarding the voting of your shares.
Q: WHAT HAPPENS IF I DO NOT GIVE MY PROXY OR IF I
ABSTAIN FROM VOTING?
A: If you do not give your proxy or do not instruct
your broker to vote your shares or if you abstain
from voting, it will have the same effect as a
vote against the proposals.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE LIQUIDATION?
A: The liquidation will be a taxable transaction to
you for United States federal income tax
purposes. A brief summary of the possible tax
consequences to you appears on page 46 of this
proxy statement. You should consult your tax
advisor as to the tax effect of your particular
circumstances.
Q: DO I HAVE APPRAISAL RIGHTS?
A: Under Maryland law, you will not have appraisal
or other similar rights of dissenters in
connection with the plan of liquidation because
the outstanding shares of our common stock are,
and were on the record date for the special
meeting, listed on the New York Stock Exchange, a
national securities exchange.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have additional questions about the
charter amendment proposal or the plan of
liquidation, or would like additional copies of
the proxy statement, you should call Morrow
& Co., Inc., our proxy solicitors, toll-free
at 1-800-662-5200 or our investor relations
department at (212) 545-1100.
3
<PAGE>
SUMMARY
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you. For additional
information concerning the charter amendment proposal and the plan of
liquidation, you should read this entire proxy statement, including the
exhibits, and the other documents referred to in or incorporated into this proxy
statement. A copy of the plan of liquidation is included in this proxy statement
as Exhibit A. Copies of the agreements we entered into in connection with the
plan of liquidation on April 28, 2000 are included as exhibits to our Current
Reports on Form 8-K dated April 28, 2000. The following summary should be read
in conjunction with, and is qualified in its entirety by, the more detailed
information appearing elsewhere in this proxy statement.
Unless otherwise indicated or the context otherwise requires, in this proxy
statement, (1) the "company," "Philips International," "we," "us," and "our"
refers to Philips International Realty Corp., a Maryland corporation; (2) the
"operating partnership" refers to Philips International Realty, L.P., a Delaware
limited partnership affiliated with the company, "units" refers to the limited
partnership units of the operating partnership and "unitholders" refers to the
holders of units; (3) "Kimco" refers to Kimco Income Operating Partnership,
L.P., a Delaware limited partnership, the "Kimco transaction" refers to the
proposed transfer of our interests in our affiliates that own eight shopping
centers located primarily in the New York metropolitan area to Kimco in exchange
for approximately $137.1 million, as adjusted, pursuant to an agreement that we,
the operating partnership, certain of our affiliates, KIR Acquisition LLC and
Kimco entered into on April 28, 2000, as amended (which we refer to in this
proxy statement as the "Kimco agreement"), and the "Kimco transactions" refers
to, collectively, the Kimco transaction and the transaction we recently
completed pursuant to which we sold seven of our shopping centers to Kimco
(which we refer to as the "Prior Kimco transaction"); (4) the "Pilevsky Group"
refers to Philip Pilevsky, our chairman and chief executive officer, his sister,
Sheila Levine, our chief operating officer, and certain of their affiliates and
family members, the "Pilevsky Group transaction" refers to, collectively,
(a) the proposed transfer of our interests in four contiguous shopping centers
located in Hialeah, Florida (with a total valuation of approximately
$120.0 million and subject to aggregate indebtedness of approximately $86.0
million), in exchange for the redemption of all of the units held by members of
the Pilevsky Group pursuant to redemption agreements that the operating
partnership and members of the Pilevsky Group entered into on April 28, 2000
(which we refer to as the "Hialeah agreements"), (b) the proposed sale of our
redevelopment property in Lake Worth, Florida to Mr. Pilevsky for approximately
$6.6 million in cash pursuant to an agreement that the operating partnership,
one of our affiliates and Mr. Pilevsky entered into as of April 28, 2000, as
amended (which we refer to as the "Lake Worth agreement") and (c) the proposed
sale of our 50% non-controlling joint venture interest in a redevelopment
property on Third Avenue, in New York, New York to members of the Pilevsky Group
for approximately $4.0 million in cash (this property is encumbered by a
$10.0 million first mortgage which will remain in place) pursuant to an
agreement that our affiliate and members of the Pilevsky Group entered into as
of April 28, 2000, as amended (which we refer to as the "Third Avenue
agreement") and (5) "KIR Portfolio" refers to KIR Portfolio I, L.P., a Delaware
limited partnership organized to facilitate the Kimco transaction.
THE PARTIES (PAGE 49)
Philips International Realty Corp.
We are a New York based, equity real estate invest-ment trust which owns and
operates neighborhood and community shopping centers located predom-inantly in
the greater New York and Miami metropolitan markets. As of June 30, 2000, we
owned interests in 28 properties totaling 3.9 million square feet of gross
leasable area. We completed our initial public stock offering in May 1998 and
our shares are traded on the New York Stock Exchange under the symbol PHR.
Kimco Income Operating Partnership, L.P.
Kimco, a private Delaware limited partnership based in New Hyde Park, New York,
is a joint venture among Kimco Realty Corporation, one of the largest
publicly-traded real estate investment trusts
in the country, the New York State Common Retirement Fund and certain other
institutional partners. As of June 30, 2000, Kimco's real estate portfolio
included 22 retail properties. Kimco's properties total 5.4 million square feet
and are located in 14 states.
4
<PAGE>
The Pilevsky Group
The Pilevsky Group consists of Philip Pilevsky, our chairman and chief executive
officer, his sister, Sheila Levine, our chief operating officer and certain of
their affiliates and family members.
THE SPECIAL MEETING
Date, Time and Place and Matters to be Considered (page 10)
The special meeting will be held at 3:00 p.m., local time, on October 10, 2000,
at HSBC Bank, 452 Fifth Avenue, 11th Floor, New York, New York, 10018. At the
special meeting, you will be asked to consider and vote upon the charter
amendment proposal and the plan of liquidation.
Vote Required (page 10)
The charter amendment proposal must be approved by the affirmative vote of a
majority of all votes entitled to be cast by the holders of our common stock. If
the charter amendment proposal is approved we plan to immediately file articles
of amendment setting forth the charter amendment with the State Department of
Assessments and Taxation of Maryland. We expect that the vote on the plan of
liquidation will take place immediately subsequent to this filing, in which case
approval of the plan of liquidation will require the affirmative vote of a
majority of all votes entitled to be cast by the holders of our common stock. If
the charter amendment proposal is not approved, or if the articles of amendment
are not filed prior to the vote on the plan of liquidation, approval of the plan
of liquidation will require the affirmative vote of two-thirds of all votes
entitled to be cast by the holders of our common stock.
Record Date for Voting (page 10)
The close of business on August 15, 2000 is the record date for determining
holders of shares of our common stock entitled to vote at the special meeting.
Each share of our common stock will be entitled to one vote. On the record date,
there were 7,340,474 shares entitled to vote at the special meeting.
Revocation of Proxies (page 10)
You may revoke your proxy at any time before the special meeting by delivering a
written notice of revocation to our corporate secretary, by executing and
delivering a later-dated proxy or by attending the meeting and giving oral
notice of your intention to vote in person. Your attendance at the meeting will
not by itself constitute a revocation of your proxy. Unless contrary
instructions are indicated on your proxy, all of your shares represented by
valid proxies will be voted FOR the approval of each proposal.
THE CHARTER AMENDMENT PROPOSAL (page 12)
Under our current charter, holders of a minority one-third (plus one) of the
outstanding shares of our common stock could prevent us from pursuing
opportunities or taking actions that are favored by holders of the majority of
our common stock and may be in our and your best interests. The charter
amendment will conform our charter with those of other similar real estate
investment trusts, in particular, and with those of other public companies, in
general, pursuant to which only a majority-in-interest of the voting stock is
required to approve an extraordinary corporate action such as a merger,
consolidation, transfer of all or substantially all of the assets or dissolution
of the company.
The charter amendment proposal must be approved by the affirmative vote of a
majority of all votes entitled to be cast by the holders of our stock. If the
charter amendment proposal is approved, we plan to immediately file articles of
amendment setting forth the charter amendment with the State Department of
Assessments and Taxation of Maryland. We expect that the vote on the plan of
liquidation will take place immediately subsequent to this filing, in which case
approval of the plan of liquidation (and any other extraordinary corporate
action that we may propose in the future) will require the affirmative vote of a
majority of all votes entitled to be cast by the holders of our common stock. If
the charter amendment proposal is not approved, or if the articles of amendment
are not filed prior to the vote on the plan of liquidation, then approval of the
plan of liquidation will require the affirmative vote of two-thirds of all votes
entitled to be cast by the holders of our common stock.
THE PLAN OF LIQUIDATION
What You will Receive in the Liquidation (page 34)
We expect that you will receive in two or more liquidating distributions an
aggregate of approx-imately $18.25 in cash for each share of our common stock
that you own (assuming that you hold your shares through the completion of the
liquidation).
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The $18.25 per share expected to be paid in the liquidation represents a premium
over the highest price at which our common stock has historically traded,
including a 16.8% premium over the $15.63 closing price of our common stock on
October 12, 1999, the day before we announced our decision to explore strategic
alternatives, and an 18.7% premium over the average closing price of $15.37 from
January 1, 1999 through October 12, 1999.
Background of the Plan of Liquidation; Reasons for the Liquidation (page 14)
For a more detailed description of the events leading to the approval of the
plan of liquidation by our board and the special committee, you should refer to
"Background of the Plan of Liquidation" and "--Recommendations of the Special
Committee and the Board of Directors; Reasons for the Liquidation."
Purpose of the Plan of Liquidation; Certain Effects of the Plan of Liquidation
(page 31)
The principal purpose of the liquidation is to provide you the opportunity to
receive a cash price for your shares at a premium over the highest price at
which our common stock has historically traded. The liquidation will result in,
among other things, the transfer of our interests in all of our real estate
assets, the payment of or provision for all of our liabilities and expenses, the
pro rata distribution of the net proceeds to our stockholders, the termination
of our business operations, the delisting of our common stock and the
dissolution of the company.
Recommendations of the Special Committee and the Board of Directors (page 17)
Our board, taking into account the unanimous recommendation of the special
committee and the opinions of our financial advisors, has unanimously determined
that the plan of liquidation is fair to you and in your and our best interests
and unanimously recommends that you vote FOR approval of the plan of
liquidation.
Opinions of Financial Advisors (page 20)
Prudential Securities Incorporated delivered an opinion to our board to the
effect that, as of the date of its opinion, the aggregate consideration to be
received by us in the Kimco transactions was fair to us from a financial point
of view. Houlihan Lokey Howard & Zukin Financial Advisors, Inc. delivered an
opinion to our board to the effect that, as of the date of its opinion, (1) the
consideration to be received by us in the Pilevsky Group transaction was fair to
us from a financial point of view and (2) the aggregate consideration to be
received by you and the unitholders in connection with the over-all transaction
is fair to you and the unitholders from a financial point of view. We have
attached copies of these opinions as Exhibit B and Exhibit C to this proxy
statement. The opinions of Prudential Securities and Houlihan Lokey are
addressed to our board and do not constitute a recommendation as to how you
should vote at the special meeting.
Interests in the Liquidation That Differ From Your Interests (page 31)
In considering our board's recommendation that you vote in favor of the plan of
liquidation, you should be aware that some of our directors and officers have
interests in the liquidation that are different from your interests as a
stockholder, including the following:
o under the Hialeah agreements, we will transfer our interests in four
contiguous shopping centers in Hialeah, Florida to Philip Pilevsky,
chairman and chief executive officer of the company, or his designee, and
Sheila Levine, a director and the chief operating officer of the company,
and certain of their affiliates and family members, in exchange for the
assumption of indebtedness and the redemption of all of their units in
the operating partnership;
o under the Lake Worth agreement, we will transfer our interest in a
redevelopment property in Lake Worth, Florida to Mr. Pilevsky or his
designee in exchange for cash;
o under the Third Avenue agreement, we will transfer our 50%
non-controlling joint venture interest in a redevelopment property in New
York, New York to the Pilevsky Group in exchange for cash;
o the unvested options held by Philip Pilevsky and Sheila Levine to
purchase shares of our common stock, which would have vested and become
exercisable on January 1, 2001, will become fully vested and exercisable
upon completion of the Kimco and Pilevsky Group transactions; and
o Louis J. Petra, Brian Gallagher and Carl Kraus, each an executive officer
of the
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company, will receive cash payments, vesting of stock options and stock
acquisition loan forgiveness under their existing employment agreements
upon completion of the Kimco and Pilevsky Group transactions.
The special committee and our board were aware of these interests and considered
them in making their recommendations.
Appraisal Rights (page 33)
Because our common stock is currently, and was on the record date for the
special meeting, listed on the New York Stock Exchange, our stockholders do not
have appraisal or other similar rights of dissenters under Maryland law in
connection with the plan of liquidation.
Federal Income Tax Consequences (page 46)
The liquidation may be a taxable transaction to you for United States federal
income tax purposes. A brief summary of the possible tax consequences to you
appears on pages 46-49 of this proxy statement. You should consult your tax
advisor as to the tax effect of your particular circumstances.
THE KIMCO TRANSACTION (page 35)
General
In the Kimco transaction, we will transfer to Kimco all of our interests in our
affiliates that own the Branhaven Plaza, Elm Plaza, Foxborough Plaza, Millside
Plaza, Mill Basin Plaza, Meadowbrook Commons, Merrick Commons and Forest Avenue
shopping centers for an aggregate purchase price of approximately
$137.1 million in cash and the assumption of indebtedness.
Conditions to the Kimco Transaction
(page 38)
Kimco's obligation to complete the Kimco transaction is subject to a number of
conditions, including, but not limited to, the approval of our stockholders of
the plan of liquidation, the material accuracy of our representations and
warranties and the performance in all material respects of our obligations.
Our obligation to complete the Kimco transaction is subject to a number of
conditions including, but not limited to, the approval of our stockholders of
the plan of liquidation, the material accuracy of Kimco's representations and
warranties and the performance in all material respects of Kimco's obligations.
Termination Rights and Fees under the Kimco Agreement (page 39)
In the event our stockholders do not approve the plan of liquidation, or we
are unable to materially comply with certain covenants or satisfy specified
closing conditions contained in the Kimco agreement, Kimco may have the right to
terminate the Kimco agreement and receive a termination fee of approximately
$4.0 million.
THE PRIOR KIMCO TRANSACTION (page 32)
On July 14, 2000, we sold seven of our shopping centers located in the New York
metropolitan area and Florida to Kimco for approximately $67.3 million in cash
and assumption of indebtedness, pursuant to an agreement that certain of our
affiliates and Kimco entered into on April 28, 2000, as amended (which we refer
to in this proxy statement as the "Prior Kimco agreement"). In this proxy
statement, we refer to that transaction as the "Prior Kimco transaction," the
Prior Kimco transaction and the Kimco transaction, collectively, as the "Kimco
transactions" and the Prior Kimco agreement and the Kimco agreement,
collectively, as the "Kimco agreements."
THE PILEVSKY GROUP TRANSACTION (page 42)
The Pilevsky Group transaction is comprised of the following:
o the transfer of our interests in four shopping centers located in
Hialeah, Florida, valued at approximately $120.0 million and encumbered
by an aggregate indebtedness of approximately $86 million, in exchange
for the redemption of all of the units held by members of the Pilevsky
Group.
o the sale of our redevelopment property in Lake Worth, Florida to
Mr. Pilevsky, or his designee, for approximately $6.6 million in cash;
and
o the sale of our 50% non-controlling joint venture interest in a
redevelopment property in New York, New York to members of
the Pilevsky Group for approximately $4.0 million in cash. This
redevelopment property is encumbered by a $10.0 million first mortgage
which will remain in place.
The purchase price to be paid by the members of the Pilevsky Group under the
Third Avenue agreement will be adjusted so that the value per unit to be
received by the members of the Pilevsky Group in the
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Pilevsky Group transaction, is equal to the amount per share we expect at the
time of the closing of the Kimco transaction and the Pilevsky Group transaction
to distribute to our stockholders in the liquidation.
THE OTHER TRANSACTIONS (page 45)
We have listed for sale seven of our shopping center properties for an aggregate
asking price of $41.5 million. Although we expect to complete the sale of these
properties in the third or fourth quarter of this year, we cannot assure you
that we will do so on satisfactory terms or at all. If any of the seven shopping
center properties remain unsold and the plan of liquidation is approved, then
the remaining properties will be sold pursuant to the plan of liquidation.
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SELECTED HISTORICAL FINANCIAL DATA OF PHILIPS INTERNATIONAL
The following selected historical financial data for the years ended
December 31, 1999 and 1998 have been derived from our audited consolidated
financial statements incorporated by reference into this proxy statement. The
selected historical financial data for the six-month periods ended June 30, 2000
and 1999 have been derived from our unaudited consolidated financial statements
incorporated by reference into this proxy statement. This information is only a
summary and you should read it together with the historical financial statements
and related notes contained in the annual reports and other information that we
have filed with the SEC and incorporated by reference. See "Other
Information--Where You Can Find More Information" on page 55.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,(1)
---------------------- ----------------------
1999 1998 2000 1999
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues from rental property............................... $ 42,457 $ 22,625 $ 25,403 $ 18,559
Income before extraordinary items........................... 8,336 4,521 4,772 3,741
Basic and diluted income before extraordinary items, per
common share............................................. 1.14 0.94 0.65 0.51
BALANCE SHEET DATA:
Rental properties, net, at cost............................. 261,631 208,914 274,778 216,260
Investment in real estate joint ventures.................... 25,134 34,664 3,747 57,385
Total assets................................................ 306,550 264,347 296,016 291,342
Mortgages and notes payable................................. 181,955 137,487 173,162 165,512
Shareholders' equity........................................ 86,854 89,398 84,542 87,699
OTHER DATA:
Funds from operations(2).................................... 19,113 15,533(3) 10,175 8,900
Net cash provided by operating activities................... 15,784 6,494 8,195 8,079
Net cash provided by (used in) investing activities......... (51,760) (47,300) 7,086 (35,437)
Net cash provided by (used in) financing activities......... 30,044 49,922 (18,250) 21,009
Cash dividends declared per share........................... 1.51 0.86 .755 .755
GLA (sq.ft.) (at end of period)............................. 3,889,514 3,814,889 3,889,514 3,814,889
</TABLE>
------------------
(1) Operating results for interim periods are not necessarily indicative of the
results for the full fiscal year.
(2) The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in October 1999 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from sales
of properties, plus real estate related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis. We believe
that Funds from Operations is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flow from operating
activities, financing activities and investing activities, it provides
investors with an indication of our ability to incur and service debt, to
make capital expenditures and to fund other cash needs. We compute Funds
from Operations in accordance with standards established by NAREIT which may
not be comparable to Funds from Operations reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than we. Funds from
Operations does not represent cash generated from operating activities in
accordance with GAAP and should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of our
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of our liquidity, nor is it indicative
of funds available to fund our cash needs, including our ability to make
cash distributions.
(3) Pro forma giving retroactive effect to the initial public offering as if it
had occurred January 1, 1998.
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THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
This proxy statement is furnished to you in connection with the
solicitation of proxies by our board of directors for the meeting of
stockholders to be held at 3:00 p.m., local time, on October 10, 2000, at HSBC
Bank, 452 Fifth Avenue, 11th Floor, New York, New York 10018, or any
postponement or adjournment of the meeting. This proxy statement, the Notice of
Special Meeting and the accompanying form of proxy card are first being mailed
to stockholders on or about September 8, 2000.
PURPOSE OF THE SPECIAL MEETING
At the special meeting, you will be asked to consider and vote upon:
o a proposal to amend our charter to reduce the affirmative stockholder
vote required to approve an extraordinary corporate action, including the
plan of liquidation, from two-thirds to a majority of all votes entitled
to be cast on the action by the holders of our stock.
o a proposal to approve the plan of liquidation, pursuant to which
-- we will transfer all of our real estate assets pursuant to the
terms and subject to the conditions of the Kimco agreement, the
Hialeah agreements, the Lake Worth agreement and the Third Avenue
agreement and the other transactions contemplated by the plan of
liquidation;
-- we will distribute the proceeds of the liquidation of our assets to
you and our other stockholders in two or more liquidating
distributions after we pay or provide for our liabilities and
expenses;
-- we will wind up our operations and dissolve.
RECORD DATE; QUORUM; OUTSTANDING COMMON STOCK ENTITLED TO VOTE
All record holders of shares of our common stock at the close of business
on August 15, 2000 are entitled to notice of, and to vote at, the special
meeting. The presence, in person or by proxy, of holders of a majority of the
outstanding shares of our common stock is required to constitute a quorum for
the transaction of business. At the close of business on August 15, 2000, there
were 7,340,474 shares of our common stock outstanding.
VOTING RIGHTS
You are entitled to one vote for each share of common stock that you held
as of the close of business on the record date. The charter amendment proposal
must be approved by the affirmative vote of a majority of all votes entitled to
be cast by the holders of our common stock. If the charter amendment proposal is
approved, we plan to immediately file articles of amendment setting forth the
charter amendment with the State Department of Assessments and Taxation of
Maryland. We expect that the vote on the plan of liquidation will take place
immediately subsequent to this filing, in which case approval of the plan of
liquidation will require the affirmative vote of a majority of all votes
entitled to be cast by the holders of our common stock. If the charter amendment
proposal is not approved, or if the articles of amendment are not filed prior to
the vote on the plan of liquidation, approval of the plan of liquidation will
require the affirmative vote of two-thirds of all votes entitled to be cast by
the holders of our common stock.
VOTING AND REVOCATION OF PROXIES
A form of proxy card for your use at the special meeting accompanies this
proxy statement. The proxy card contains instructions for the authorization of
proxies by Internet or telephone. All properly given proxies that are received
prior to or at the special meeting and not revoked will be voted at the special
meeting in the manner specified. If you give a proxy and do not specify
otherwise, the shares represented by your proxy will be voted "FOR" approval of
the charter amendment proposal and the plan of liquidation in accordance with
the recommendation of our board.
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If you have given a proxy in response to this solicitation, you may
nonetheless revoke it by attending the special meeting and giving oral notice of
your intention to vote in person. In addition, you may revoke any proxy you give
at any time before the special meeting by delivering to our Corporate Secretary
a written statement revoking it or by delivering a duly executed proxy bearing a
later date. If you have given a proxy to us, your attendance at the special
meeting will not in and of itself constitute a revocation of your proxy. If you
do not give your proxy or do not instruct your broker to vote your shares or if
you abstain from voting, it will have the same effect as a vote against the
proposals.
SOLICITATION OF PROXIES
We will bear the cost of the solicitation of proxies. We will solicit
proxies initially by mail. Further solicitation may be made by our directors,
officers and employees personally, by telephone or otherwise, but they will not
be specifically compensated for these services. Upon request, we will reimburse
brokers, dealers, banks or similar entities acting as nominees for their
reasonable expenses incurred in forwarding copies of the proxy materials to the
beneficial owners of the shares of our common stock they hold of record. We have
retained Morrow & Co., Inc. to coordinate the solicitation of proxies for a fee
of $7,500, plus reasonable out-of-pocket expenses estimated to be approximately
$4,000.
OTHER MATTERS
We do not know of any matters other than those described in this proxy
statement which may come before the special meeting. If any other matters are
properly presented to the special meeting for action, we intend that the persons
named in the enclosed form of proxy card will vote in accordance with their best
judgment. These matters may include an adjournment or postponement of the
special meeting from time to time if our board so determines. If any adjournment
or postponement is made, we may solicit additional proxies during the
adjournment period.
Your vote is important. Please return your marked proxy card promptly so
your shares can be represented, even if you plan to attend the meeting in
person.
You should not send any certificates representing common stock with your
proxy card. The procedure for receiving liquidating dividends will be as
described on page 34 of this proxy statement.
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THE CHARTER AMENDMENT PROPOSAL
BACKGROUND
The Maryland General Corporation Law (the "MGCL") requires that a charter
amendment or an extraordinary corporate action such as a merger, consolidation,
transfer of all or substantially all of the assets or dissolution of a Maryland
corporation be approved by the stockholders of the corporation by the
affirmative vote of two-thirds of all votes entitled to be cast on the matter.
The MGCL also provides, however, that a corporation's charter may include a
provision which reduces the affirmative vote of stockholders required to approve
a charter amendment or an extraordinary corporate action from two-thirds to a
lesser proportion, but not less than a majority of all votes entitled to be cast
on the matter. Our charter already contains such a provision with respect to
charter amendments (including the one being proposed), which require the
approval of a majority of all votes entitled to be cast on the matter by the
holders of our stock.
Our board has unanimously determined that it is advisable that our charter
be amended to reduce the affirmative stockholder vote required to approve an
extraordinary corporate action from two-thirds to a majority of all votes
entitled to be cast on the action by the holders of our stock. Our board
believes the adoption of the charter amendment is advisable because it will
permit us to take extraordinary corporate actions upon approval by the
affirmative vote of a majority of all votes entitled to be cast by holders of
our stock. Under our current charter, holders of a minority one-third (plus one)
of the votes entitled to be cast by our stockholders could prevent us from
pursuing opportunities or taking actions that are favored by holders of the
majority of all votes entitled to be cast by our stockholders and may be in our
and your best interests. The charter amendment will conform our charter with
those of other similar real estate investment trusts, in particular, and with
those of other public companies, in general, pursuant to which only a
majority-in-interest of the voting stock is required to approve an extraordinary
corporate action such as a merger, sale of all or substantially all of the
assets or dissolution. In addition, the charter amendment will bring the charter
provisions concerning extraordinary corporate actions in line with the
provisions in the current charter providing that charter amendments require
approval by the affirmative vote of a majority of all votes entitled to be cast
on the matter by our stockholders.
THE CHARTER AMENDMENT AND ITS EFFECTS
The proposed charter amendment is to replace Article VII of our current
charter in its entirety with the following provisions:
"ARTICLE VII
AMENDMENTS AND OTHER EXTRAORDINARY ACTIONS
Section 1. General Power to Amend Charter. The Corporation reserves the
right from time to time to make any amendment to its charter, now or
hereafter authorized by law, including any amendment altering the terms or
contract rights, as expressly set forth in this charter, of any shares of
outstanding stock. All rights and powers conferred by the charter of the
Corporation on stockholders, directors and officers are granted subject to
this reservation.
Section 2. Vote Required. Except as specifically required in Article IV,
Section 7 of the charter of the Corporation, notwithstanding any provision
of law requiring a greater proportion of the votes entitled to be cast by
the stockholders in order to take or approve any action, such action shall
be valid and effective if taken or approved by the affirmative vote of at
least a majority of all votes entitled to be cast by the stockholders on the
matter."
If the charter amendment proposal is approved by our stockholders, we plan
to immediately file articles of amendment setting forth the charter amendment
with the State Department of Assessments and Taxation of Maryland. We expect
that the vote on the plan of liquidation will take place immediately subsequent
to this filing, in which case approval of the plan of liquidation will require
the affirmative vote of a majority of all votes entitled to be cast by the
holders of our common stock. If the charter amendment proposal is not approved,
or if the articles of amendment are not filed prior to the vote on the plan of
liquidation, approval of the plan of
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liquidation will require the affirmative vote of two-thirds of all votes
entitled to be cast by the holders of our common stock.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Assuming a quorum is present, the affirmative vote, either in person or by
proxy, of a majority of all votes entitled to be cast by the holders of our
common stock is required for the approval of the charter amendment proposal.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE PROPOSED CHARTER
AMENDMENT IS IN THE BEST INTERESTS OF YOU AND PHILIPS INTERNATIONAL AND HAS
APPROVED THE CHARTER AMENDMENT PROPOSAL. ACCORDINGLY, OUR BOARD RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL OF THE CHARTER AMENDMENT PROPOSAL.
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SPECIAL FACTORS RELATING TO THE PLAN OF LIQUIDATION
BACKGROUND OF THE PLAN OF LIQUIDATION
Shortly after the initial public offering of our common stock on May 8,
1998 at $17.50 per share, market prices for publicly traded real estate
investment trusts ("REITs") began a significant decline. This decline
accelerated in the third and fourth quarters of 1998 and continued through 1999.
As one measure of the deteriorating equity market conditions for REITs, the REIT
Morgan Stanley Index declined 18.2% during the period from May 8, 1998 to
October 12, 1999. This decline compares to a 15.0% increase in the Dow Jones
Industrial Index, a 54.1% increase in the NASDAQ Combined Composite Index and a
18.5% increase in the S&P 500 Index over the same time period. In addition,
during this period, REITs completed very few equity offerings in the public
markets, while facing debt markets with significantly diminished liquidity. As a
result, REITs, generally, and we, specifically, were severely constrained in
their and our ability to obtain financing from the public equity and debt
markets. The absence of capital needed to fund our future growth through
acquisitions or development would limit our ability to continue to achieve our
strategic objectives and enhance stockholder value. In addition, the trading
price of our common stock was, in the opinion of management, significantly below
the underlying value of our assets.
In light of these market conditions for REITs, at our regular strategic
planning meetings during the third and fourth quarters of 1999, members of our
senior management began to discuss our future direction and the possibility of
exploring options available to us to enhance stockholder value, including the
possibility of engaging in a joint venture, a strategic partnership, a merger,
the sale of some or all of our assets or continuing our operations in the
ordinary course of business. Management discussed the validity of these options
on a preliminary basis with Prudential Securities Incorporated, our financial
advisor.
On October 12, 1999, our board convened a special meeting attended by
representatives of Prudential Securities, Incorporated, our financial advisor,
and Pryor Cashman Sherman & Flynn LLP, our legal advisor, to discuss our future
direction and to explore our strategic alternatives. At the meeting, Louis J.
Petra, our president, reviewed the challenges we faced in the unfavorable REIT
market environment. Mr. Petra highlighted and presented information with respect
to the following issues confronting us:
o the generally depressed valuations of REITs in the equity markets;
o the status of and the trends seen in the public REIT market;
o the equity market's relative preference for REITs of significantly
greater size than that of the company;
o our equity market valuation and how it compares to valuations of
other shopping center REITs;
o the impact of an inability to raise cost effective capital to pursue
our acquisition and redevelopment opportunities; and
o the disparity between our financial performance and the trading
price of our common stock;
Our board and representatives of Prudential Securities then discussed the
issues and the information highlighted by Mr. Petra. Following this discussion,
we engaged Prudential Securities to review and analyze our strategic
alternatives and, upon completion of such review and analysis, to report their
findings to our board. On October 13, 1999, we issued a press release announcing
our decision to retain Prudential Securities in connection with our exploration
of strategic alternatives to maximize stockholder value.
Prudential Securities and our senior management evaluated a wide range of
potential transaction alternatives and potential third parties to execute such
alternatives. After carefully evaluating such possibilities, Prudential
Securities and senior management contacted approximately 30 potential parties,
including public REITs, private real estate companies, opportunity funds and
pension funds, to explore potential interest in various transactions with us.
After distributing a number of confidential memoranda, we received written
preliminary indications of interest from four such parties.
On December 15, 1999, senior management and certain of our directors met
with Prudential Securities and Pryor Cashman to discuss the preliminary
indications of interest that we had received. Two of the preliminary
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indications of interest proposed to acquire a portion of our assets,
specifically our New York metropolitan-area properties and certain other retail
properties. The first indication of interest valued these assets at a gross
purchase price of $180.0 million. The second indication of interest valued these
assets at a gross purchase price of $174.0 million. The third indication of
interest contemplated a purchase of all of our assets for $320.0 million. The
fourth indication of interest, from Kimco, contemplated a purchase of all of our
assets other than our redevelopment properties for the equivalent of $17.00 per
share.
Senior management and Prudential Securities then compared the relative
advantages and disadvantages of each indication of interest, focusing in
particular on the financial terms, contingencies and the potential benefits of
each. Following this discussion, senior management and Prudential Securities
agreed that three of the four indications of interest, two of which were for a
portion of our assets, were below the fair value of such properties and did not
maximize value for our stockholders. Senior management and Prudential Securities
concluded, after thorough consideration of the offers received, that Kimco's
indication of interest was the most attractive from a financial point of view.
It was recommended that our board be apprised of the discussions and findings to
date and, following our board's discussion and deliberation, a vote be taken as
to how to proceed.
On December 21, 1999, Mr. Petra contacted all of the members of our board
and described the terms and conditions of the indications of interest and the
substance of the December 15th meeting. On December 21, 1999, after speaking
with Mr. Petra, our board held a telephonic meeting and evaluated the
indications of interests and, following discussion among our board, Prudential
Securities and Pryor Cashman, unanimously determined to pursue the indication of
interest from Kimco. We executed a letter agreement with Kimco, pursuant to
which we agreed to give Kimco the exclusive right until February 1, 2000 to
access our records for the purpose of finalizing its offer, and we agreed not to
pursue any other opportunities, except any unsolicited acquisition proposals
which the board believed that it was legally required to pursue.
On December 28, 1999, the party that had submitted an earlier indication of
interest to purchase our entire portfolio sent an unsolicited letter to
Prudential Securities expressing interest in a purchase of our four properties
in Hialeah, Florida for $115.0 million. This offer to purchase the Hialeah
properties was subject to complete due diligence, including a detailed review of
environmental, engineering, cash flow and other relevant information related to
the properties.
During the Kimco exclusivity period, Mr. Petra and other senior members of
our management had a number of discussions with Kimco concerning the proposed
scope and structure of the transactions. Over the course of these conversations,
Kimco informed our senior management that Kimco was no longer interested in
purchasing our entire retail portfolio, primarily because they realized that
certain properties did not fit within the parameters of Kimco's investment
strategy.
On January 19, 2000, during telephonic meetings, our board, Prudential
Securities and Pryor Cashman reviewed the status and nature of the discussions
with Kimco, focusing in particular on whether we should proceed in light of
Kimco's interest in purchasing only certain assets, and considered potential
alternatives for divesting the remaining assets. After further review with
Prudential Securities and Pryor Cashman, our board determined that the Kimco
offer permitted us to receive fair value for those assets Kimco was now
proposing to purchase and that the remaining assets were saleable for fair value
in a reasonable time frame. It was therefore in our best interest to pursue the
Kimco offer and to authorize senior management to negotiate definitive
agreements with Kimco.
Also during our board meetings on January 19th, Philip Pilevsky, our
chairman and chief executive officer, informed the board that he would be
interested in formulating, with one or more affiliates and family members, a
proposal to exchange his and their operating partnership units for certain of
those assets in which Kimco no longer had an interest, specifically our
properties in Hialeah, Florida, and to purchase our redevelopment property in
Lake Worth, Florida and our 50% non-controlling joint venture interest in our
Third Avenue redevelopment property. Mr. Pilevsky described his reasons for
desiring to make such a proposal, including his understanding that Kimco was
unwilling to purchase these properties, and stated that his proposed
transaction, when combined with the Kimco transactions and other contemplated
transactions, could be the most effective way of maximizing value to our
stockholders, while also being tax-efficient for the unitholders. Mr. Pilevsky
requested our board's permission to formulate such a proposal which, if deemed
feasible, would be presented to our board for its consideration.
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<PAGE>
During our board's consideration of Mr. Pilevsky's request, Mr. Pilevsky
and Ms. Levine recused themselves from the meeting and agreed to recuse
themselves from all subsequent board meetings at which matters involving the
Pilevsky Group would be discussed. Pryor Cashman was then invited by the
remaining board members to advise our board with respect to its legal duties in
considering the Pilevsky Group's request. After an extensive discussion of our
board's alternatives, our board determined to permit the Pilevsky Group to
formulate a proposal to acquire the Hialeah properties, the Lake Worth
redevelopment property and the Third Avenue redevelopment property, which, if
deemed feasible, would be presented to our board. In light of the potential
conflicts of interest presented by the possibility of the Pilevsky Group making
this proposal, our board appointed a special committee comprised of all of our
independent directors, Robert Grimes, Elise Jaffe, Arnold Penner and Attilio
Petrocelli, to evaluate any acquisition proposal that might be made by the
Pilevsky Group or others and to consider a potential plan of liquidation.
In connection with the Pilevsky Group's interest in acquiring the Hialeah
and redevelopment properties, and due to Mr. Pilevsky's and Ms. Levine's
conflicts of interest, Mr. Petra conducted an analysis to determine the fair
value of the properties on our behalf. Mr. Petra concluded that the fair value
for the Hialeah and redevelopment properties was an aggregate of $131.0 million,
which included the valuation of Hialeah in the range of $117.0 million to
$120.0 million. The Pilevsky Group agreed to purchase, without a due diligence
condition, the Hialeah and redevelopment properties for an aggregate purchase
price of $131.0 million, to be allocated $120.0 million for the Hialeah
properties and approximately $11.0 million for the redevelopment properties.
Mr. Petra informed our board and senior management that he viewed the offer by
the Pilevsky Group as more attractive than the indication of interest offering
$115.0 million for the Hialeah properties given the higher valuation of such
properties and the absence of a due diligence condition.
On February 1, 2000, the Kimco exclusivity period expired. Over the next
month, Kimco met with our senior management to discuss the Kimco offer. Senior
management had numerous conversations with the special committee, Prudential
Securities and Pryor Cashman to discuss the best manner in which to structure
the proposed Kimco and Pilevsky Group transactions to maximize stockholder
value.
On March 22 and 23, 2000, our board, with the assistance of senior
management, Prudential Securities and Pryor Cashman, finalized a plan of
liquidation, which contemplated the proposed Kimco and Pilevsky Group
transactions. Considering Prudential Securities' ongoing investment banking
relationship with us, our board determined that a financial advisor with no
previous relationship with us and the Pilevsky Group should opine upon the
fairness of the Pilevsky Group transaction and the over-all transaction and that
Prudential Securities should opine only upon the fairness of the Kimco
transactions. At this time, Mr. Petra requested that Prudential Securities and
Houlihan Lokey each render fairness opinions. Mr. Petra requested that
Prudential Securities render an opinion to the effect that the aggregate
consideration we are to receive in the proposed Kimco transactions is fair to us
from a financial point of view. Mr. Petra requested that Houlihan Lokey render
two opinions: the first opinion to the effect that the aggregate consideration
to be received by us in the proposed Pilevsky Group transaction is fair to us
from a financial point of view and the second opinion to the effect that the
aggregate consideration to be received by our stockholders and unitholders in
connection with the over-all transaction is fair to us and to our stockholders
and the unitholders from a financial point of view.
On April 13, 2000, our board held a special meeting to discuss the proposed
plan of liquidation and the transactions contemplated by the plan of liquidation
and to receive presentations from our financial advisors and our legal advisor.
Pryor Cashman made a presentation to our board summarizing the material terms of
the plan of liquidation, the Kimco transactions and the Pilevsky Group
transaction, including the structure, closing conditions and termination rights
and fees of the transactions. Pryor Cashman also noted that the provisions of
the proposed Kimco agreements contained a due diligence condition, pursuant to
which Kimco would have until May 31, 2000 to complete due diligence. They
further noted that the transfers to Kimco as proposed would be completed in two
steps at the request of Kimco. First, Kimco would purchase seven of our shopping
centers (which comprise all the assets acquired since the initial public
offering which Kimco was interested in acquiring) for an aggregate purchase
price of approximately $67.3 million (which transaction closed on July 14,
2000). Second, subject to stockholder approval, Kimco would purchase our
interest in eight shopping centers for approximately $137.1 million.
16
<PAGE>
At the April 13, 2000 meeting, Prudential Securities presented a financial
analysis of the Kimco transactions and then delivered to our board its oral
opinion, later confirmed in writing, to the effect that the consideration to be
received in the proposed Kimco transactions was fair to us from a financial
point of view. At the same meeting, Houlihan Lokey presented a financial
analysis of the Pilevsky Group transaction and the overall transaction. Houlihan
Lokey then delivered to our board its oral opinions, later confirmed in writing,
to the effect that (1) the aggregate consideration to be received by us in the
proposed Pilevsky Group transaction was fair to us from a financial point of
view and (2) the aggregate consideration to be received by our stockholders and
the unitholders in connection with the over-all transaction was fair to both of
them from a financial point of view.
On April 17, 2000, the special committee held a telephonic meeting to
review and discuss the terms of the plan of liquidation, the Pilevsky Group
transaction, the Kimco transactions and the related agreements. At the
conclusion of the telephonic meeting, the special committee approved and adopted
the plan of liquidation and the related Kimco transaction and the Pilevsky Group
transaction and unanimously agreed to recommend to the board that (a) the plan
of liquidation be approved and (b) senior management finalize any remaining
issues in the agreements.
Following the telephonic meeting of the special committee on April 17,
2000, our board held a telephonic meeting at which all the directors were
present and Mr. Petra informed our board of the special committee's unanimous
recommendation of the plan of liquidation, the Pilevsky Group transaction, the
Kimco transactions and the related agreements. After further review and full
discussion, our board unanimously adopted resolutions approving the Prior Kimco
transaction, the plan of liquidation and the transactions contemplated by the
plan of liquidation, including the Kimco transaction and the Pilevsky Group
transaction, and determined to recommend to our stockholders that they vote to
approve the plan of liquidation and the transactions contemplated by the plan of
liquidation.
On April 28, 2000, the parties finalized and executed the Kimco agreements
and the Pilevsky Group agreements. On May 1, 2000, we issued a press release
announcing that these agreements had been executed.
On May 31, 2000, we issued a press release announcing the extension of
Kimco's due diligence period.
On June 9, 2000, in connection with its due diligence investigation, Kimco
contacted Mr. Petra regarding a reduction of the aggregate consideration to be
paid under the Kimco agreements by $2.0 million. On June 14, 2000, Mr. Petra,
after consulting with the other members of senior management and our board,
negotiated a reduction in the aggregate consideration to be paid by Kimco under
the Kimco agreements by $1.5 million. On the same day, our board held a special
meeting via telephone with Prudential Securities, Houlihan Lokey and Pryor
Cashman. At our request, Prudential Securities and Houlihan Lokey stated that
the reduction in the consideration to be paid under the Kimco agreements did not
affect their respective opinions. Our board unanimously approved and ratified
(1) the reduction in the aggregate consideration to be paid by Kimco under the
Kimco agreements from $205.9 million to $204.4 million and (2) amendments to the
Kimco agreements, pursuant to which we granted Kimco an extension of the due
diligence period under both agreements.
On June 20, 2000, we issued a press release announcing that Kimco had
substantially completed its due diligence investigation and was now committed to
purchase the shopping center properties under the Prior Kimco agreement and the
Kimco agreement for an aggregate of $204.4 million.
On July 14, 2000, we completed the sale of seven of our shopping center
properties to Kimco for approximately $67.3 million in cash and assumption of
indebtedness, pursuant to the Prior Kimco agreement.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS; REASONS FOR
THE LIQUIDATION
Recommendations of the Special Committee and the Board of Directors
On April 17, 2000, the special committee unanimously determined that the
plan of liquidation and the liquidation is fair to and in our and our
stockholders' best interests and unanimously voted to recommend that our board
approve the plan of liquidation and the liquidation and recommend to our
stockholders that they vote to approve the plan of liquidation.
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<PAGE>
Following the special committee meeting on April 17, 2000, our board
unanimously determined that the terms of the plan of liquidation are fair to and
in our and our stockholders best interests and approved the plan of liquidation.
Accordingly, our board unanimously recommends that you vote "FOR" the approval
of the plan of liquidation.
Reasons for the Liquidation
The Special Committee. In reaching its determination that the plan of
liquidation is fair to, and in the best interests of us and our stockholders and
in recommending that our board approve the liquidation and recommend to
stockholders that they vote to approve the plan of liquidation, the special
committee consulted with our senior management (other than Philip Pilevsky and
Sheila Levine) and our financial and legal advisors and considered the following
factors:
o The special committee's review of possible alternatives to the
liquidation, including the possibility of engaging in a joint
venture, a strategic partnership, a merger, the sale of some or all
of our assets or continuing our operations in the ordinary course of
business. Based on a variety of factors, including presentations by
Prudential Securities, the special committee concluded that none of
the alternatives considered was reasonably likely to provide equal
or greater value to our stockholders than the proposed plan of
liquidation;
o The special committee's belief that we had, with the assistance of
Prudential Securities, thoroughly explored the market interest in
various strategic transactions;
o The aggregate cash distribution of approximately $18.25 per share
expected to be distributed in two or more liquidating distributions
represents a premium over (1) the initial public offering price of
$17.50 per share of our common stock; (2) the highest price at which
our common stock has historically traded; (3) the $15.63 closing
price of our common stock on October 12, 1999, the day before we
publicly announced our decision to explore strategic alternatives;
(4) the average daily closing price of $15.37 from January 1, 1999
through October 12, 1999; and (5) our net book value of $11.79 as of
March 31, 2000.
o The financial presentations made by Prudential Securities and
Houlihan Lokey, including their respective opinions, dated
April 17, 2000, in the case of the Prudential Securities opinion, to
the effect that, as of such date, the aggregate consideration we are
to receive in the Kimco transactions was fair to us from a financial
point of view and, in the case of the Houlihan Lokey opinion, to the
effect that the aggregate consideration we are to receive in the
Pilevsky Group transaction was fair to us from a financial point of
view and that the aggregate consideration to be received by our
stockholders and unitholders in the over-all transaction was fair to
our stockholders and the unitholders from a financial point of view;
o The special committee's belief that the approximately $18.25 per
share in cash in the aggregate to be received by our stockholders in
the liquidation was fair relative to its own assessment of our
current and expected future financial condition, earnings, business
opportunities, strategies and competitive position and the nature of
the market environment in which we operate;
o The per share price to be received by our stockholders in the
liquidation is payable in cash, thereby eliminating any
uncertainties in valuing the consideration to be received by our
stockholders;
o The proposed structure of the transactions enabled our stockholders
to receive substantially equivalent value per share as they would
have received had we sold all of our assets to a third party for
cash, while providing a tax efficient structure for the unitholders;
o The terms and conditions of the plan of liquidation, including
provisions which are designed to ensure that our board could fulfill
its duties if presented with an acquisition proposal that is more
favorable to our stockholders than the liquidation. In particular,
the special committee considered that the terms of the Kimco
transactions and the Pilevsky Group transaction:
(1) permit our board, in certain circumstances, to provide
information to and engage in negotiations with third parties
who have made a proposal to acquire us or our assets, to modify
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<PAGE>
or withdraw its recommendation of the plan of liquidation and
to terminate the applicable agreements in order to pursue more
favorable transactions; and
(2) do not, in its view, discourage competing third party
acquisition proposals.
o Kimco's and the Pilevsky Group's financial ability to complete the
applicable transactions.
The special committee believed that each of the above factors generally
supported its determination and recommendation. The special committee did,
however, consider the following potentially negative factors in its
deliberations concerning the liquidation:
o following the proposed liquidation, our stockholders (other than the
members of the Pilevsky Group) will no longer participate in any
future earnings or growth of our assets or benefit from any
increases in the value of our assets;
o the actual or potential conflicts of interest which certain of our
executive officers and directors have in connection with the
liquidation, including those specified under "--Interests of Certain
Persons in the Liquidation." The special committee believed,
however, that these conflicts of interests were mitigated in
substantial part by the establishment of the special committee
consisting of all of our independent board members to evaluate the
fairness of the plan of liquidation; and
o our stockholders may, depending on their tax basis in their stock,
recognize a taxable gain upon the completion of the liquidation.
The above discussion concerning the information and factors considered by
the special committee is not intended to be exhaustive, but includes all of the
material factors considered by the special committee in making its
determination. In view of the variety of factors considered in connection with
its evaluation of the plan of liquidation and the proposed liquidation, the
special committee did not quantify or otherwise attempt to assign relative
weights to the specific factors it considered. In addition, individual members
of the special committee may have given different weight to different factors
and therefore may have viewed certain factors more positively or negatively than
others.
The Board of Directors. In determining to approve and recommend the plan
of liquidation, and in reaching its determination that the plan of liquidation
and the liquidation are fair to, and in the best interests of, us and our
stockholders, our board consulted with our senior management (other than Philip
Pilevsky and Sheila Levine) and our financial and legal advisors, and considered
the same factors that were considered by the special committee. Our board
unanimously adopted the recommendations of the special committee and approved
the plan of liquidation. The members of our senior management have informed us
that they intend to vote their shares for the approval of the charter amendment
proposal and the plan of liquidation. Kimco Realty Corporation, which owns
345,500 shares of our common stock (which represents 4.7% of our outstanding
stock), has also informed us that it will vote its shares for the approval of
the charter amendment proposal and the plan of liquidation.
In connection with its consideration of the fairness to us and our
stockholders of the consideration to be received by us in the Pilevsky Group
transaction, the Pilevsky Group has adopted the conclusions of the special
committee and our board with respect to the fairness of the Pilevsky Group
transaction.
Sources and Uses of Liquidation Proceeds
We have summarized below the estimated sources and uses of the proceeds we
expect to receive in the transactions contemplated by the plan of liquidation.
The actual sources and uses of the liquidation proceeds will vary from those
summarized below, depending on the actual dates of the closings of, and the
amounts received in, the transactions contemplated by the plan of liquidation
and the amount needed to pay or provide for our liabilities and expenses,
including any reserve fund amounts to cover contingent liabilities.
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<PAGE>
SOURCES AND USES OF LIQUIDATION PROCEEDS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRANSACTION DEBT ASSUMPTION/ LIQUIDATION
VALUE EQUITY REDEMPTION PROCEEDS
----------- ----------------- -----------
<S> <C> <C> <C>
SOURCES OF LIQUIDATION PROCEEDS:
Prior Kimco transaction(1).......................................... $ 67,300 $ 16,300(2) $ 51,000
Kimco transaction................................................... 137,100 47,600(3) 89,500
Pilevsky Group transaction.......................................... 131,000 120,000(4) 11,000
Other property sales................................................ 41,500(5) -- 41,500
--------- --------- ---------
Total.......................................................... $ 376,900 $ 183,900 $ 193,000
========= ========= =========
USES OF LIQUIDATION PROCEEDS:
Payment of liabilities................................................................................. $ 36,600
Fees and expenses incurred in connection with the liquidation.......................................... 13,000
Reserve fund........................................................................................... 9,000(6)
Liquidating distributions to stockholders.............................................................. 134,400(7)
---------
Total............................................................................................. $ 193,000
=========
</TABLE>
------------------
(1) Transaction closed on July 14, 2000.
(2) Represents $16,300 of debt assumed.
(3) Represents $37,100 of debt assumed and $10,500 of equity redeemed (576,326
operating partnership units at $18.25 per unit).
(4) Represents $85,900 of debt assumed and $34,100 of equity redeemed (1,870,873
operating partnership units at $18.25 per unit).
(5) Represents asking price for seven Kmart anchored shopping center properties
which have been listed for sale. No assurance can be given regarding
completion of these property sales at the asking price or on satisfactory
terms, if at all.
(6) Reserve for unanticipated fees and expenses we may incur in connection with
the liquidation, expenses associated with winding up our operations,
potential unanticipated costs or short falls associated with the other
property sales, potential costs related to the representations and
warranties contained in the Kimco agreement and other contingent
liabilities.
(7) Represents estimated distributions at $18.25 per share based upon 7,340,474
shares of common stock and 25,196 operating partnership units to be redeemed
for cash.
FAIRNESS OPINIONS OF PRUDENTIAL SECURITIES AND HOULIHAN LOKEY
Opinion of Prudential Securities
On April 13, 2000, Prudential Securities delivered its oral opinion to our
board of directors to the effect that, as of such date, the aggregate
consideration of $205.9 million (for purposes of this description of Prudential
Securities opinion, the "Portfolio Consideration") to be paid for the fifteen
properties to be purchased by Kimco under the Kimco agreements (for purposes of
this description of Prudential Securities' opinion, the "Portfolio") was fair to
us from a financial point of view. Prudential Securities made a presentation of
the financial analysis underlying its oral opinion at a meeting of our board on
April 13, 2000. This analysis, as presented to our board, is summarized below.
Prudential Securities subsequently confirmed its opinion in writing on
April 17, 2000. Although it did not update its written opinion, Prudential
Securities informed our board that the amendments to the Kimco agreements, dated
June 20, 2000, did not change or otherwise affect its opinion.
In requesting the opinion, our board did not give any special instructions
to Prudential Securities or impose any limitation upon the scope of the
investigation that Prudential Securities deemed necessary to enable it to
deliver its opinion. A copy of the opinion, which sets forth the assumptions
made, matters considered and limits on the review undertaken, is attached to
this proxy statement as Exhibit B and is incorporated into this proxy statement
by reference. At a meeting held on April 13, 2000, our board reviewed and took
into consideration Prudential Securities' opinion. The summary of Prudential
Securities' opinion set forth below is qualified in its entirety by reference to
the full text of the opinion. Our stockholders are urged to read the opinion in
its entirety.
PRUDENTIAL SECURITIES' OPINION IS ADDRESSED TO THE PHILIPS INTERNATIONAL
BOARD AND ADDRESSES ONLY THE FAIRNESS AS OF THE DATE OF THE OPINION, FROM A
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FINANCIAL POINT OF VIEW, OF THE AGGREGATE CONSIDERATION TO BE RECEIVED BY
PHILIPS INTERNATIONAL IN THE KIMCO TRANSACTIONS AND DOES NOT ADDRESS THE MERITS
OF THE UNDERLYING DECISION BY PHILIPS INTERNATIONAL TO ENGAGE IN THE KIMCO
TRANSACTIONS OR THE LIQUIDATION AND DOES NOT CONSTITUTE, NOR SHOULD IT BE
CONSTRUED AS, A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE AT THE PHILIPS INTERNATIONAL SPECIAL MEETING. THE AGGREGATE
CONSIDERATION TO BE PAID IN THE KIMCO TRANSACTIONS WAS DETERMINED ON THE BASIS
OF NEGOTIATIONS BETWEEN KIMCO AND PHILIPS INTERNATIONAL AND WAS APPROVED BY THE
PHILIPS INTERNATIONAL BOARD.
In conducting its analysis and arriving at its opinion, Prudential
Securities reviewed information and considered financial data and other factors
as it deemed relevant under the circumstances, including, among others, the
following:
o a draft of each of the Kimco agreements and the limited partnership
agreement of KIR Portfolio;
o certain historical and projected financial and operating data
concerning the Portfolio;
o certain of our publicly-available historical financial and operating
data including, but not limited to, our annual report on Form 10-K
for the fiscal years ended December 31, 1998 and 1999;
o certain publicly-available financial and operating data of certain
companies engaged in businesses Prudential Securities deemed
comparable to the Portfolio, or otherwise relevant to its inquiry;
o the financial terms of certain recent comparable transactions
Prudential Securities deemed relevant to its inquiry; and
o other financial studies, analyses and investigations as Prudential
Securities deemed appropriate.
Prudential Securities assumed, with our consent, that the drafts of the
agreements which Prudential Securities reviewed, as referred to above, would
conform in all material respects to those documents when in final form.
Prudential Securities met with our senior management to discuss the
following:
o the historic and current operating and financial condition of the
Portfolio;
o their estimates of the future financial performance of the
Portfolio; and
o other matters as Prudential Securities deemed relevant.
In connection with its review and analysis and in arriving at its opinion,
Prudential Securities relied upon the accuracy and completeness of the financial
and other information that is publicly available or provided to Prudential
Securities by us. Prudential Securities did not undertake any independent
verification of this information or any independent valuation or appraisal of
any of our assets or liabilities, and Prudential Securities has not been
furnished with any such valuation or appraisal. With respect to certain
financial forecasts for the Portfolio provided to Prudential Securities by our
management, Prudential Securities assumed that this information, and the
assumptions and bases for this information, represents the best currently
available estimates and judgments of our management as to the future financial
performance of the Portfolio. Further, Prudential Securities' opinion was
necessarily based on economic, financial and market conditions as they existed,
and can only be evaluated, as of April 17, 2000. Prudential Securities assumes
no responsibility to update or revise its opinion based upon events or
circumstances after April 17, 2000.
Prudential Securities' opinion does not address nor should it be construed
to address the relative merits of the Kimco transactions, the liquidation or
other alternative business strategies that may be available to us. The opinion
does not constitute a recommendation to our stockholders as to how they should
vote in connection with the plan of liquidation, or as to any other action they
should take regarding the Kimco transactions or the liquidation.
In addition, Prudential Securities' opinion and its presentation to our
board was one of the many factors taken into consideration by our board in
making its determination to recommend approval of the Kimco
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<PAGE>
transactions and the plan of liquidation. Consequently, the analyses of
Prudential Securities described below should not be viewed as determinative of
the recommendation of our board with respect to the Kimco transactions or the
plan of liquidation. The Portfolio Consideration was determined through arm's
length negotiations between us and Kimco and was approved by our board. The
Portfolio Consideration was not determined on the basis of any recommendation by
Prudential Securities.
In arriving at its opinion, Prudential Securities performed a variety of
financial analyses, including those summarized below. The summary set forth
below of the analyses presented to our board at the April 13, 2000 meeting does
not purport to be a complete description of the analyses performed. The
preparation of a fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of these methods to the particular circumstance.
Therefore, an opinion is not necessarily susceptible to partial analysis or
summary description.
Prudential Securities believes that its analysis must be considered as a
whole and that selecting portions of the opinion or portions of the factors
considered by it, without considering all analyses and factors, could create an
incomplete view of the evaluation process underlying the opinion. Prudential
Securities made numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond our control. Any estimates contained in Prudential
Securities' analyses are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the values of businesses and
securities do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities may be sold. Accordingly, these analyses and
estimates are inherently subject to substantial uncertainty. Subject to the
foregoing, the following is a summary of the material financial analyses
presented by Prudential Securities to our board in connection with its opinion
dated April 17, 2000.
Comparable Single Property Sales Analysis.
Prudential Securities analyzed the consideration paid in several recent
sales of individual shopping centers deemed by Prudential Securities to be
reasonably similar to those in the Portfolio and considered the implied
capitalization rates realized in these sales. The implied capitalization rate
realized in each comparable individual sale is based on the trailing twelve
month net operating income of the comparable single property (rental revenues
less related expenses), as adjusted to reflect a management fee equal to 3% of
revenues and a $.10 per square foot structural reserve to make the data
comparable to the Portfolio data.
Prudential Securities considered the following transactions:
o the sale by Newton Village Associates of one shopping center to CV
REIT, Inc.;
o the sale by an undisclosed seller of three shopping centers to Pan
Pacific Retail Properties;
o the sale by an undisclosed seller of 15 shopping centers to Kimco
Realty Corporation;
o the sale by various sellers of 11 shopping centers to United
Investors Realty Trust;
o the sale by various sellers of five shopping centers to Developers
Diversified Realty Corporation;
o the sale by Laurel Lakes Centre of one shopping center to Urban
Investment Trust;
o the sale by The Centrum of one shopping center to an undisclosed
buyer; and
o the sale by Latham Farms Shopping Center of one shopping center to
Kimco.
Prudential Securities' calculations resulted in a range of capitalization
rates of 9.2% to 10.7%, with a median of 10.0%. Applying the foregoing
capitalization rates to actual 1999 net operating income of the Portfolio (as
adjusted to reflect a management fee equal to 3% of revenues and a $.10 per
square foot structural reserve) resulted in a range of implied values of
$174.7 million and $203.5 million, with a median of $187.7 million. Prudential
Securities observed that the Portfolio Consideration is above the top range of
the implied values realized by the comparable single property sales.
None of the properties in any of the comparable single property sales is
identical to any of the properties in the Portfolio, and none of the comparable
sales is identical to the Kimco transactions. Accordingly, a complete
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analysis of the results of the foregoing calculations cannot be limited to a
quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable single properties and comparable sales and other factors that
could affect the valuation and consideration paid for each of the comparable
single properties, as well as the properties in the Portfolio.
Capitalization Rate Survey Analysis
Prudential Securities analyzed the capitalization rates expected to be
realized in prospective shopping center sales by the participants in the
following independent market surveys:
o Price Waterhouse Korpacz Real Estate Investor Survey (First Quarter
of 2000) (capitalization rates based on projected first year net
operating income divided by the expected sale price);
o National Real Estate Index (Fourth Quarter of 1999) (capitalization
rates based on historical, trailing twelve month net operating
income, as adjusted for a 3% management fee and $.10 per square foot
structural reserve, divided by the expected sales price);
o Cushman & Wakefield Real Estate Outlook (Summer/Winter 2000)
(capitalization rates represent what investors consider appropriate
"going-in" capitalization rates for Class A and Class B neighborhood
and community shopping centers).
Prudential Securities' analysis resulted in:
o a range of capitalization rates of 8.5% to 12.0%, with a mean of
9.8%, based on the Price Waterhouse Korpacz Real Estate Investor
Survey;
o a range of capitalization rates of 8.7% to 9.3%, with a mean of
8.9%, based on the National Real Estate Index; and
o a range of capitalization rates of 9.4% to 9.7%, with a mean of
9.5%, based on the Cushman & Wakefield Real Estate Outlook.
The foregoing capitalization rates yielded an average range of
capitalization rates of 8.9% to 10.3%, with a mean of 9.4%. Applying the
foregoing capitalization rates to the actual 1999 net operating income of the
Portfolio (as adjusted to reflect a management fee equal to 3% of revenues and a
$.10 per square foot structural reserve) resulted in a range of implied values
of $181.2 million and $210.8 million, with a mean of $198.7 million. Prudential
Securities observed that the Portfolio Consideration is within the range of, and
above the mean of, the implied values realized in the analysis of the three
independent market surveys.
Pro Forma Comparable Company FFO Analysis.
Prudential Securities analyzed selected financial ratios of 12
publicly-traded shopping center REITs which Prudential Securities considered to
be reasonably comparable to the Portfolio for purposes of this analysis.
The companies considered were:
o Agree Realty Corporation;
o Bradley Real Estate, Inc.;
o First Washington Realty Trust;
o Glimcher Realty Trust;
o IRT Property Company;
o Kranzco Realty Trust;
o Malan Realty Investors, Inc.;
o Mid-Atlantic Realty Trust;
o Pan Pacific Retail Properties, Inc.;
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o Ramco Gershenson Properties Trust;
o Saul Centers, Inc.; and
o Western Properties Trust.
For purposes of this analysis, Prudential Securities applied an average
comparable public company capital structure and overhead level to the actual
1999 and projected 2000 and 2001 net operating income of the Portfolio (as
adjusted for a 3% management fee and $.10 structural reserve) to determine an
estimated FFO for the Portfolio of $8.9 million in 1999, $10.4 million in 2000
and $11.6 million in 2001. Prudential Securities then applied the equity value
to FFO multiples of the comparable public companies to the estimated FFO of the
Portfolio for each year.
Prudential Securities' calculations resulted in the following relevant
ranges for the comparable companies:
o a range of market value as a multiple of actual 1999 FFO per share
of 5.2x to 9.0x, with a median of 7.0x;
o a range of market value as a multiple of projected 2000 FFO per
share of 4.9x to 8.7x, with a median of 6.7x; and
o a range of market value as a multiple of projected 2001 FFO per
share of 4.5x to 7.2x, with a median of 6.3x.
Applying the foregoing multiples to the Portfolio's estimated 1999, 2000
and 2001 FFO resulted in, respectively:
o a range of implied values of $157.2 million to $191.2 million, with
a median of $173.2 million;
o a range of implied values of $161.2 million to $200.7 million, with
a median of $180.7 million; and
o a range of implied values of $163.2 million to $194.7 million, with
a median of $183.4 million.
Prudential Securities observed that the Portfolio Consideration is above
the top ranges of the foregoing implied values.
Comparable Portfolio Transactions Analysis.
Prudential Securities analyzed the consideration paid in several recent
sales of shopping center portfolios deemed by Prudential Securities to be
reasonably similar to the Portfolio and considered the implied capitalization
rates realized in these sales. The implied capitalization rate realized in each
comparable portfolio sale is based on the trailing twelve month net operating
income of the comparable portfolio (rental revenues less related expenses), as
adjusted to reflect a management fee equal to 3% of revenues and a $.10 per
square foot structural reserve to make the data comparable to the Portfolio
data.
Prudential Securities considered the following transactions:
o the sale by Midland Group of 21 shopping centers to Regency Realty
Corporation;
o the sale by Rodwell/Kane of eight shopping centers to Konover
Property Trust;
o the sale by Sandor Development Co. of 13 shopping centers to Malan
Realty Investors;
o the sale by AIG Baker Shopping of 12 shopping centers to Excel
Realty Trust;
o the sale by Metropolitan Life Insurance Co. of 30 shopping centers
to Kimco Realty Trust;
o the sale by Konover & Associates South of eight shopping centers to
Konover Property Trust;
o the sale by certain foreign investors of nine shopping centers to
Kranzco Realty Trust;
o the sale by Pacific Retail Trust of 75 shopping centers to Regency
Realty Corporation; and
o the sale by Burnham Pacific Properties of 25 shopping centers to AMB
Property Corporation.
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Prudential Securities' calculations resulted in a range of capitalization
rates of 7.4% to 10.8%, with a median of 8.8%. Applying the foregoing
capitalization rates to actual 1999 net operating income of the Portfolio (as
adjusted to reflect a management fee equal to 3% of revenues and a $.10 per
square foot structural reserve) resulted in a range of implied values of
$173.0 million and $250.9 million, with a median of $212.6 million. Prudential
Securities observed that the Portfolio Consideration is within the range of the
implied values realized by the comparable portfolio sales.
None of the portfolios in any of the comparable sales is identical to the
Portfolio, and none of the comparable sales is identical to the Kimco
transactions. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable portfolios and
comparable sales and other factors that could affect the valuation and
consideration paid for each of the comparable portfolios, as well as the
Portfolio.
Prudential Securities has in the past provided various investment banking
and other financial advisory services to Philips International and Kimco and may
continue to do so, and has received, and may receive, customary fees (and
reimbursement of expenses) for the rendering of these services. As compensation
to Prudential Securities for its services as our financial advisor in connection
with our analysis of, and actions with respect to, our strategic alternatives,
we have agreed to pay Prudential Securities an aggregate amount of approximately
1.0% of the transaction value (inclusive of $350,000 for rendering its fairness
opinion), in addition to reimbursement of its expenses in connection therewith.
Opinion of Houlihan Lokey
Scope of Opinion. Our board retained Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. ("Houlihan Lokey") to render an opinion as to: (1) the
fairness, from a financial point of view, to us of the Pilevsky Group
transaction (the "Pilevsky Group Fairness"); and (2) the fairness, from a
financial point of view, to our stockholders and the unitholders of the
consideration to be received by them in connection with the (a) Pilevsky Group
transaction, (b) the Kimco transactions and (3) the assumed sale of our seven
Kmart shopping centers (the "Kmart Segment") in one or more transactions (the
"Overall Transaction Fairness"). The Pilevsky Group transaction, the Kimco
transactions and the assumed sale of the Kmart Segment are collectively referred
to as the "Overall Transaction".
We retained Houlihan Lokey based upon Houlihan Lokey's experience in the
valuation of businesses and their securities in connection with
recapitalizations and similar transactions, especially with respect to REITs and
other real estate companies. Houlihan Lokey is a nationally recognized
investment banking firm that is continually engaged in providing financial
advisory services in connection with mergers and acquisitions, leveraged
buyouts, business valuations for a variety of regulatory and planning purposes,
recapitalizations, financial restructurings, and private placements of debt and
equity securities.
On April 17, 2000, Houlihan Lokey delivered its written opinion to us (the
"Houlihan Lokey Opinion"), to the effect that, as of the date of such opinion,
on the basis of its analysis summarized below and subject to the limitations
described below, that: (1) the Pilevsky Group transaction is fair to us from a
financial point of view; and (2) the consideration to be received by our
stockholders and the unitholders in connection with the Overall Transaction is
fair to them from a financial point of view. On June 20, 2000, Houlihan Lokey
issued a written opinion reaffirming the Houlihan Lokey Opinion as of such date
(the "Houlihan Lokey Bringdown Opinion"). The Houlihan Lokey Opinion and the
Houlihan Lokey Bringdown Opinion do not constitute a recommendation to any
stockholder as to how any such stockholder should vote at the special meeting.
Houlihan Lokey has no obligation to update the Houlihan Lokey Opinion or the
Houlihan Lokey Bringdown Opinion.
THE FULL TEXT OF THE HOULIHAN LOKEY OPINION, WHICH SETS FORTH, AMONG OTHER
THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS EXHIBIT C TO THIS PROXY STATEMENT. WE URGE YOU TO
READ SUCH OPINION IN ITS ENTIRETY.
As compensation to Houlihan Lokey for its services in connection with the
Overall Transaction, we agreed to pay Houlihan Lokey an aggregate fee of
$400,000 in addition to Houlihan Lokey's expenses in connection
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therewith. No portion of Houlihan Lokey's fee is contingent upon the successful
completion of any part of the Overall Transaction. We have also agreed to
indemnify Houlihan Lokey and related persons against certain liabilities,
including liabilities under federal securities laws, arising out of the
engagement of Houlihan Lokey, and to reimburse Houlihan Lokey for certain
expenses.
The Houlihan Lokey Opinion does not address our underlying business
decision to effect the Overall Transaction or any part thereof or to effect the
liquidation. Houlihan Lokey did not, and was not requested by us or any other
person to, solicit third party indications of interest in acquiring all or any
part of us or to make any recommendations as to the form or amount of
consideration to be received by us, our stockholders, or any other person in
connection with the Overall Transaction or any part thereof, which consideration
was determined through negotiations among Kimco, the Pilevsky Group, our
management and us. Houlihan Lokey was not asked to opine on and did not express
any opinion as to (1) tax or legal consequences of the Overall Transaction or
any part thereof, including but not limited to tax or legal consequences to us,
or our stockholders or the unitholders; (2) the fairness, advisability or
desirability of alternatives to the Overall Transaction or any part thereof;
(3) our fair market value or the fair market value of any of our assets;
(4) the fairness of any aspect of the Overall Transaction not expressly
addressed in the Houlihan Lokey Opinion; or (5) any other aspect of the plan of
liquidation, including the payment of or establishing reserves with respect to
our liabilities or the amount that will ultimately be distributed to our
stockholders or the unitholders. Houlihan Lokey did not perform an independent
appraisal of our assets. Furthermore, Houlihan Lokey did not negotiate the
Overall Transaction or any part thereof or advise us with respect to
alternatives to it.
In arriving at its opinion, Houlihan Lokey:
1. met with our senior management and our advisors to discuss the Overall
Transaction, our operations, financial condition, future prospects and
performance;
2. held discussions with our senior management to discuss our operations
and financial condition since April 17, 2000;
3. reviewed our annual reports to stockholders on Form 10-K for the fiscal
years ended December 31, 1999 and 1998, and our quarterly report on
Form 10-Q for the quarter ended September 30, 1999;
4. reviewed company-prepared income statements for the assets comprising
each of the Kimco portfolio, the Hialeah portfolio, and the Kmart
portfolio for the fiscal year ended December 31, 1999, which our
management has identified as being the most current financial statements
available for each such portfolio;
5. reviewed the November, 1999 confidential information memorandum
pertaining to us, as prepared by Prudential Securities;
6. reviewed the summary of offers schedule pertaining to us, as prepared by
Prudential Securities as of December 15, 1999;
7. reviewed the term sheet as prepared by Kimco Income REIT, Kimco and
affiliated entities outlining the terms and conditions of Kimco's offer
to purchase 15 of our shopping center properties;
8. reviewed forecasts and projections prepared by our management with
respect to us for the years ended December 31, 2000 through
December 31, 2010;
9. reviewed the Kimco agreements;
10. reviewed the preliminary pro forma for development of the 86th Street
and 3rd Avenue redevelopment parcel prepared by us;
11. reviewed the residential market study for proposed development of 86th
Street and 3rd Avenue prepared by The Sunshine Group, Ltd.;
12. reviewed confidential summaries as prepared by CB Richard Ellis for the
following Kmart properties:
o Kmart Sacramento Center;
o McHenry Commons;
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o Kmart Atwater Shopping Center;
o Pennyrile Marketplace;
o North Star Center;
o Reedley Shopping Center; and
o Port Angeles Shopping Center.
13. reviewed the draft presentation to our board prepared by Prudential
Securities pertaining to Prudential Securities' fairness opinion
regarding the Kimco transactions;
14. reviewed copies of the following agreements:
o internal draft of the Redemption Agreement, dated April 7, 2000;
o Contribution and Exchange Agreement dated August 11, 1997;
o Amendment No. 1 to Contribution and Exchange Agreement, dated
December 31, 1997;
o Amended and Restated Agreement of Limited Partnership of Philips
International Realty, L.P.;
o First Amendment to the Amended and Restated Agreement of Limited
Partnership of Philips International Realty, L.P.;
o Third Amended and Restated Bylaws of Philips International Realty
Corp.;
o Amended and Restated Management Agreement;
o Amended and Restated Non-Competition Agreement;
o Registration Rights Agreement;
o Ground Lease Economic Summary pertaining to the Yonkers property;
o Shareholder Rights Agreement dated March 31, 1999; and
o Amendment No. 1 to Shareholder Rights Agreement dated July 27, 1999.
15. conducted site visits to certain of our properties;
16. reviewed minutes of meetings of our board,
17. reviewed publicly available information on companies Houlihan Lokey
deemed comparable to us; and
18. conducted such other studies analyses, studies and investigations as
Houlihan Lokey deemed appropriate.
Valuation Analyses. The following is a summary of the material financial
analyses used by Houlihan Lokey in connection with providing its fairness
opinions. This summary is qualified in its entirety by reference to the full
text of the Houlihan Lokey Opinion, which is attached as Exhibit C to this Proxy
Statement. We urge you to read the full text of the Houlihan Lokey Opinion
carefully and in its entirety.
In order to determine (1) the fairness, from a financial point of view, to
us of the Pilevsky Group transaction and (2) the fairness, from a financial
point of view, to our stockholders and the unitholders of the consideration to
be received by them in connection with the Overall Transaction, Houlihan Lokey
analyzed the value of (a) the Kimco transactions, (b) the Hialeah Properties
(defined below), (c) the Redevelopment Properties (defined below), and (d) the
Kmart Segment.
Kimco Transactions Valuation. Houlihan Lokey determined the estimated
enterprise value of the assets included in the Kimco transactions. In order to
determine the estimated enterprise value of the assets included in the Kimco
transactions, Houlihan Lokey primarily used the following methodologies: (1) a
review of the fairness opinion analysis of Prudential Securities, (2) a
discounted cash flow approach, and (3) a capitalization rate analysis. The
analyses required studies of the overall market, economic and industry
conditions in which the
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properties included in the Kimco transactions operate and the historical and
projected operating results of the properties included in the Kimco
transactions.
(1) Prudential Securities' Fairness Opinion Analysis. In order to
determine the estimated enterprise value of the Kimco transactions,
Prudential Securities employed the following approaches: (a) a
Comparable Portfolio Transactions Analysis, (b) a Comparable Single
Property Sales Analysis, (c) a Capitalization Rate Survey Analysis, and
(d) a Pro Forma Comparable Company FFO Analysis. Based upon the
aforementioned analyses, Prudential Securities rendered a fairness
opinion stating that, as of the date of the opinion, the aggregate
consideration to be received by us in the Kimco transactions was fair
to us from a financial point of view.
(2) Portfolio Discounted Cash Flow Approach. Houlihan Lokey utilized cash
flow projections for the assets included in the Kimco transactions
prepared by us and included in the confidential offering memorandum as
prepared by Prudential Securities covering fiscal years 2000 through
2010. After calculating the net present value of the cash flows of the
assets included in the Kimco transactions for the applicable periods
using discount rates of 10.0 percent to 14.0 percent, a terminal value
was calculated based upon an exit capitalization rate of 9.0 percent to
11.0 percent. Based on the projections from the confidential offering
memorandum and this analysis, Houlihan Lokey calculated enterprise
value indications for the assets included in the Kimco transactions to
be in the range of $197.1 million to $229.0 million.
(3) Capitalization Rate Analysis. Using $204.4 million in value for the
Kimco transactions, Houlihan Lokey derived a range of implied
capitalization rates for the assets included in the Kimco transactions
based upon: (a) adjusted net operating income as of December 31, 1999
(the "FYE Capitalization Rate Analysis Approach") and (b) estimated
adjusted net operating income for the fiscal year ended December 31,
2000 (the "NFY Capitalization Rate Analysis Approach"), with such
implied capitalization rates range being 9.2 percent to 10.0 percent.
These implied capitalization rates were then compared to publicly
available capitalization rates that were exhibited in transactions
involving assets similar in type and location to our assets included in
the Kimco transactions.
Based upon the above analyses, Houlihan Lokey utilized a value of
$204.4 million in its analyses set forth herein.
Pilevsky Group Transaction Valuation. Houlihan Lokey determined the value
of the four properties located in Hialeah, Florida that include: (a) The Mall on
the Mile, (b) Palm Springs Village, (c) Philips Plaza, and (d) The Shops on 49th
(and collectively, the "Hialeah Properties") and the value of two development
properties (the "Redevelopment Properties").
In order to determine the estimated enterprise value of the Hialeah
Properties, Houlihan Lokey primarily used the following methodologies: (1) a net
asset value approach based on various capitalization rates and (2) a discounted
cash flow approach. The analyses required studies of the overall market,
economic and industry conditions in which the Hialeah Properties operate and the
historical and projected operating results of the Hialeah Properties.
(1) Net Asset Approach. Houlihan Lokey derived an indication of the range
of enterprise value for the Hialeah Properties by: (a) applying
capitalization rates to the Hialeah Properties' adjusted net operating
income as of December 31, 1999 (the "FYE Capitalization Rate
Approach"), (b) applying capitalization rates to the Hialeah
Properties' projected adjusted net operating income for the fiscal year
ended December 31, 2000 (the "NFY Capitalization Rate Approach"), and
(c) applying representative price per square foot rates to the Hialeah
Properties' rentable square feet as of December 31, 1999 (the "Square
Foot Approach"). Houlihan Lokey utilized publicly available information
regarding capitalization rates and price per square foot indications
exhibited in transactions involving assets similar in type and location
to the Hialeah Properties.
By applying appropriate capitalization rates and price per square foot
indications to the Hialeah Properties' net operating income and square
footage, as discussed above, Houlihan Lokey calculated an enterprise
value indication of the Hialeah Properties of approximately $104.0
million.
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(2) Discounted Cash Flow Approach. Houlihan Lokey utilized cash flow
projections prepared by us and included in the confidential offering
memorandum for the Hialeah Properties prepared by Prudential Securities
covering fiscal years 2000 through 2010. After calculating the net
present value of the individual property cash flows for the applicable
periods using discount rates of 10.5 percent to 14.5 percent, a
terminal value was calculated based upon an exit capitalization rate of
9.5 percent to 12.0 percent. Based on the projections from the
confidential offering memorandum and this analysis, Houlihan Lokey
calculated an enterprise value indication of the Hialeah Properties to
be $116.9 million.
Based upon the aforementioned analyses, Houlihan Lokey determined the
indicated enterprise value of the Hialeah Properties converged in a range from a
low of $104.0 million to a high of $116.9 million.
In order to determine the estimated enterprise value of the Redevelopment
Properties, Houlihan Lokey primarily used a cost basis approach. The analysis
required studies of the overall market, economic and industry conditions in
which the Redevelopment Properties operate and the historical and projected
operating results of the Redevelopment Properties. Houlihan Lokey determined the
purchase prices of the Redevelopment Properties, after adjusting for our
ownership percentage, to be a reasonable proxy of value for the Redevelopment
Properties.
Based upon the aforementioned analysis, Houlihan Lokey calculated an
enterprise value indication of the Redevelopment Properties to be $14.7 million
and, together with the Hialeah Properties, resulted in enterprise value
indications in the range of $118.7 million and $131.6 million (the "Pilevsky
Group Transaction Valuation Range").
Kmart Segment Valuation. Houlihan Lokey determined the value of the assets
included in the Kmart Segment. In order to confirm the estimated enterprise
value of the assets included in the Kmart Segment, Houlihan Lokey primarily used
the following methodologies: (1) an analysis of the aggregate listing price of
the Kmart Segment as provide by CB Richard Ellis which we understand is
$41.5 million, (2) an analysis of the Company's management's estimates regarding
the value of the assets included in the Kmart Segment, (3) a direct
capitalization approach as it relates to the Kmart Segment's actual net
operating income as of December 31, 1999 that utilizes publicly available
information regarding capitalization rates exhibited in transactions involving
assets similar in type and location to our Kmart properties. and (4) a
discounted cash flow approach based upon the forecasts as provided by us and
contained in the confidential offering memorandum as prepared by Prudential
Securities covering fiscal years 2000 through 2010 and using discount rates of
9.5 percent to 16.0 percent and a terminal value was calculated based upon an
exit capitalization rate of 9.5 percent to 11.5 percent. The analyses required
studies of the overall market, economic and industry conditions in which the
properties in the Kmart Segment operate and the historical and projected
operating results of the properties in the Kmart Segment. As such, Houlihan
Lokey understands that we may in fact receive less that the listing price for
the Kmart Segment and this possibility has been considered in the analyses set
forth herein.
Fairness Analyses. In order to determine the Overall Transaction Fairness,
Houlihan Lokey first determined our enterprise value based upon the summation of
a range of selected enterprise values as derived from the Kimco transactions,
the Pilevsky Group transaction, and the Kmart Segment.
Based on the analyses and factors described in the foregoing, Houlihan
Lokey determined the enterprise value to be in the range of $353.7 to $368.8
million (the "Enterprise Value Range"). Subtracting interest-bearing debt net of
cash as of April 1, 2000 from the Enterprise Value Range resulted in indications
of equity which would be available to be allocated to our stockholders and the
unitholders ranging from $181.1 to $196.2 million, which translates into
approximately $18.46 to $20.00 per share, prior to any costs associated with the
Transaction (the "Derived Value Per Share"). These indications of equity value
were then (1) compared to our common stock price as exhibited in trading on the
New York Stock Exchange and (2) utilized to determine the value of the operating
partnership units to be utilized as consideration in the Pilevsky Group
transaction.
Pilevsky Group Transaction Fairness Analysis. In order to determine the
fairness of the Pilevsky Group transaction to us from a financial point of view,
Houlihan Lokey applied its range of the concluded value per share prior to any
transaction costs ($18.46 to $20.00), as determined above, to the number of
units held by those unitholders participating in the Pilevsky Group transaction.
The result was a range of equity value for such unitholders' equity is $34.6
million to $37.5 million (this range of unitholders' equity is referred to
herein as the
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"Unitholders' Equity Value"). The Unitholders' Equity Value was then compared to
the equity transferred in connection with the Pilevsky Group transaction, as
discussed below.
Based upon the Pilevsky Group transaction valuation range of $118.7 million
to $131.6 million, as discussed above, Houlihan Lokey determined the equity
value transferred in the Pilevsky Group transaction. From the Pilevsky Group
transaction valuation range discussed above, Houlihan Lokey subtracted
interest-bearing debt of $86.0 million and $11.0 million of cash, representing
the amount contributed by the Pilevsky Group for the acquisition of the
Redevelopment Properties, to result in net equity values to be transferred to
the unitholders ranging from $21.7 million to $34.6 million in exchange for the
unitholders' interest in the Overall Transaction.
Based on the foregoing analysis Houlihan Lokey concluded that the Pilevsky
Group transaction is fair to us from a financial point of view.
Overall Transaction Fairness Analysis. Houlihan Lokey then analyzed the
consideration to be received by our stockholders and the unitholders not
participating in the Pilevsky Group transaction in the Overall Transaction.
Houlihan Lokey compared the Derived Equity Value Per Share (which is before
costs associated with the Overall Transaction) to the price exhibited for our
common stock in New York Stock Exchange trading. Furthermore, Houlihan Lokey
compared the total consideration to be received by our stockholders and the
unitholders not participating in the Pilevsky Group transaction to the Derived
Equity Value Per Share (which does not adjust for the Pilevsky Group
transaction) as well as the price exhibited for the our common stock in New York
Stock Exchange trading. Specifically, Houlihan Lokey added the consideration to
be received in the Kimco transactions and the debt to be transferred in the
Pilevsky Group transaction and reduced such total consideration by any debt
assumed in the Kimco transactions and other of our debt and assumed that we
would complete a sale of the seven Kmart shopping centers. Houlihan Lokey
further reduced such consideration by costs associated with the Overall
Transaction as estimated by our management to arrive at consideration per share
of $18.19 to $18.47.
Based upon the foregoing analyses Houlihan Lokey concluded that the
consideration to be received by our stockholders and the unitholders in
connection with the Overall Transaction is fair to them from a financial point
of view.
In arriving at its fairness opinion, Houlihan Lokey reviewed key economic
and market indicators, including, but not limited to, growth in gross domestic
product, inflation rates, interest rates, consumer spending levels,
manufacturing productivity levels, unemployment rates and general stock market
performance. Houlihan Lokey's opinion is based on the business, economic, market
and other conditions as they existed as of June 20, 2000 and on the projected
financial information provided to Houlihan Lokey as of such date. In rendering
its opinion, Houlihan Lokey has relied upon and assumed, without independent
verification that the historical and projected financial information provided to
Houlihan Lokey by us has been reasonably and accurately prepared based upon the
best current available estimates of our financial results and condition.
Houlihan Lokey did not independently verify the accuracy or completeness of the
information supplied to it with respect to us and does not assume responsibility
for it. Except as set forth above, Houlihan Lokey did not make any independent
appraisal of our specific properties or assets.
The summary set forth above describes the material points of more detailed
analyses performed by Houlihan Lokey in arriving at its fairness opinion. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and application of those methods to the particular
circumstances and is therefore not readily susceptible to summary description.
In arriving at its opinion, Houlihan Lokey made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Houlihan
Lokey believes that its analyses and summary set forth herein must be considered
as a whole and that selecting portions of its analyses, without considering all
analyses and factors, or portions of this summary, could create an incomplete
view of the processes underlying the analyses set forth in Houlihan Lokey's
fairness opinions. In its analysis, Houlihan Lokey made numerous assumptions
with respect to us, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
the respective entities. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be more or less favorable than suggested by such analyses.
However, there were no specific factors reviewed by Houlihan Lokey that did not
support its opinion. Additionally, analyses relating to the value of
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businesses or securities are not appraisals. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty.
PURPOSE OF THE LIQUIDATION; CERTAIN EFFECTS OF THE LIQUIDATION
The principal purpose of the liquidation is to afford our stockholders the
opportunity to receive a cash price for their shares that represents a premium
over (1) the closing price of our common stock on the day before the
announcement of the decision by our board to explore strategic alternatives;
(2) the initial public offering price of our common stock of $17.50 per share
and (3) the highest price at which our common stock has traded since the initial
public offering. This will be accomplished by completing the Kimco transaction,
the Pilevsky Group transaction, and the other transactions contemplated by the
plan of liquidation. In the liquidation we expect each stockholder will be
entitled to receive aggregate liquidation distributions of approximately $18.25
per share in cash.
In the liquidation we will sell or otherwise dispose of all of our real
estate assets, and Kimco, members of the Pilevsky Group and the other purchasers
of our real estate assets will be the sole beneficiaries of any earnings and
growth of these real estate assets following the liquidation. Accordingly, we
and our stockholders will no longer benefit from any potential increase in the
value of our real estate assets, nor will we or our stockholders bear the risk
of any potential decrease in the value of these assets following the
liquidation.
Our common stock is currently registered under the Securities Exchange Act
of 1934 and is listed for trading on the New York Stock Exchange under the
symbol "PHR." In connection with our liquidation, we expect that our common
stock will be delisted from this exchange and registration of our common stock
under the Exchange Act will be terminated.
Approval of the plan of liquidation and the transactions contemplated by
the plan of liquidation, including the Pilevsky Group transaction, requires the
affirmative vote of the holders of a majority (or two-thirds, as the case may
be) of all votes entitled to be cast by the holders of our common stock but does
not require the separate approval of the holders of a majority (or two-thirds,
as the case may be) of our common stock held by stockholders other than the
members of the Pilevsky Group. The special committee, the board and the members
of the Pilevsky Group believe that the fairness of the Pilevsky Group
transaction was established by certain factors, including the arm's-length
bargaining between the Pilevsky Group and our senior management (other than
Philip Pilevsky and Sheila Levine) as to the terms of the Pilevsky Group
transaction, the opinion of Houlihan Lokey and the other factors taken into
account by the special committee and our board and described under
"--Recommendations of the Special Committee and the Board of Directors; Reasons
for the Liquidation."
INTERESTS IN THE LIQUIDATION THAT DIFFER FROM YOUR INTERESTS
In considering the recommendations of the special committee and our board
with respect to the plan of liquidation, our stockholders should be aware that
some of our directors and officers have interests in the liquidation that are
different from your interests as a stockholder. The special committee and our
board were aware of these actual and potential conflicts of interest.
The conflicts of interests presented by the liquidation include the
following:
o pursuant to the Hialeah agreements, we will cause our affiliate to
transfer its interests in four contiguous shopping centers in
Hialeah, Florida to the Pilevsky Group in exchange for the
redemption of all of their units in the operating partnership.
o pursuant to the Lake Worth agreement, we will cause our affiliate to
transfer its interest in a redevelopment property in Lake Worth,
Florida to Mr. Pilevsky or his designee in exchange for cash.
o pursuant to the Third Avenue agreement, we will cause our affiliate
to transfer its 50% non-controlling joint venture interest in a
redevelopment property in New York, New York to the Pilevsky Group
in exchange for cash.
o we will pay to Philips International Holding Corporation, our
affiliated management company, $250,000 for services rendered in
connection with our liquidation which are beyond the scope of its
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management agreement, which will terminate upon the closing of the
Kimco transactions and the Pilevsky Group transaction.
o pursuant to the employment agreements of our senior management and
other arrangements, upon completion of the Kimco and Pilevsky Group
transactions the following will occur:
1) the options held by Philip Pilevsky and Sheila Levine to
purchase an aggregate of 340,000 shares of our common stock at
an exercise price of $17.50 per share will become fully
exercisable and vested (such stock options would otherwise have
become fully exercisable and vested on or before January 1,
2001)
2) Louis J. Petra, Brian Gallagher and Carl Kraus will receive
severance payments and stock acquisition loan forgiveness under
their existing employment agreements in an aggregate amount of
approximately $2.0 million (excluding any stock acquisition loan
forgiveness which would have otherwise occurred on or before
December 31, 2000); and
3) the options of Messrs. Petra, Gallagher and Kraus to purchase an
aggregate of 175,000 shares of our common stock at an average
exercise price of $17.29 per share will become fully exercisable
and vested (the options to purchase 125,000 shares of common
stock held by Messrs. Petra and Gallagher would otherwise have
become fully exercisable and vested on or before January 1,
2001).
4) the options of each of the members of the special committee to
purchase 10,000 shares of our common stock at an exercise price
of $17.50 per share will become fully exercisable and vested
(such stock options would otherwise have become fully
exercisable and vested on or before January 1, 2001).
o Mr. Jeffrey Levine, the husband of Sheila 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 to
us. Chassin Levine Rosen & Company, LLP has provided tax advisory
services, and will receive approximately $150,000 in fees in
connection with the liquidation.
PRIOR KIMCO TRANSACTION
On July 14, 2000, we completed the transfer of our shopping centers listed
below for an aggregate purchase price of approximately $67.3 million in cash and
assumption of indebtedness pursuant to the Prior Kimco agreement. The
transaction did not require stockholder approval.
<TABLE>
<CAPTION>
PROPERTY LOCATION
---------------------------------------------- ----------------------------------------------
<S> <C>
Munsey Park Shopping Center Munsey Park, NY
Northshore Triangle Glen Cove, NY
1703 Central Park Avenue Yonkers, NY
Walgreens at Freeport Freeport (Henry Street), NY
Bayhill Plaza Orlando, FL
Tradewinds Shopping Center Key Largo, FL
The Shoppes at Lake Mary Lake Mary, FL
</TABLE>
PLANS FOR PHILIPS INTERNATIONAL AND THE PROPERTIES AFTER THE LIQUIDATION;
LIQUIDATION PROCEDURES
Following the completion of the sale or transfer of all of our real estate
assets in accordance with the plan of liquidation, we will pay or provide for
our liabilities and expenses, distribute the proceeds of the liquidation of our
real estate assets to you and our other stockholders, wind up our operations,
delist our common stock and dissolve.
It is expected the members of the Pilevsky Group will own and operate the
properties they are to acquire in the Pilevsky Group transaction in the ordinary
course of business. No member of the Pilevsky Group has any present plans or
proposals that relate to or would result in an extraordinary corporate
transaction involving a
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material amount of the assets or interests they receive in the Pilevsky Group
transaction. However, it is expected that the members of the Pilevsky Group will
continue to evaluate these assets or interests after the liquidation from time
to time, and may propose or develop new plans and proposals which they consider
to be in their best interests.
We currently expect that you will receive in two or more liquidating
distributions an aggregate of approximately $18.25 in cash for each share of our
common stock that you own (assuming that you hold your shares through the
completion of the liquidation). The $18.25 per share expected to be paid in the
liquidation represents a premium of approximately 16.8% over the $15.63 closing
price of our common stock on October 12, 1999, the day before we publicly
announced our decision to explore strategic alternatives, and a premium of
approximately 18.7% over the average daily closing price of $15.37 from January
1, 1999 through October 12, 1999. The aggregate amount we expect you to receive
in the liquidation will be subject to the amounts required to pay or provide for
our liabilities and expenses, including any contingent liabilities, and the
amounts received in the liquidation of our real estate assets that we have
listed for sale but are not currently subject to definitive sale agreements.
Thus we cannot assure you that you will receive $18.25 per share.
The actual amounts and times of the liquidating distributions to be made to
you will be determined by our board in its discretion. Our board will also
inform you whether the surrender of stock certificates is necessary in
connection with the liquidation. If you transfer your shares during the
liquidation, the right to receive liquidating distributions will transfer with
those shares.
APPRAISAL RIGHTS OF STOCKHOLDERS
Under Maryland General Corporation Law, you are not entitled to any rights
of appraisal or similar rights of dissenters in connection with the approval of
the plan of liquidation because the outstanding shares of our common stock are,
and were, on the record date for the special meeting, listed on the New York
Stock Exchange, a national securities exchange.
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THE PLAN OF LIQUIDATION
The following is a brief summary of the material provisions of the plan of
liquidation. The following summary is qualified in its entirety by reference to
the plan of liquidation, which we have attached as Exhibit A to this proxy
statement, and the Kimco agreements, the Hialeah agreements, the Third Avenue
Agreement and the Lake Worth Agreement attached as exhibits to our Current
Reports on Form 8-K, dated April 28, 2000, all of which we incorporate by
reference into this proxy statement. We encourage you to read the plan of
liquidation, the Kimco agreements and the Hialeah agreements in their entirety.
THE PLAN OF LIQUIDATION
Principal Terms
The plan of liquidation contemplates the following transactions:
(1) the transfer to Kimco of all of our interests in our affiliates
that own eight shopping centers for an aggregate of approximately
$137.1 million in cash and assumption of indebtedness pursuant to the Kimco
agreement;
(2) the redemption of all of the operating partnership units owned by
the members of the Pilevsky Group in exchange for our interests in four
contiguous shopping centers in Hialeah, Florida, which we have valued, in
the aggregate, at approximately $120.0 million, subject to aggregate
indebtedness of approximately $86.0 million, pursuant to the Hialeah
agreements;
(3) the sale to Philip Pilevsky or his designee of our redevelopment
property in Lake Worth, Florida for approximately $6.6 million in cash
pursuant to the Lake Worth agreement;
(4) the sale by 1517-25 Third L.P., a wholly-owned subsidiary of the
operating partnership, of its 50% non-controlling, joint venture interest
in a redevelopment property located at 1517-25 Third Avenue, New York, New
York to the members of the Pilevsky Group for $4.0 million in cash (and
encumbered by a $10.0 million first mortgage which will remain in place)
pursuant to the Third Avenue agreement;
(5) unless otherwise sold prior to the special meeting, the sale of
our remaining shopping centers, which we currently have listed for sale at
an aggregate asking price of $41.5 million, to one or more third party
purchasers;
(6) the payment or provision for all of our expenses and liabilities,
including expenses and liabilities incurred in connection with the plan of
liquidation, and the establishment of a reserve fund for unanticipated fees
and expenses we may incur in connection with the liquidation, expenses
associated with winding up our operations, potential unanticipated costs or
shortfalls associated with property sales, potential costs related to the
representations and warranties contained in the Kimco agreement and other
contingent liabilities;
(7) the pro rata distribution of the all of the proceeds of the
liquidation to our stockholders;
(8) our dissolution under the laws of Maryland.
Liquidation Distributions and Procedures
In connection with the payment or provision for our liabilities and
expenses pursuant to the plan of liquidation, we expect to establish a reserve
fund to cover any contingent liabilities we may have and anticipated liquidation
expenses. Therefore, we anticipate making at least two liquidating distributions
to stockholders: an initial distribution as soon as practicable after the
approval of the plan of liquidation, the completion of the Kimco transaction and
the Pilevsky Group transaction, payment for our known debts and liabilities and
establishment of the reserve fund; and a final liquidating distribution of any
funds remaining in the reserve fund or otherwise after we pay or provide for our
contingent liabilities and future expenses. We cannot assure you that we will
not make more or less than two liquidating distributions or that the initial
liquidating distribution or the aggregate of all liquidating distributions will
be in the amounts we anticipate. The actual amounts and times of payment of the
liquidating distributions to be made to you will be determined by our board in
its discretion. Our board will also inform you whether the surrender of stock
certificates is necessary in connection with the
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liquidation. If you transfer your shares during the liquidation, the right to
receive liquidating distributions will transfer with those shares.
THE KIMCO TRANSACTION
General
The Kimco transaction will result in the transfer to Kimco of all of our
interests in our affiliates that own the shopping centers listed below for an
aggregate purchase price of approximately $137.1 million, subject to certain
adjustments:
<TABLE>
<CAPTION>
PROPERTY LOCATION
----------------------------------------- -----------------------------------------
<S> <C>
Branhaven Plaza Branford, CT
Elm Plaza Enfield, CT
Foxborough Plaza Foxborough, MA
Millside Plaza Delran, NJ
Mill Basin Plaza Brooklyn, NY
Meadowbrook Commons Freeport (Long Island), NY
Merrick Commons Merrick (Long Island), NY
Forest Avenue Staten Island, NY
</TABLE>
The Kimco transaction also contemplates the election by the unitholders
(other than us and members of the Pilevsky Group) to sell their units in the
operating partnership to Kimco at the proportionate purchase price of the Kimco
transaction per unit (at an amount per unit equal to what we estimate at closing
to be distributed to our stockholders per share upon our liquidation) or retain
their units and become partners with Kimco in KIR Portfolio.
Representations and Warranties
The Kimco agreement contains customary representations and warranties by us
and our applicable affiliates (for purposes of this description, collectively
"our" or "we") relating to, among other things:
o our organization, qualification and similar corporate matters;
o our authorization, execution and delivery of the Kimco agreement and
its binding effect on us;
o the absence of violation of our organizational documents, law or
contracts;
o our receipt of consents to the Kimco transaction required under law
or our contracts;
o the disclosure of certain information concerning our leases, the
full force and effect of these leases, the absence of material
defaults under these leases and other similar matters;
o our compliance with applicable zoning, environmental or other land
use regulations;
o the absence of litigation and bankruptcy-related events related to
us;
o our ownership of the properties and the absence of ground leases
affecting the properties;
o the absence of other undisclosed agreements relating to the
properties;
o the absence of certain tax proceedings related to the properties;
o the absence of any on-site employees or similar persons in
connection with the management of the properties for which Kimco
would be responsible;
o the absence of any tenant rights of first refusal or similar rights
related to the properties;
o the disclosure of our existing debt;
o certain securities law and tax matters;
o the completion of certain construction;
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o certain matters related to the unitholder redemptions contemplated
by the Kimco transaction, including that on the closing date, Philip
Pilevsky, Sheila Levine and their entity affiliates will not be
partners of our operating partnership and will not own any units of
our operating partnership;
o certain matters related to the newly-formed entities contemplated by
the Kimco transaction;
o certain property-specific representations; and
o our delivery at the closing of a certificate confirming the accuracy
of the foregoing representations and warranties in all material
respects.
The foregoing representations and warranties are subject, in some
cases, to specified limitations, exceptions and qualifications. For
example, our representations and warranties (1) are deemed to be modified
to reflect any facts inconsistent with our representations and warranties
which are disclosed by information in the possession of (or made available
to) Kimco prior to the closing; (2) are deemed to expire, upon Kimco's
receipt of an estoppel letter from a tenant or a lender, as to the
information contained in the applicable estoppel; and (3) do not survive
beyond six months after the closing of the Kimco transaction.
The Kimco agreement contains customary representations and warranties by
Kimco relating to, among other things:
o its organization, qualification and similar corporate matters;
o its authorization, execution and delivery of the Kimco agreement and
its binding effect on them;
o the absence of violation of its organizational documents, law or
contracts;
o its receipt of consents to the Kimco transaction required under law
or its contracts;
o the absence of litigation affecting the Kimco transaction;
o certain matters related to the ownership structure of Kimco and the
issuance of units in connection with the Kimco transaction; and
o its delivery at the closing of a certificate confirming the accuracy
of the foregoing representations and warranties in all material
respects.
The foregoing representations and warranties are subject, in some
cases, to specified limitations, exceptions and qualifications and survive
for six months following the closing of the Kimco transaction.
No Solicitation of Transactions
In the Kimco agreement, we have agreed not to solicit, facilitate or
otherwise participate in any inquiries or negotiations relating to any proposal
to acquire any of the properties or more than 20% of our assets or capital stock
(and we may not disclose information to third parties in connection with such an
acquisition proposal). We may, however, make disclosures and take certain
actions in connection with an acquisition proposal that are required by
applicable law.
We may also, at any time prior to our stockholders' approval of the plan of
liquidation, furnish information to and engage in discussions and negotiations
with any party who seeks, without any solicitation or encouragement on our part,
to engage in such discussions or negotiations if:
o our board concludes in good faith, after consulting with its
financial and legal advisors, that the acquisition proposal would,
if completed, result in a transaction more favorable to our
stockholders from a financial point of view than the Kimco
transaction; and
o our board concludes in good faith, after consulting with its legal
advisors, that such action is necessary in order for the directors
to comply with their duties under applicable law.
If we breach the Kimco agreement relating to the solicitation of
acquisition proposals summarized above, Kimco's sole remedy will be to receive
approximately $4.0 million as liquidated damages from us, as well as return of
the good faith deposits that Kimco has made under the Kimco agreement.
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<PAGE>
Agreements Related to the Properties
We and our affiliates have agreed under the Kimco agreement, from the date
of the agreement to the closing date, to take (or refrain from taking without
Kimco's prior written consent (which may not be unreasonably withheld or
delayed), as the case may be) the following actions subject to certain
exceptions:
o refrain from entering into, renewing, amending or terminating any
lease or other document affecting the properties (other than
agreements contemplated by the plan of liquidation);
o refrain from entering into, renewing, amending or terminating any
mortgage, note, reciprocal easement, common area maintenance
agreement or similar agreement relating to the properties;
o refrain from applying any security deposits;
o maintain and repair the properties in the ordinary course of
business; and
o keep accurate records any new lease expenses incurred in connection
with all amendments and renewals of leases consented to by Kimco
(these expenses to be allocated between us and Kimco based on the
closing date);
Other Agreements
In addition, the Kimco agreement provides that:
o we will retain our rights to institute summary proceedings against a
tenant or terminate a lease upon a tenant's default;
o we make no representation as to the continued occupancy of any of
the properties by any tenant;
o we may commence, continue and control any tax proceedings for the
reduction of the assessed value of any property and, with respect to
proceedings for pre-closing taxable years (but not with respect to
proceedings for the taxable year in which the closing occurs and all
subsequent taxable years), we may settle these proceedings (and tax
refunds and credits will be allocated between us and Kimco based on
the closing date);
o we will permit Kimco to inspect the properties and the information
relating to the properties, subject to certain customary exceptions
and procedures;
o Kimco and KIR Portfolio (the "releasors") will release us, the
operating partnership and its unitholders, our affiliates and
certain members of the Pilevsky Group (the "releasees") from all
claims relating to the properties that they may now have or later
acquire against the releasees, except for claims expressly provided
for in the Kimco agreement;
o we and the other releasees agree to cooperate in good faith with the
releasors (at the releasors' expense) in the event that the
releasors cannot, without the cooperation of the releasees, maintain
an action against any third party in connection with any matter from
which the releasees are released;
o we and Kimco agree to (1) generally allocate rents, taxes and
charges, common area maintenance expenses, brokerage and similar
commissions and other items based on the closing date (and Kimco
will be entitled to all prepaid rentals and security and other
deposits) and (2) make certain property-specific adjustments
provided for in the Kimco agreement;
o we agree to diligently seek (and Kimco agrees to reasonably
cooperate with us in seeking (at no cost to them)) the consent of
the lenders of our existing debt related to the properties. See
"--Conditions to the Kimco Transaction" and "--Termination Rights
and Fees under the Kimco Agreement;"
o we agree to pay all transfer and similar taxes in connection with
the Kimco transaction;
o we agree to file this proxy statement in material compliance with
the federal securities laws, mail this proxy statement to our
stockholders, convene the special meeting and recommend to our
stockholders that they should approve the Kimco transaction;
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<PAGE>
o if, prior to the closing, we become aware that any of the
representations and warranties that we make in the Kimco agreement
are materially untrue, inaccurate or incorrect in any material
respect, we may postpone the closing and make efforts to cure same
for up to 30 days;
o we are required to satisfy all liens affecting the encumbered
property that are capable of being satisfied by readily
ascertainable funds not to exceed three percent (3%) of the
encumbered property's allocable purchase price;
o we are required to satisfy all mortgages, real estate taxes and
assessments affecting the encumbered property irrespective of amount
and, in the event we fail to do so, credit the applicable purchase
price in an amount equal to the unsatisfied amount of such
mortgages, real estate taxes and assessments; and
o we will have the right to postpone the closing date and attempt to
eliminate any unacceptable encumbrances not waived by Kimco for up
to 30 days.
Conditions to the Kimco Transaction
Kimco's obligation to complete the Kimco transaction is subject to a number
of conditions, including the following:
o the approval of our stockholders of the plan of liquidation;
o the material accuracy of our and our affiliates' representations and
warranties, and the performance in all material respects of our and
our affiliates' obligations under the Kimco agreement;
o the execution of the partnership agreement of KIR Portfolio by each
holder of units in the operating partnership (other than the
Pilevsky Group and those who have elected cash);
o the absence of any breach by us or our affiliates of certain
agreements that we have made in the Kimco agreement relating to the
management and operation of our properties prior to closing;
o the preparedness of a title insurance company to issue the required
form of title insurance policy at the closing, subject to permitted
exceptions;
o the absence of any order or injunction, or pending or threatened
proceeding seeking an order, prohibiting the Kimco transaction;
o the satisfaction of certain property-specific conditions relating to
work being performed at our shopping centers in Enfield, Connecticut
and Foxborough, Massachusetts;
o the receipt of consents to the Kimco transaction by the mortgagees
of the relevant properties (and we have agreed to take actions and
pay certain costs relating to the securing of consents). To the
extent a mortgagee's consent is not obtained, despite the good faith
efforts of us and Kimco, Kimco will not be required to close on the
subject property and the property will be treated as a "post-closing
property," subject to certain provisions contained in the Kimco
agreement. See "--Termination Rights and Fees Under the Kimco
Agreement;"
o the assignment by us of our environmental insurance policy for the
Forest Avenue, Branhaven and Enfield properties, together with a
consent to the assignment from the insurer and an acknowledgment
from the insurer that certain environmental claims at the Forest
Avenue and Enfield properties are covered;
o our deposit into escrow of certain funds for environmental
remediation costs in the event that we are unable to deliver "no
further action" letters for the Forest Avenue, Mill Basin, Branhaven
and Enfield properties; and
o our delivery of certain environmental compliance documentation for
the Foxborough, Enfield and Branhaven properties.
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<PAGE>
Our obligation to complete the Kimco transaction is subject to the
following conditions:
o the approval of our stockholders of the plan of liquidation;
o the material accuracy of Kimco's representations and warranties
under the Kimco agreement;
o the delivery by Kimco of all funds required to be delivered to us
under the Kimco agreement;
o the execution of the all of the documents required to be executed by
Kimco under the Kimco agreement, including the partnership
agreement;
o the absence of any order or injunction, or pending or threatened
proceeding seeking an order, prohibiting the Kimco transaction;
o our receipt of any government or third party consents required of
Kimco in connection with the Kimco transaction; and
o the non-occurrence of certain Kimco bankruptcy-related events.
Termination Rights and Fees under the Kimco Agreement
The Kimco agreement contains the following provisions related to
termination rights and fees.
-- Violations; Liens
If the cost of remedying a notice of violation of applicable law or a
notice asserting that work on any of our properties must be performed
exceeds two percent (2%) of the allocable purchase price for the applicable
property, or if the cost to satisfy all liens at a particular property
exceeds three percent (3%) of the allocable purchase price for such
property, Kimco's sole remedy will be to either:
(1) waive the violations or liens, as applicable, and close on the
affected property for the purchase price less an amount equal to two
percent (2%) or three percent (3%), as applicable, of the applicable
property's allocated purchase price; or
(2) exclude the affected property from the scope of the Kimco
agreement, reduce the aggregate purchase price in an amount equal to the
allocable purchase price of the excluded property and close on the
non-affected properties to be sold under the Kimco agreement.
In the event Kimco elects (2) above, we will have the right to elect
either to:
(a) terminate the Kimco agreement and pay to Kimco approximately
$4.0 million as liquidated damages, as well as the good faith deposits
that Kimco has made under the Kimco agreement; or
(b) cause the operating partnership to distribute to us or our
designee its entire ownership interest in the affiliate that owns the
affected property (in which event the affected property will become an
excluded property), reduce the aggregate purchase price in an amount
equal to the allocable purchase price of the excluded property and sell
the non-affected properties to Kimco, in which event we will be free to
sell the excluded property to any third party without liability to
Kimco.
-- Representations and Warranties; Unacceptable Encumbrances
If we fail to cure any material inaccuracies of our representations and
warranties as required under the Kimco agreement, or are unable to remove (or
obtain insurance against) any unacceptable encumbrances as required under the
Kimco agreement, Kimco's sole remedy will be to either:
(1) waive the material inaccuracy or unacceptable encumbrance, as
applicable, and close on the applicable property without any set-off to the
purchase price; or
(2) postpone the closing of the applicable property (a "post-closing
property" under the Kimco agreement).
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<PAGE>
In the event Kimco elects (2) above, we will have the right to either:
(a) terminate the Kimco agreement and pay to Kimco approximately
$4.0 million as liquidated damages, as well as the good faith deposits
that Kimco has made under the Kimco agreement; or
(b) cause the operating partnership to distribute to us or our
designee its entire ownership interest in the affiliate that owns the
applicable property (in which event the applicable property will become
a post-closing property) reduce the aggregate purchase price in an
amount equal to the allocable purchase price of the post-closing
properties and sell the non-affected properties to Kimco.
-- Casualty and Eminent Domain
Under the Kimco agreement, if (a) a material part of any property is
damaged or destroyed by fire or other casualty, or (b) a significant
portion of any property is taken by eminent domain or condemnation, Kimco
will have the right to exclude the damaged, taken or condemned property
from the scope of the Kimco agreement, reduce the aggregate purchase price
in an amount equal to the allocable purchase price of the excluded property
and close on the non-affected properties. In the event Kimco elects to
exclude the damaged, taken or condemned property, we will have the right to
either:
(1) terminate the Kimco agreement and pay to Kimco approximately
$4.0 million as liquidated damages as well as the good faith deposits that
Kimco has made under the Kimco agreement; or
(2) cause the operating partnership to distribute to us or our
designee its entire ownership interest in the affiliate that owns the
damaged, taken or condemned property (in which event the damaged, taken or
condemned property will become an excluded property), reduce the aggregate
purchase price in an amount equal to the allocable purchase price of the
excluded property and sell the non-affected properties to Kimco, in which
event we will be free to sell the excluded property to any third party
without liability to Kimco.
In the event Kimco does not elect to exclude the damaged, taken or
condemned property, the damage or destruction was of an immaterial part of
the property, or the taking or condemnation was of an insignificant portion
of the property, Kimco is required to close on the damaged property and is
entitled (unless we repair the damage) to either (a) any applicable
insurance proceeds and a credit to the purchase price of any applicable
deductible, or (b) any proceeds received in connection with the taking or
condemnation, as applicable.
-- Failure to Satisfy Closing Conditions
If any condition to Kimco's obligation to close under the Kimco
agreement is not satisfied within 200 days of the date we entered into the
Kimco agreement with respect to one or more properties the allocable
purchase price of which does not exceed $20.0 million, Kimco may either:
(1) waive the failed closing condition and close on the subject
property at the purchase price without any set-off; or
(2) postpone the transfer of the subject property.
In the event Kimco elects (2) above, we will have the right to elect
either to:
(1) terminate the Kimco agreement and pay to Kimco approximately
$4.0 million as liquidated damages, as well as the good faith deposits that
Kimco has made under the Kimco agreement; or
(2) cause the operating partnership to distribute to us or our
designee its entire ownership interest in the affiliate that owns the
subject property (in which event the subject property will become a
post-closing property), reduce the aggregate purchase price in an amount
equal to the allocable purchase price of the post-closing properties, and
transfer the non-affected properties to Kimco.
If any condition to Kimco's obligations under the Kimco agreement is
not satisfied within 200 days of the date we entered into the Kimco
agreement with respect to two or more properties the allocable purchase
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price of which exceeds $20 million, we are required to deliver a notice to
Kimco in which we may elect either to:
(1) terminate the Kimco agreement and pay to Kimco approximately
$4.0 million as liquidated damages, as well as the good faith deposits that
Kimco has made under the Kimco agreement; or
(2) offer to cause the operating partnership to distribute to us or
our designee its entire ownership interest in the affiliate that owns the
subject property (in which event the subject property will become a
post-closing property), reduce the aggregate purchase price in an amount
equal to the allocable purchase price of the post-closing properties and
transfer the non-affected properties to Kimco.
Within five days of Kimco's receipt of our notice of election of option
(2) described above, Kimco may either:
(1) terminate the Kimco agreement and receive the return of the good
faith deposits that Kimco has made under the Kimco agreement (but not the
break up fee); or
(2) close on the post-closing properties in accordance with the terms
described below.
Notwithstanding the foregoing, in the event that our stockholders have
received a proxy statement setting a date for a stockholders meeting to
vote upon the Kimco transaction within 30 days following the mailing of
such proxy statement, and, in the event such meeting date has not occurred
prior to the expiration of the 200 day period referenced above, then the
200 day period will be extended automatically for 20 additional business
days, at the conclusion of which period the parties to the Kimco agreement
will have the rights and remedies set forth in subsections (1) and
(2) above.
In the event a property becomes a "post-closing property" under any of
the provisions of the Kimco agreement, the closing of the transfer of such
post-closing property to Kimco will be postponed for up to six months,
during which time:
(1) we will not sell or agree to transfer the post-closing property
other than to Kimco;
(2) we will use our good faith efforts to satisfy the failed
condition(s);
(3) Kimco will have the right to close on the subject property on the
terms set forth in the Kimco agreement, notwithstanding the failed
condition;
(4) if within ten days after we notify Kimco in writing that we have
cured the failed condition(s), Kimco does not elect to close on the subject
property (or fails to make an election), we will be free to sell the
property to any third party without liability to Kimco; and
(5) if any failed condition remains uncured at the end of six months
following the closing, Kimco may either close on the subject property,
notwithstanding the failed condition, or terminate the Kimco agreement with
respect to that property, but Kimco will not be entitled to the break up
fee or its good faith deposits.
If either (a) Kimco has satisfied the conditions to our obligations
under the Kimco agreement and we willfully refuse to close or satisfy a
closing condition, or (b) we breach our representations and warranties with
respect to the unitholder redemptions, Kimco's sole remedy will be to
terminate the Kimco agreement and receive approximately $4.0 million as
liquidated damages from us, as well as the good faith deposits that Kimco
has made under the Kimco agreement.
If we have satisfied the conditions to Kimco's obligations under the
Kimco agreement and Kimco fails or willfully refuses to close, we may, as
our sole remedy, retain the good faith deposits that Kimco has made under
the Kimco agreement.
Further, in the event any breakup fee is payable to Kimco under the
Kimco agreement as set forth above, such fee will be reduced by an amount
equal to four percent (4%) of the difference between (a) the aggregate
purchase price of any properties transferred to Kimco and (b) the aggregate
amount of debt assumed by Kimco on such properties.
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Post Closing Claims
The Kimco agreement prohibits Kimco from making any post-closing
claims against our affiliates, the members of the Pilevsky Group and the
unitholders (other than those that are parties to the Kimco agreement) in
connection with the Kimco agreement or the Kimco transactions, and Kimco
expressly waived any claims against such parties and released such parties
from any and all such liability.
The Kimco agreement prohibits Kimco from making any post-closing
claims against us and the parties to the Kimco agreement for any liability
in connection with the Kimco agreement, the Prior Kimco agreement or the
Kimco transactions unless:
(1) the claim is brought (a) with respect to the Prior Kimco
agreement, prior to December 31, 2000; and (b) with respect to the Kimco
agreement, within six months of the closing of the Kimco transaction;
(2) the applicable party has received timely notice from Kimco of, and
a reasonable opportunity to cure, such breach; and
(3) the aggregate damages to Kimco from such breaches are reasonably
expected to exceed $100,000 (the amount for which Kimco shall be
responsible).
In no event will our collective post-closing liability for such claims
exceed $2.5 million (for which we must provide reasonably acceptable
insurance or a collateral account in such amount if we complete the
liquidation within six months following the closing).
Expenses
Except as described above, all fees and expenses in connection with the
Kimco transaction will be paid by the party incurring such expense.
THE PILEVSKY GROUP TRANSACTION
The Pilevsky Group transaction is valued at $131.0 million in the aggregate
and is comprised of the following:
o the transfer of our interests in the following four shopping centers
valued at approximately $120.0 million, encumbered by an aggregate
of approximately $86.0 million in debt, in exchange for the
redemption of 1,870,873 units held by members of the Pilevsky Group,
pursuant to the Hialeah agreements:
<TABLE>
<CAPTION>
PROPERTY LOCATION
----------------------------------------- -----------------------------------------
<S> <C>
Mall on the Mile Hialeah, FL
Palm Springs Village Hialeah, FL
The Shops on 49th Street Hialeah, FL
Philips Plaza Hialeah, FL;
</TABLE>
o the sale of our redevelopment property in Lake Worth, Florida to
Mr. Pilevsky or his designee for approximately $6.6 million in cash
pursuant to the Lake Worth agreement; and
o the sale of our redevelopment property on Third Avenue in New York,
New York to members of the Pilevsky Group for approximately
$4.0 million in cash, as adjusted pursuant to the Third Avenue
agreement. This redevelopment property is encumbered by a
$10.0 million first mortgage which will remain in place.
The purchase price to be paid by members of the Pilevsky Group under the
Third Avenue agreement will be adjusted so that the value per unit to be
received by the members of the Pilevsky Group on the Pilevsky Group transaction,
is equal to the amount per share we expect at the time of the closing of the
Kimco transaction and the Pilevsky Group transaction to distribute to our
stockholders in the liquidation. In the event that it is estimated at the
closing that our stockholders will receive greater than or less than the
estimated $18.25 per share expected to be received in the liquidation, the
Pilevsky Group will be required to pay either less or more consideration for the
Third Avenue property in an amount such that the per unit value received by
members of the Pilevsky Group
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pursuant to the Hialeah agreements and the estimated per share value to be
received by our stockholders in the liquidation will be the same. THE EFFECT OF
THIS ADJUSTMENT IS THAT THE MEMBERS OF THE PILEVSKY GROUP WILL RECEIVE OUR BEST
ESTIMATE AT THE CLOSING OF THE PILEVSKY GROUP TRANSACTION OF WHAT OUR
STOCKHOLDERS WILL RECEIVE IN AGGREGATE LIQUIDATION DISTRIBUTIONS.
Hialeah, Lake Worth and Third Avenue Agreements
The Hialeah, Lake Worth and Third Avenue agreements contain customary
representations and warranties by the operating partnership and our applicable
affiliates relating to, among other things:
o their organization, qualification and similar corporate matters;
o their power and authority to enter into the applicable agreements
and perform their respective obligations under the applicable
agreements;
o the absence of violation of their organizational documents, laws or
their contracts;
o the operating partnership's (or our affiliate's) ownership of the
interest to be transferred under the applicable agreements free and
clear of all liens and encumbrances;
o the absence of any rights of preemptive, first refusal or similar
rights related to the interests to be transferred under the
applicable agreements;
o the accuracy of the foregoing representations and warranties in all
material respects.
The foregoing representations and warranties are subject, in some cases, to
specified exceptions and qualifications.
The Hialeah, Lake Worth and Third Avenue agreements contain customary
representations and warranties by the applicable members of the Pilevsky Group
relating to, among other things:
o their power and authority to enter into the applicable agreements
and perform their respective obligations under the applicable
agreements;
o the absence of violations of law or defaults under their contracts
which would have a material adverse effect upon the applicable
transaction;
o the accuracy of the foregoing representations and warranties in all
material respects;
o with respect to the Hialeah agreements only, the ownership of their
units; and
o with respect to the Hialeah agreements only, certain
investment-related matters.
The foregoing representations and warranties are subject, in some cases, to
specified exceptions and qualifications.
Other Material Terms
We and our applicable affiliates have agreed under the Hialeah agreements
from the date of the agreement to the closing date, to:
o refrain from entering into, renewing, amending or terminating any
lease or other document affecting the Hialeah properties without the
Pilevsky Group's prior written consent (which is not to be
unreasonably withheld or delayed);
o refrain from entering into any maintenance or similar agreement
affecting the Hialeah properties not terminable within 30 days; and
o to maintain and repair the Hialeah properties in the normal course
of business.
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In addition, the Hialeah, Third Avenue and Lake Worth agreements provide
that:
o the Pilevsky Group will take the applicable properties (or interests
therein) on an "as-is where-is and with all faults basis," subject
to the other provisions in the agreements;
o the members of the Pilevsky Group will release us, the operating
partnership and its affiliates (the "releasees") from all claims
relating to the applicable properties (or interests therein) or
arising under the applicable agreements that they may now have or
later acquire against the releasees;
o with respect to the Hialeah agreements only, we and the operating
partnership will release the members of the Pilevsky Group and its
affiliates from all claims arising under the Hialeah agreements that
we or they may now have or later acquire against the members of the
Pilevsky Group and their affiliates.
Conditions to the Pilevsky Group Transaction
The Pilevsky Group's obligation to complete the Pilevsky Group transaction
is subject to a number of conditions, including the following:
o the accuracy of the operating partnership's representations and
warranties under the applicable agreements in all material respects;
o the receipt of all required consents and approvals of governmental
authorities and third parties under applicable agreements of the
operating partnership and our applicable affiliates;
o the nonoccurrence of certain bankruptcy-related events related to
the operating partnership or our applicable affiliates;
o the satisfaction or waiver of all material conditions to the Kimco
transaction;
o with respect to certain Hialeah agreements only, the operating
partnerhip's sole ownership of certain entities formed in connection
with the Hialeah properties;
o with respect to the Hialeah agreements only, the absence of any
pending or threatened litigation or other proceeding which would
materially and adversely affect the Hialeah properties or the
interests being assigned to the Pilevsky Group;
o with respect to the Hialeah agreements only, the existence of not
less than approximately $60.1 million in total debt encumbering the
Hialeah properties and the allocation to certain members of the
Pilevsky Group of sufficient amount of debt so that such members do
not recognize any taxable gain as a result of the Pilevsky Group
transaction;
o with respect to the Hialeah agreements only, the existence of not
less than approximately $34.3 million in total equity value of the
Hialeah properties; and
o with respect to the Hialeah agreements only, the redemption of the
general partnership interests in the applicable affiliate.
o with respect to the Hialeah agreements only, the approval of our
stockholders of the plan of liquidation;
Our obligation to complete the Pilevsky Group transaction is subject to the
following conditions:
o the material accuracy of the Pilevsky Group's representations and
warranties under the applicable agreements;
o the receipt of all required consents and approvals of governmental
authorities and third parties under applicable agreements of the
Pilevsky Group;
o the nonoccurrence of certain bankruptcy-related events related to
members of the Pilevsky Group;
o the absence of termination of the applicable agreements;
o the satisfaction or waiver of all material conditions to the Kimco
transaction; and
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o with respect to the Hialeah agreements only, the absence of any
pending or threatened proceeding which would materially and
adversely affect the units being redeemed under the Hialeah
agreements;
o with respect to the Hialeah agreement pertaining to Philip Pilevsky
only, the execution by Philip Pilevsky of a guaranty of the debt
encumbering the Hialeah properties; and
o with respect to the Hialeah agreements only, the approval of our
stockholders of the plan of liquidation.
The Pilevsky Group transaction will be completed in two or more stages, one
of which will close at least one day prior to the closing date for the Kimco
transaction. Certain unitholders holding units representing 6.0% of the
outstanding units are not party to the Pilevsky Group transaction. Those
unitholders, who have no voting rights with respect to the charter amendment
proposal or the plan of liquidation, have all elected to receive either cash or
equity interests in KIR Portfolio.
THE OTHER TRANSACTIONS
We have listed for sale the following seven of our shopping centers with
Kmart as a tenant, comprising an aggregate of approximately 695,000 square feet
of leasable space, for an aggregate asking price of $41.5 million:
<TABLE>
<CAPTION>
PROPERTY LOCATION
----------------------------------------- -----------------------------------------
<S> <C>
Kmart Sacramento Center Sacramento, California
Kmart Atwater Shopping Center Atwater, California
Pennyrile Marketplace Hopkinsville, Kentucky
North Star Shopping Center Alexandria, Minnesota
McHenry Commons McHenry, Illinois
Reedley Shopping Center Reedley, California
Port Angeles Shopping Center Port Angeles, Washington
</TABLE>
Although we expect to complete the sale of the above properties in the
third or fourth quarter of 2000, we cannot assure you that we will complete the
sale at such time or at the prices we are asking or on satisfactory terms, if at
all. If any of the seven shopping center properties remain unsold as of the date
of the special meeting and the plan of liquidation is approved, then the
remaining properties will be sold pursuant to the plan of liquidation.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax considerations that may be relevant to you from the transactions
described in this proxy statement. Pryor Cashman (referred to in this section as
"counsel"), which had acted as our tax counsel in connection with our formation
and our election to be taxed as a REIT for United States federal income tax
purposes, has reviewed the following discussion and is of the opinion that it
fairly summarizes the United States federal income tax considerations that are
likely to be material to you. This discussion and such opinion are based on
current law and assumes that we have, at all times throughout our existence, and
will continue to until our liquidation, qualify as a REIT for United States
federal income tax purposes. Counsel is not aware of any facts or circumstances
that are inconsistent with this assumption, although counsel has not reviewed,
nor will it review, our compliance with the various tests that we must satisfy
for qualification as a REIT for United States federal income tax purposes. The
following discussion is not exhaustive of all possible tax considerations. This
summary neither gives a detailed discussion of any state, local or foreign tax
considerations nor does it discuss all of the aspects of United States federal
income taxation that may be relevant to you in light of your particular
circumstances or to certain types of stockholders (including insurance
companies, tax-exempt entities, financial institutions or broker-dealer, foreign
corporations and persons who are not citizens or residents of the United States)
subject to special treatment under the United States federal income tax laws.
YOU ARE ADVISED TO CONSULT WITH YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU FROM THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT AND
YOUR RECEIPT OF DISTRIBUTIONS FROM US IN THE LIQUIDATION.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND OUR
STOCKHOLDERS
TAX CONSEQUENCES TO THE COMPANY. In the Prior Kimco transaction, certain
subsidiary partnerships and limited liability companies of our affiliated
operating partnership (each, a "Selling Subsidiary") sold seven properties
(each, a "Group A Property") to Kimco for total consideration of approximately
$67.3 million in cash and assumption of indebtedness ("Total Purchase Price")
which is allocated, under the Purchase and Sale Agreement, to the Group A
Properties as follows: $18.6 million to the Munsey Park Property; $9.5 million
to the Glen Cove Property; $9.7 million to the Yonkers Property; $3.8 million to
the Freeport Property (Henry Street); $12.25 million to the Orlando Property;
$11.8 million to the Key Largo Property; and $1.675 to the Lake Mary Property.
Each Selling Subsidiary owner of a Group A Property will recognize gain or loss
for United States federal income tax purposes on the sale of its Group A
Property equal to the difference between the amount of the total consideration
allocated to such property and the Selling Subsidiary's adjusted basis in such
property immediately prior to the sale. As entities that are treated as either
partnerships or are "disregarded" (whether because they constitute single member
limited liability companies or "qualified REIT subsidiaries") for United States
federal income tax purposes, neither a Selling Subsidiary, our affiliated
operating partnership nor any Philips QRS owner of an interest in such Selling
Subsidiary will be subject to tax on their respective allocable shares of any
such gain or loss recognized by a Selling Subsidiary. As the general partner of
our affiliated operating partnership, we will recognize our allocable share of
any of the gain or loss that is allocable to our affiliated operating
partnership and will recognize the entire amount of any such gain or loss that
is allocated to a Philips QRS.
We will also recognize gain or loss on the sale of our operating
partnership units to Kimco equal to the difference between our "amount realized"
from the sale and our "adjusted tax basis" in such units. Our "amount realized"
will include the amount of cash that we receive from Kimco in the sale plus our
share of the operating partnership's liabilities immediately prior to the sale.
Our "adjusted tax basis" in our affiliated operating partnership will also
include our share of our affiliated operating partnership's liabilities
immediately prior to the sale.
In general, as a REIT, we are not subject to United States federal
corporate income tax on the portion of our taxable income that we currently
distribute to our stockholders in distributions that are eligible for the
dividends paid deduction ("DPD"). Distributions eligible for the DPD include (1)
in the case of amounts distributed in liquidation, the part of such distribution
which is properly chargeable to earnings and profits accumulated after February
28, 1913; and (2) in the case of a complete liquidation of a corporation
occurring within 24 months after the adoption by a corporation of a plan of
liquidation, any distribution within such period pursuant to such plan to the
extent of the earnings and profits (computed without regard to capital losses)
of such corporation for the
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<PAGE>
taxable year in which such distribution is made. In addition, under
Section 562(e) of the Code, in the case of a REIT, in determining the amount of
dividends under Section 316 of the Code for purposes of computing the DPD, the
earnings and profits of such REIT are increased for any taxable year by the
total amount of gain, if any, on the sale or exchange of real property by the
REIT during such taxable year.
We expect to completely liquidate within 24 months after our adoption of
our plan of liquidation, in which case any liquidating distributions that we
make to our stockholders within such 24-month period pursuant to such plan will,
to the extent of our earnings and profits (computed without regard to our
capital losses) for the taxable year in which any such distributions are made,
be treated as dividends for purposes of computing our DPD. For this purpose, for
our taxable year in which we make the liquidating distributions to our
stockholders, our earnings and profits will include any gain that we and the
Philips QRSs are allocated on the sale of the Group A Properties and any gain
that we recognize on the sale of our operating partnership units to Kimco. We
believe that our liquidating distributions to our stockholders will qualify for
the DPD and that the amount of the DPD will exceed our taxable income or gain.
Accordingly, we believe that we will not be subject to United States federal
corporate income tax for our taxable year in which we liquidate.
TAX CONSEQUENCES TO OUR STOCKHOLDERS. The United States federal income tax
consequences to you upon our liquidation and your receipt of liquidating
distributions from us are not entirely certain. This uncertainty arises from the
interplay between the normal REIT distribution rules and the general rule under
Section 331 of the Code. In general, Section 331 provides that the amount
received by a stockholder in a distribution in complete liquidation of a
corporation is treated as in full payment in exchange for such stockholder's
stock in such corporation.
Counsel believes that the general rule under Section 331 of the Code
governs the United States federal income tax consequences to our stockholders
upon our liquidation and their receipt of liquidating distributions from us.
First, the regulations promulgated under the REIT provisions of the Code provide
that the rules of Section 331 of the Code apply to determine the character of
liquidating distributions received by a stockholder of a REIT. Second, in at
least one private letter ruling, the Internal Revenue Service ("IRS") had noted
that although a liquidating distribution may be treated as a dividend by a REIT
for purposes of the DPD, at the stockholder level, such distribution is treated
as an amount received in full payment in exchange for stock. In this ruling, the
IRS ruled that the liquidating distributions received by the REIT's stockholders
were not characterized as dividends in their hands, but as payments in exchange
for their stock. However, it should be noted that a private letter ruling is not
authority and may only be relied upon by the taxpayer requesting such ruling.
Moreover, a private letter ruling does not preclude the IRS from taking a
contrary position with respect to us or our stockholders.
Accordingly, you will recognize gain or loss for United States federal
income tax purposes upon receipt of liquidating distributions equal to the
difference between the amount of liquidating distributions received by you and
your adjusted basis in your stock. Such gain or loss will constitute a capital
gain or loss if you have held your stock as a capital asset and as a long-term
capital gain or loss if you have held your stock for more than one year at the
time of your receipt of the liquidating distributions. As a result of the
Taxpayer Relief Act of 1997 and the Internal Revenue Service Restructuring and
Reform Act of 1998 (together, the "Act"), the maximum tax rate imposed on the
long-term capital gains of non-corporate taxpayers is 20%, although a 25%
maximum tax rate is imposed on the portion of such gains attributable to the
prior depreciation claimed in respect of depreciable real property held for more
than one year and not otherwise treated as ordinary "recapture" income under
Section 1250 of the Code. The Secretary of the Treasury has the authority to
prescribe appropriate regulations on how the capital gains rates will apply to
sales and exchanges by partnerships and REITs and of interests in partnerships
and REITs. Pursuant to this authority, the Secretary of the Treasury had issued
proposed regulations on August 9, 1999 relating to the taxation of capital gains
in the case of sales and exchanges of interests in partnerships, S corporations
and trusts, but not of interests in REITs. Accordingly, you are urged to consult
with your tax advisors with respect to your capital gain tax liability resulting
from our liquidation and your receipt of liquidating distributions from us. A
corporate stockholder that has held its stock for more than one year will be
subject to a 35% maximum tax rate on its capital gains recognized as a result of
our liquidation and its receipt of liquidating distributions from us. In
general, any loss recognized by a stockholder that has held its stock for six
months or more after applying the holding period rules will be treated as a
long-term capital loss to the extent of distributions received by the
stockholder from us that were required to be treated as long-term capital gains.
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<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS
The rules governing United States federal income taxation of stockholders
that are nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign persons (collectively, "Non-U.S. Stockholders")
are complex, and no attempt will be made in this proxy statement to provide more
than a limited summary of such rules. A Non-U.S. Stockholder should consult with
its own tax advisor to determine the impact of United States federal, state and
local income tax laws with regard to our liquidation and its receipt of
liquidating distributions from us. Accordingly, this discussion does not address
all aspects of United States federal income taxation, nor state, local or
foreign tax consequences (including treaty benefits, if any, that may be
available in certain instances), that may be relevant to a Non-U.S. Stockholder
in light of its particular circumstances.
TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS UNDER THE FOREIGN INVESTMENT IN
REAL PROPERTY TAX ACT OF 1980 ("FIRPTA"). In general, Section 897 of the Code
requires a Non-U.S. Stockholder that disposes of a "United States real property
interest" ("USRPI") to treat any gain or loss from such disposition as gain that
is effectively connected with the conduct of a trade or business within the
United States or as loss that is allocable to such gain. A USRPI includes an
interest in real property in the United States and any interest other than that
of a creditor in a domestic corporation that is a "United States real property
holding corporation".
As noted above, we intend to treat our liquidating distributions to our
stockholders as distributions eligible for the DPD and, from our stockholders'
perspective (including Non-U.S. Stockholders), as payments made in exchange for
their stock. Accordingly, gain recognized by a Non-U.S. Stockholder on its
receipt of liquidating distributions would be subject to FIRPTA taxation only if
its stock constitutes a USRPI. The stock will only constitute a USRPI if we are
not a "domestically controlled REIT". We will be a domestically-controlled REIT
if, at all times during a specified testing period, less than 50% in value of
our stock is held directly or indirectly by Non-U.S. Stockholders. We believe
that, currently, we are a domestically-controlled REIT and, therefore, a
Non-U.S. Stockholder's receipt of liquidating distributions from us will not be
subject to taxation under FIRPTA. However, because our shares are, and will
continue to be, publicly-traded, we cannot guarantee that we will, through to
the date of our final liquidating distributions, continue to be a
domestically-controlled REIT.
Even if we do not qualify as a domestically-controlled REIT at the time
that we make our liquidating distributions to our Non-U.S. Stockholders, any
gain of a Non-U.S. Stockholder resulting from its receipt of liquidating
distributions from us will still not be subject to FIRPTA tax if: (1) the
Non-U.S. Stockholder's stock is considered regularly traded under applicable
Treasury Regulations on an established securities market (e.g., the New York
Stock Exchange), and (2) the Non-U.S. Stockholder owned, actually or
constructively, 5% or less in value of our total outstanding stock throughout
the period that the Non-U.S. Stockholder has held its stock (or, if shorter, the
five-year period ending on the date of the Non-U.S. Stockholder's receipt of the
final liquidating distribution from us).
If a Non-U.S. Stockholder were to recognize any gain on its receipt of
liquidating distributions and such gain were subject to taxation under FIRPTA,
then the Non-U.S. Stockholder would be subject to regular United States income
tax with respect to such gain in the same manner as a taxable domestic
stockholder, subject to any applicable alternative minimum tax, possible
withholding tax, special alternative minimum tax in the case of nonresident
alien individuals and the possible application of the 30% branch profits tax in
the case of corporate Non-U.S. Stockholders in the absence of treaty relief or
exemption.
UNITED STATES INCOME TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS OTHER THAN
UNDER FIRPTA. Gain recognized by a Non-U.S. Stockholder upon our liquidation
and its receipt of liquidating distributions from us which is not otherwise
subject to taxation under FIRPTA will nonetheless be subject to United States
federal income tax if (1) the Non-U.S. Stockholder's investment in its stock is
"effectively connected" with the Non-U.S. Stockholder's United States trade or
business, in which case the Non-U.S. Stockholder will be subject to the same
treatment as a domestic stockholder with respect to such gain, except that a
stockholder that is a foreign corporation also may be subject to the 30% branch
profits tax; or (2) the Non-U.S. Stockholder is a nonresident alien individual
who is present in the United States for 183 days or more during the taxable year
and has a 'tax home' in the United States, in which case the Non-U.S.
Stockholder will be subject to a 30% tax on his or her net capital gains for the
taxable year.
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BACKUP WITHHOLDING AND INFORMATION REPORTING CONSEQUENCES TO
STOCKHOLDER. Generally, we must report annually to the Internal Revenue Service
and to our stockholders the amount of dividends paid during each calendar year,
and the amount of any tax withheld. Information reporting requirements may apply
even if withholding is not required. Copies of these information reporting
returns also may be made available, under provisions of an applicable income tax
treaty or agreement, to the tax authorities in the country in which a Non-U.S.
Stockholder is resident.
In general, under the backup withholding rules, a domestic stockholder may
be subject to backup withholding at the rate of 31% with respect to dividends
paid unless the stockholder: is a corporation or comes within other exempt
categories, and when required, demonstrates this fact; furnishes a correct
taxpayer identification number and certifies that he or she is not subject to
backup withholding on Internal Revenue Service Form W-9, or an appropriate
substitute form; or otherwise complies with applicable requirements of the
backup withholding rules.
As noted above, we intend to treat the liquidating distributions that we
make to you as payments made in exchange for your stock. Accordingly, as a
general matter, backup withholding and information reporting will not apply to a
payment of the liquidating proceeds in respect of stock held by or through a
foreign office of a foreign broker. However, information reporting, but
currently not backup withholding, will apply to a payment of such proceeds in
respect of stock held by a foreign office of a broker that: (1) is a United
States person for United States federal income tax purposes; (2) is a non-United
States person that derives 50% or more of its gross income for applicable
periods from the conduct of a trade or business in the United States; (3) is a
"controlled foreign corporation," which, in general, is a foreign corporation
that is controlled by United States stockholders; or (4) for payments made after
December 31, 2000, a foreign partnership with relevant United States
connections.
If, however, the broker has documentary evidence in its records that the
holder is a Non-U.S. Stockholder and other conditions are met or the stockholder
otherwise establishes an exemption, information reporting will not apply.
Payment to or through a United States office of a broker of the liquidating
proceeds in respect of stock is subject to both backup withholding and
information reporting unless the stockholder certifies under penalty of perjury
that the stockholder is a Non-U.S. Stockholder, or otherwise establishes
entitlement to an exemption. According to Treasury Regulations currently due to
be removed effective January 1, 2001, although backup withholding does not
currently apply to a payment of liquidation proceeds by or through a non-United
States office of a United States broker, this rule is still under consideration
by the Internal Revenue Service. Any change to this rule, however, will only be
on a prospective basis. A Non-U.S. Stockholder may obtain a refund of any
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the Internal Revenue Service.
A Non-U.S. Stockholder should consult its own advisor regarding the
application and effect of the information reporting and backup withholding rules
to them, including changes to these rules that will become effective after
December 31, 2000.
STATE AND LOCAL TAXES
Our stockholders may be subject to state or local taxation in various state
or local jurisdictions, including those in which they transact business or
reside. The state and local tax treatment of our stockholders may not conform to
the United States federal income tax consequences discussed above. Consequently,
stockholders should consult their own tax advisors regarding the effect of state
and local tax laws on the transactions described herein and on the receipt of
the liquidating distributions from us.
PARTIES TO THE LIQUIDATION TRANSACTIONS
PHILIPS INTERNATIONAL REALTY CORP.
We are a self-advised, New York based real estate investment trust. For
more than 16 years, we and our predecessors have been engaged in the ownership,
development and acquisition for redevelopment concentrated in two major,
densely-populated east coast regions--the New York, Northern New Jersey, Long
Island and Connecticut metropolitan area and the Miami-Fort Lauderdale
metropolitan area. As of June 30, 2000, our
49
<PAGE>
portfolio consisted of interests in 28 retail properties and two development
sites, encompassing 3.9 million square feet of gross leasable area. Twenty-one
(21) of our properties are anchored by national or regional supermarkets or
discount department stores. We are currently structured as an umbrella
partnership real estate investment trust. We completed our initial public stock
offering in May 1998 and our shares are traded on the New York Stock Exchange
under the symbol PHR.
KIMCO INCOME OPERATING PARTNERSHIP, L.P.
Kimco, a private Delaware limited partnership based in New Hyde Park, New
York, is a joint venture among Kimco Realty Corporation, one of the largest
publicly-traded real estate investment trusts in the country, the New York State
Common Retirement Fund and certain other institutional partners. As of June 30,
2000, Kimco's real estate portfolio includes 22 retail properties. Kimco's
properties total 5.4 million square feet and are located in 14 states.
THE PILEVSKY GROUP
The Pilevsky Group consists of Philip Pilevsky, our chairman and chief
executive officer, his sister Sheila Levine, our chief operating officer, and
certain of their affiliates and family members.
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<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The members of our senior management have informed us that they intend to
vote their aggregate 502,274 shares of common stock for the approval of the
charter amendment proposal and the plan of liquidation. Set forth below is
certain information as of June 30, 2000, for (1) our directors, (2) our
executive officers and (3) our directors and executive officers 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............................... 53 1997 2001 2,045,554(7) 22.6 20.0
Louis J. Petra, President and Director.................. 46 1997 2002 82,143(8) 1.1 *
Sheila Levine, Chief Operating Officer, Executive Vice
President, Secretary and Director(5).................. 42 1997 2000 265,018(9) 3.5 2.6
Brian J. Gallagher, Acquisitions Director............... 43 -- -- 20,954(10) * *
Carl E. Kraus, Chief Financial Officer.................. 52 -- -- 12,449(11) * *
Elise Jaffe, Director(6)................................ 44 1997 2002 7,667(12) * *
Robert S. Grimes, Director(5)........................... 55 1997 2001 19,467(13) * *
Arnold S. Penner, Director(5)........................... 63 1997 2001 16,667(14) * *
A. F. Petrocelli, Director(6)........................... 56 1997 2000 63,767(15) * *
---------
All directors and executive officers as a group......... -- -- -- 2,533,686 27.0 24.8
=========
</TABLE>
------------------
* Beneficial Ownership of less than 1 percent is omitted.
(1) Certain of our executive officers and directors beneficially own
approximately 17.7 percent of the total 25.2 percent aggregate limited
partnership interests in the operating partnership. The limited partners
of the operating partnership share with us, (we hold a 74.8 percent
general partnership interest in the operating partnership), 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 our common
stock on a one-for-one basis. Such units will be redeemed, at our option
and in our 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 our common stock at the time of redemption).
(2) Except as otherwise noted below, all shares of our 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 our
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 our common stock and the
exercise of all vested options.
(5) Member of the compensation committee of the board.
(6) Member of the audit committee of the board.
(7) Includes 344,695 shares of common stock, 160,000 vested options and
1,540,859 units.
(8) Includes 57,143 shares of common stock and 25,000 vested options.
(9) Includes 2,800 shares of common stock, 66,667 vested options and 195,551
units.
(10) Includes 4,287 shares of common stock and 16,667 vested options.
(11) Includes 12,449 shares of common stock.
(12) Includes 1,000 shares of common stock and 6,667 vested options.
(Footnotes continued on next page)
51
<PAGE>
(Footnotes continued from previous page)
(13) Includes 12,800 shares of common stock and 6,667 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.)
(14) Includes 10,000 shares of common stock and 6,667 vested options.
(15) Includes 57,100 shares of common stock and 6,667 vested options.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth information as of June 30, 2000 with respect
to each person who is known by us, in reliance on Schedules 13D and 13G filed
with the Securities and Exchange Commission (the "SEC"), to own beneficially
more than 5% of our 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>
PERCENTAGE
AMOUNT AND NATURE OF SHARES
NAME OF OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER OWNERSHIP (%)(2)
-------------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
The Philips Group(1)............................................................ 2,447,452 25.93%
Heitman/PRA Securities Advisors LLC(3).......................................... 985,678 13.43%
LaSalle Investment Management, Inc. and LaSalle Investment Management
(Securities), L.P.(4)......................................................... 737,200 10.04%
</TABLE>
------------------
(1) Address: 417 Fifth Avenue, New York, New York 10016. The Philips Group (not
a legal entity) is composed of certain of our directors and executive
officers and their immediate families and related trusts. Share information
is furnished in reliance on the Schedule 13G dated February 14, 2000 of The
Philips Group filed with the SEC, which represents holdings as of
December 31, 1999. This number represents shares for which The Philips Group
has shared dispositive and voting power, and includes units redeemable for
shares of our 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 or 852,550 shares reserved for issuance upon
the exercise of stock options granted or reserved for possible grant to
certain of our 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 our executive officers,
directors, their immediate family members and related trusts. Of the 852,550
shares reserved for issuance upon the exercise of stock options, 555,000
shares, or 65% 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 June 30, 2000.
(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 Schedule 13G/A filed January 12, 2000 with the SEC, which
represents holdings as of December 31, 1999. This number includes 985,678
shares for which Heitman has sole dispositive and voting power.
(4) Address: 200 East Randolph Drive, Chicago, IL 60601. Share information is
furnished in reliance on Schedule 13G filed with the SEC on February 10,
2000, which represents holdings as of December 31, 1999.
52
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed on the New York Stock Exchange. The following
table sets forth, for the fiscal quarters indicated, the high and low trading
prices per share of our common stock as quoted on the New York Stock Exchange
composite tape.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1998:
First Quarter................................................................... $ N/A $ N/A
Second Quarter.................................................................. $17.75 $16.50
Third Quarter................................................................... $17.50 $13.875
Fourth Quarter.................................................................. $15.812 $14.188
1999:
First Quarter................................................................... $15.875 $13.062
Second Quarter.................................................................. $16.938 $13.688
Third Quarter................................................................... $17.125 $15.00
Fourth Quarter.................................................................. $16.625 $15.50
2000:
First Quarter................................................................... $16.812 $14.562
Second Quarter.................................................................. $17.50 $16.00
Third Quarter (through August 31, 2000)......................................... $17.375 $16.875
</TABLE>
On May 8, 1998, we completed an initial public offering of 7.2 million
shares of our common stock at $17.50 per share, generating net proceeds of
approximately $113.0 million. Since our initial public offering, we have not
completed an underwritten public offering of our securities which was registered
under the Securities Act of 1933 or exempt from registration under Regulation A
under the Securities Act.
On October 12, 1999, the last trading day prior to the public announcement
of our decision to explore strategic alternatives, the closing sale price of our
common stock reported on the New York Stock Exchange was $15.63 per share and
the high and low trading prices per share of our common stock as quoted on the
New York Stock Exchange Composite tape were $15.75 and $15.63, respectively. On
August 31, 2000, the most recent practicable date prior to the printing of this
proxy statement, the closing price of our common stock reported on the New York
Stock Exchange was $17.00. You are urged to obtain current market quotations for
our common stock prior to making any decision with respect to the proposed
liquidation.
If stockholders approve the plan of liquidation, we expect to make, in lieu
of the regular quarterly dividend, two or more liquidating distributions as soon
as practicable. Our board intends to suspend the payment of quarterly dividends
beginning in the third quarter 2000, pending the outcome of the special meeting.
As of the record date, there were 7,340,474 holders of record of our common
stock, as shown on the records of our transfer agent.
53
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995:
o certain statements, including possible or assumed future results of
operations of Philips International, contained in "The Plan of
Liquidation--Background of the Plan of Liquidation;" "--Recommendation of
the Special Committee and the Board of Directors; Reasons for the
Liquidation" and "--Opinions of Financial Advisors," including any
forecasts, projections and descriptions of anticipated cost savings
referred to therein, and certain statements incorporated by reference
from documents filed by us with the SEC and any statements made herein or
therein regarding future cash flows, future business prospects, revenues,
working capital, liquidity, capital needs, interest costs, income or the
effects of the liquidation;
o any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends," "estimates," "projects"
or similar expressions; and
o other statements contained or incorporated by reference herein regarding
matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. You are cautioned not to place undue reliance on
such statements, which speak only as of the date hereof.
Among the factors that could cause actual results to differ materially are:
o uncertainties relating to our property portfolio;
o uncertainties relating to our operations;
o uncertainties relating to the implementation of our liquidation strategy;
o uncertainties relating to domestic and international economic and
political conditions;
o uncertainties regarding the impact of regulations, changes in government
policy and industry competition; and
o other risks detailed from time to time in our reports filed with the SEC.
The cautionary statements contained or referred to in this proxy statement
should be considered in connection with any subsequent written or oral
forward-looking statements that may be issued by us or persons acting on our
behalf. Except for our ongoing obligations to disclose material information as
required by the federal securities laws, we undertake no obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Please refer to our SEC filings for a description of such
factors.
54
<PAGE>
OTHER INFORMATION
PROPOSALS BY STOCKHOLDERS OF PHILIPS INTERNATIONAL
If we complete the liquidation, we will no longer have public stockholders
or any public participation in our stockholder meetings. If the plan of
liquidation is not approved, we intend to hold our next annual stockholder
meeting in May 2001, at which time the stockholders will elect our Class II and
Class III directors. In that case, you would continue to be entitled to attend
and participate in our stockholder meetings.
If the plan of liquidation is not approved, any stockholder proposal that
is submitted to us for inclusion in our proxy statement for our annual meeting
in 2001 pursuant to Rule 14a-8 under the Exchange Act must be received by us
before the close of business on January 19, 2001.
If you intend to present a proposal at our annual meeting in 2001 but do
not intend to have your proposal included in our proxy statement, you must
notify us on a timely basis of your intent to present such proposal at the
meeting. To be timely, your notice must be delivered to us either by personal
delivery or by U.S. mail, postage prepaid, to our Corporate Secretary at the
address under "Where You Can Find More Information," not earlier than the
120th day prior to the meeting and not later than the close of business on the
later of the 90th day prior to such meeting or the tenth day following the date
on which public announcement of the date of such meeting is first made by us. In
addition, your notice must otherwise comply with the requirements of our
by-laws. If you would like a copy of our by-laws, we will furnish one without
charge upon your written request to our Corporate Secretary.
SEC rules establish standards as to which stockholder proposals are
required to be included in a proxy statement for an annual meeting. We will only
consider proposals meeting the requirements of applicable SEC rules.
INDEPENDENT AUDITORS
The consolidated financial statements incorporated in this proxy statement
by reference from our Annual Report on Form 10-K for the year ended
December 31, 1999 have been audited by Ernst & Young LLP, independent auditors,
as stated in their report thereon.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other information
with the SEC. You may read and copy this information at the following offices of
the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
</TABLE>
For further information concerning the SEC's public reference rooms, you
may call the SEC at 1-800-SEC-0330. You may obtain copies of this information by
mail from the public reference section of the SEC, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. You may also access some of
this information via the World Wide Web through the SEC's Internet address at
http://www.sec.gov. Our common stock is listed on the New York Stock Exchange,
and materials may be inspected at the New York Stock Exchange's offices at 20
Broad Street, New York, New York 10005.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this proxy
statement. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this proxy statement, and
later information filed with the SEC will update and supercede the information
in this proxy statement.
We incorporate by reference each document we file pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the special meeting. We also incorporate by
55
<PAGE>
reference into this proxy statement the following documents that we filed with
the SEC (File No. 0-23463) under the Exchange Act:
o our Annual Report on Form 10-K for the year ended December 31, 1999, as
amended;
o our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000; and
o our Current Reports on Form 8-K dated April 28, 2000.
All subsequent documents filed by us with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the date of the special meeting will be deemed to be
incorporated by reference into this proxy statement and to be a part of the
proxy statement from the date of filing of those documents.
You should rely only on the information contained in (or incorporated by
reference into) this proxy statement. We have not authorized anyone to give any
information different from the information contained in (or incorporated by
reference into) this proxy statement. This proxy statement is dated
September 8, 2000. You should not assume that the information contained in this
proxy statement is accurate as of any later date, and the mailing of this proxy
statement to you shall not create any implication to the contrary.
Documents incorporated by reference are available from us without charge,
excluding all exhibits (unless we have specifically incorporated by reference an
exhibit into this proxy statement). You may obtain documents incorporated by
reference by requesting them in writing or by telephone as follows:
Philips International Realty Corp.
417 Fifth Avenue
New York, New York 10016
Attention: Corporate Secretary
Telephone: (212) 545-1100
If you would like to request documents from us, please do so by
September 19, 2000 in order to ensure timely receipt before the special meeting.
56
<PAGE>
EXHIBIT A
PHILIPS INTERNATIONAL REALTY CORP.
PLAN OF
LIQUIDATION AND DISSOLUTION
------------------------
The Board of Directors of Philips International Realty Corp., a Maryland
corporation (the "Corporation"), deems it advisable and in the best interests of
the stockholders of the Corporation to wind up the affairs of the Corporation
and to liquidate and dissolve the Corporation in accordance with this Plan of
Liquidation and Dissolution (the "Plan")
Subject to the approval of the stockholders of the Corporation and
effective with the date of such approval, the Corporation hereby adopts the
following Plan to liquidate and dissolve the Corporation in accordance with
Section 331 of the Internal Revenue Code of 1986, as amended, and in accordance
with Maryland General Corporation Law.
1. The Corporation, acting for itself or in its capacity as general partner
of Philips International Realty, L.P., a Delaware limited partnership
(the "Operating Partnership"), as appropriate, is authorized to enter
into and perform its obligations and the obligations of the Operating
Partnership and the Affiliated Parties (as hereinafter defined under)
the following contracts (the "Agreements") relating to the disposition
of assets: (i) Redemption Agreements by and among the Operating
Partnership and the members of the Pilevsky Group and (ii) Asset
Contribution, Purchase and Sale Agreement by and among the Operating
Partnership, the Corporation, Certain Affiliated Parties Signatory
thereto (the "Affiliated Parties"), KIR Acquisition, LLC, a Delaware
limited liability company and KIR Income Operating Partnership, L.P., a
Delaware limited partnership.
2. The Corporation, acting for itself or in its capacity as general partner
of the Operating Partnership, as appropriate, is authorized to sell any
and all assets of the Corporation and the Operating Partnership
remaining after the consummation of the transactions contemplated by the
Agreements for such consideration and upon such terms as the Board of
Directors of the Corporation may deem advisable.
3. The Corporation, acting for itself or in its capacity as general partner
of the Operating Partnership, as appropriate, shall act in a manner as
to obtain the best possible price for the assets of the Corporation to
be sold so as to maximize the amounts distributable to stockholders upon
the liquidation and dissolution of the Corporation.
4. The directors and officers of the Corporation are authorized and
directed to proceed promptly to wind up the affairs of the Corporation;
collect its assets; convey and dispose of such of its assets as are not
to be distributed in kind to its stockholders; pay or otherwise
adequately provide for all of its liabilities and obligations; pay all
the Corporation's expenses incidental to this Plan, including all
counsel fees, accountant's fees, and such other fees and taxes as are
necessary to effectuate this Plan; and, following such payment of or
provision for its liabilities and obligations, distribute all the
remaining assets of the Corporation, either in cash or in kind, to the
stockholders, in cancellation of their stock. Upon the complete
distribution of all the assets of the Corporation, all shares of issued
and outstanding shares of preferred stock and common stock of the
Corporation shall no longer be deemed outstanding and all rights of the
holders thereof as stockholders of the Corporation shall cease and
terminate.
5. The Corporation, acting for itself or in its capacity as general partner
of the Operating Partnership, as appropriate, is authorized, but not
required, to establish a reserve in a reasonable amount to be determined
by the Board of Directors within its discretion, to meet known
liabilities and liquidating expenses and estimated unascertained or
contingent liabilities and expenses, if the Board of Directors of the
Corporation deems such a reserve desirable.
6. The directors and officers of the Corporation are authorized and
directed, when appropriate, to file Articles of Dissolution with the
Department of Assessments and Taxation of the State of Maryland pursuant
to Section 3-407 of the Maryland General Corporation Law and to take all
other appropriate and necessary action to dissolve the Corporation under
Maryland law.
A-1
<PAGE>
7. The directors of the Corporation are authorized and directed to execute,
deliver and file such documents, incur and pay any such fees and taxes
or other expenses, and take any other such action as they may deem
necessary and desirable to effectuate the liquidation and dissolution of
the Corporation pursuant to this Plan.
8. The Corporation shall cease the transaction of all business as soon as
practicable following the approval of the plan of liquidation by our
stockholders.
9. The current Board of Directors shall continue in charge of the affairs
of the Corporation until the liquidation and dissolution of the
Corporation is complete, and shall take such further action as may be
necessary and proper to wind up the affairs of the Corporation.
10. The Plan shall become effective upon its formal adoption by the
stockholders of the Corporation.
11. The validity, interpretation, and performance of this Plan shall be
controlled by and construed under the laws of the State of Maryland.
A-2
<PAGE>
EXHIBIT B
April 17, 2000
Philips International Realty Corp.
417 Fifth Avenue
New York, NY 10016
Members of the Board of Directors,
We understand that (i) Philips International Realty Corp., a Maryland
corporation, ("Philips") Philips International Realty, L.P., a Delaware limited
partnership, and certain affiliated parties (collectively, the "Sellers") and
(ii) KIR Income Operating Partnership, L.P., a Delaware limited partnership, and
KIR Acquisition, LLC, a Delaware corporation, (collectively, the "Purchaser")
propose to enter into two separate Purchase and Sale Agreements dated as of
April 17, 2000 (the "Agreements"), pursuant to which the Purchaser will purchase
all of Sellers' right, title and interest in 15 shopping center properties as
identified in the Agreements (the "Portfolio") owned by Sellers (the
"Transaction"). The purchase price to be paid to the Sellers by Purchaser
pursuant to the Agreements for the Portfolio is $205.9 million (the "Portfolio
Consideration"), subject to certain adjustments.
You have requested our opinion as to the fairness, from a financial point of
view, to the Sellers of the Portfolio Consideration to be paid by Purchaser for
the Portfolio pursuant to the Agreements.
In conducting our analysis and arriving at the opinion expressed herein, we have
reviewed such materials and considered such financial and other factors as we
deemed relevant under the circumstances, including:
(i) the Agreements including the Limited Partnership Agreement of KIR
Portfolio I, L.P.;
(ii) certain historical and projected financial and operating data
concerning the Portfolio;
(iii) certain publicly available historical financial and operating data
concerning Philips including, but not limited to, the Annual Reports
on Form 10-K for the fiscal years ended December 31, 1998 and 1999;
(iv) publicly available financial and operating data concerning certain
companies engaged in businesses we deemed comparable to the
businesses of the Sellers, or otherwise relevant to our inquiry;
(v) the financial terms of certain recent transactions we deemed relevant
to our inquiry; and
(vi) such other financial studies, analyses and investigations that we
deemed appropriate.
We have discussed with senior management of the Sellers: (i) the historical and
current operating and financial condition of the Portfolio, (ii) their estimates
of the future financial performance of the Portfolio, and (iii) other matters as
we deemed relevant.
In connection with our review and analysis and in arriving at our opinion, we
have relied upon the accuracy and completeness of the financial and other
information that is publicly available or was provided to us by the management
of the Sellers and we have not undertaken any independent verification of such
information or any independent valuation or appraisal of the Portfolio or any of
the assets or liabilities of the Sellers and we have not been furnished with any
such valuation or appraisal. With respect to certain financial forecasts for the
Portfolio provided to us by the management of the Sellers, we have assumed that
such information (and the assumptions and bases therefor) represents such
management's best currently available estimates as to the future financial
performance of the Portfolio. Further, our opinion is based on economic,
financial and market conditions as they currently exist and can be evaluated as
of the date hereof and we assume no responsibility to update or revise our
opinion based upon events or circumstances occurring after the date hereof.
Our opinion does not address, nor should it be construed to address, the
relative merits of the Transaction, on the one hand, or any alternative business
strategies that may be available to the Sellers, on the other hand. This opinion
does not constitute a recommendation to the stockholders of Philips or Sellers
as to how such
B-1
<PAGE>
stockholders should vote in connection with the Transaction or as to any other
action such holders should take regarding the Transaction.
We have been retained by Philips to render this opinion and provide other
financial advisory services in connection with the Transaction and will receive
an advisory fee for such services. As you know, we are currently in the process
of restructuring and extending the existing secured revolving credit agreement
with Philips International Realty, L.P. In the past, Prudential Securities has
provided financing and other advisory services for Philips and has received
compensation for such services. In the ordinary course of business we may
actively trade the common stock of Philips for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This letter and the opinion expressed herein are for the sole use of the Board
of Directors of Philips. In addition, we understand and agree that Houlihan,
Lokey Howard & Zukin Financial Advisors, Inc. is relying on this opinion in
connection with its opinion dated the date hereof to the Board of Directors of
Philips. This opinion may not be reproduced, summarized, excerpted from or
otherwise publicly referred to or disclosed in any manner without our prior
written consent, except that it may be reproduced in its entirety in a
definitive proxy statement mailed to shareholders of Philips seeking their
approval of the Transaction.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Portfolio Consideration to be paid by the Purchaser for the
Portfolio pursuant to the Agreements is fair to the Sellers from a financial
point of view.
PRUDENTIAL SECURITIES INCORPORATED
April 17, 2000
B-2
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EXHIBIT C
April 17, 2000
The Board of Directors
Philips International Realty Corp.
c/o Mr. Louis Petra
President
Philips International Realty Corp.
417 Fifth Avenue
New York, NY 10015
To The Board of Directors:
We understand that Philips International Realty Corp. (the "Company") is a
public real estate investment trust whose stock trades on the New York Stock
Exchange under the ticker symbol PHR. The Company currently is structured as an
umbrella partnership real estate investment trust ("UPREIT"); accordingly, the
Company has 7.34 million outstanding common shares and 2.47 million outstanding
operating partnership ("OP") units. Further, we understand that the Company has
retained Prudential Securities Inc. ("Prudential") to serve as its financial
advisor in a series of liquidation transactions pursuant to which: i) Kimco
Income Operating Partnership, LP will acquire interests in a portfolio of 15
properties from the Company for total consideration of $205.9 million (the
"Kimco Segment"), including the assumption of $53.370 million of debt; ii) the
Company will distribute/convey approximately $131 million of real property or
interests in real property consisting of its four Hialeah, Florida shopping
centers and two other development properties to certain of the Company's OP
unitholders (the "Unitholders") in exchange for OP units held by such
Unitholders (the "Unitholder Segment") and/or other consideration; and iii) the
Company will sell, with the assistance of a broker (CB Richard Ellis) seven
Kmart shopping centers with an estimated value of approximately $35 million to
an as yet to be identified acquirer or acquirers (the "Kmart Segment"). It is
our understanding that the real property which is the subject of the Unitholder
Segment will be encumbered by approximately $89 million of debt; such debt will
be provided by affiliates of Prudential, specifically, Prudential Securities
Credit Corp. and Prudential Mortgage Capital Corp. The Kimco Segment, the
Unitholder Segment, and the Kmart Segment and other related transaction
disclosed to Houlihan Lokey are collectively referred to herein as the
"Transaction." It is our understanding that the Company has in the process of
forming a special committee (the "Committee") to consider certain matters
relating to the Transaction.
With respect to the Transaction, we understand the Kimco Segment consists of two
separate transactions, the first of which includes seven properties with a
transaction value of approximately $68 million (the "First Kimco Segment"), and
the second of which includes the eight remaining properties in which Kimco will
acquire an interest for a total of approximately $138 million (the "Second Kimco
Segment"). We also understand the Company seeks to execute contracts regarding
both the Kimco Segment and the OP Unitholder Segment as quickly as possible, and
no later than April 18, 2000. However, we understand that the Second Kimco
Segment and the OP Unitholder Segment require shareholder approval and, as such,
the Company plans to: i) file a proxy statement to obtain the requisite
shareholder approvals for the Second Kimco Segment and the OP Unitholder Segment
in May 2000; ii) close the First Kimco Segment as quickly as possible; and iii)
close the Kmart Segment, either in one transaction or a series of transactions,
as quickly as possible.
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. met with the Company's senior management and the Company's advisors to
discuss the Transaction, the operations, financial condition, future
prospects and performance of the Company;
2. reviewed the Company's annual reports to shareholders and on Form 10-K for
the fiscal years ended December 31, 1999 and quarterly reports on Form 10-Q
for the quarter ended September 30, 1999;
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3. reviewed company-prepared income statements for the Kimco Portfolio, the
Hialeah Portfolio, and the Kmart Portfolio for the fiscal year ended
December 31, 1999, which the Company's management has identified as being
the most current financial statements available;
4. reviewed the November 1999 Confidential Information Memorandum pertaining to
the Company as prepared by the investment banking firm of Prudential
Securities;
5. reviewed the Summary of Offers Schedule pertaining to the Company as
prepared by Prudential Securities as of December 15, 1999;
6. reviewed the Term Sheet as prepared by Kimco Income REIT, Kimco Income
Operating, L.P. and affiliated entities outlining the terms and conditions
of Kimco's offer to purchase 15 shopping center properties;
7. reviewed forecasts and projections prepared by the Company's management with
respect to the Company for the years ended December 31, 2000 through
December 31, 2010;
8. reviewed the Preliminary Pro Forma for Development of the 86th Street and
3rd Avenue redevelopment parcel prepared by the Company;
9. reviewed the Residential Market Study for Proposed Development of 86th
Street and 3rd Avenue prepared by The Sunshine Group, Ltd.
10. reviewed Confidential Summary's as prepared by CB Richard Ellis for the
following Kmart properties:
Kmart Sacramento Center,
McHenry Commons,
Kmart Atwater Shopping Center,
Pennyrile Marketplace,
North Star Center,
Reedley Shopping Center, and
Port Angeles Shopping Center
11. reviewed the draft presentation to the Board of Directors prepared by
Prudential pertaining to Prudential's fairness opinion regarding the Kimco
Segment;
12. reviewed copies of the following agreements:
Internal draft of the Redemption Agreement, dated April 7, 2000,
Contribution and Exchange Agreement dated August 11, 1997,
Amendment No. 1 to Contribution and Exchange Agreement, dated
December 31, 1997,
Amended and Restated Agreement of Limited Partnership of Philips
International Realty, L.P.,
First Amendment to the Amended and Restated Agreement of Limited
Partnership of Philips International Realty, L.P.,
Third Amended and Restated Bylaws of Philips International Realty
Corp.,
Amended and Restated Management Agreement,
Amended and Restated Non-Competition Agreement,
Registration Rights Agreement,
Ground Lease Economic Summary pertaining to the Yonkers property,
Shareholder Rights Agreement dated March 31, 1999, and
Amendment No. 1 to Shareholder Rights Agreement dated July 27, 1999
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13. conducted site visits to certain of the properties owned by the Company;
14. reviewed Minutes of Meeting of the Board of Directors of the Company,
15. reviewed publicly available information on companies we deemed comparable to
the Company; and
16. conducted such other studies analyses, studies and investigations as we
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that: i)
the Unitholder Segment of the Transaction is fair to the Company from a
financial point of view; and ii) the consideration to be received by the public
stockholders and the OP Unitholders of the Company in connection with the
Transaction is fair to them from a financial point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
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PHILIPS INTERNATIONAL REALTY CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Philip Pilevsky, Louis Petra, Sheila Levine,
Carl Kraus, or any of them, lawful attorneys and proxies of the undersigned,
with full power of substitution, for and in the name, place and stead of the
undersigned to attend the Special Meeting of Stockholders of Philips
International Realty Corp. to be held at HSBC Bank, 452 Fifth Avenue, 11th
Floor, New York, New York 10018 on October 10, 2000, at 3:00 p.m., local time,
and any adjournment(s) or postponement(s) thereof, with all powers the
undersigned would possess if personally present, and to vote the number of
shares the undersigned would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. IF ANY OTHER MATTERS SHOULD PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF, THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE PROXY HOLDERS. ANY PRIOR PROXY IS HEREBY REVOKED.
(to be signed on the other side)
SEE REVERSE SIDE
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FOLD AND DETACH HERE
PHILIPS INTERNATIONAL REALTY CORP.
SPECIAL MEETING OF STOCKHOLDERS
DATE: October 10, 2000
TIME: 3:00 P.M.
PLACE: HSBC Bank
452 Fifth Avenue, 11th Floor
New York, New York 10018
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS NUMBER 1 AND 2.
FOR AGAINST ABSTAIN
1. Approval and adoption of an amendment / / / / / /
to the charter of Philips International
Realty Corp. to reduce the affirmative
stockholder vote required to approve an
extraordinary corporate action from
two-thirds to a majority of all votes
entitled to be cast on the action.
FOR AGAINST ABSTAIN
2. Approval and adoption of a plan of / / / / / /
liquidation of Philips International
Realty Corp.
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
In accordance with their discretion, said Attorneys and Proxies are authorized
to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting. Any prior
proxy authorized by the undersigned is hereby revoked. The undersigned hereby
acknowledges receipt of the Notice of Special Meeting and the related Proxy
Statement dated September 8, 2000.
SIGNATURE(S) _____________________________________________ DATE ________________
NOTE: Please sign exactly as your name or names appear hereon. Joint owners
should each sign. When signing as attorney, executor, administrator, trustee,
guardian or corporate officer, give full title.
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FOLD AND DETACH PROXY CARD HERE AND RETURN IN ENCLOSED ENVELOPE
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