UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 2-95449
NATIONAL PROPERTIES INVESTMENT TRUST
Formerly Richard Roberts Real Estate Growth
Trust I (Exact name of registrant as specified in
its charter)
Massachusetts 06-6290322
------------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
P.O. Box 148 Canton Center, CT 06020
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (860) 693-9624
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:Shares of Beneficial
Interest No Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K . X
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 15, 1998: Shares of Beneficial Interest without
par value $309,164 *
Documents Incorporated by Reference: None
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: Not Applicable
* As no established public trading market exists, a value of $1.768 (the
approximate Net Asset Value as of December 31, 1997) has been ascribed for the
purpose of this calculation.
<PAGE>
PART I
ITEM 1. BUSINESS.
NATIONAL PROPERTIES INVESTMENT TRUST (the "Trust") was organized on January 16,
1985, as a Massachusetts Business Trust. On July 23, 1993, the Trust changed its
name from Richard Roberts Real Estate Growth Trust I to its current name. The
Trust has made for 1996 and prior years, and intends to make for 1997, an
election to file as a real estate investment trust "REIT" under the provisions
of the Internal Revenue Code and intends to maintain this status as long as it
will benefit the Trust's shareholders.
Since inception, the Trust has invested directly in equity interests in five
commercial properties in the United States, which have income-producing
capabilities, four of which have been lost to foreclosure and the last property
was sold on December 31, 1997. The Trust has experienced income of $1,067,259,
loss of $18,598 and income of $33,452 for fiscal years ended December 31, 1997,
1996 and 1995, respectively. The Trust considers its business to be operating in
one industry segment, investment in real property.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the common stock of the New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). The New REIT will indirectly own ten
shopping center properties in the New England, Mid-Atlantic and Southeast
regions of the United States. New REIT is not affiliated with the Trust or the
Trustees of the Trust and the sale price for the Property was determined by
arm's-length negotiations between the parties. The Property is an approximately
38,125 square foot shopping center located in Lake Mary, Florida and, as of the
date of sale, was 100% occupied. The consummation of the transactions
contemplated by the Contribution and Exchange Agreement, including the sale of
the Property, was approved by a majority of the shareholders of the Trust at its
special meeting held on December 30, 1997. 499,097 of the 747,522 shares
entitled to vote at such meeting approved the transaction proposal, with 13,219
opposed and 10,624 abstaining.
The Trust exchanged its sole real estate holding for 32,000 shares of the Common
Stock of New REIT plus the assumption of its first mortgage. The total selling
price was $2,161,940, resulting in a gain of $1,106,368. 3,744 shares of the New
REIT Common Stock were distributed to the Trust shareholders on December 31,
1997 and approximately 20,256 of such shares were distributed to the Trust
shareholders on January 7, 1998 (representing in the aggregate not less than 75%
of the Common Stock received by the Trust). The remaining 8,000 shares are to be
retained by the Trust and any distributions on the shares or net proceeds from
the sale of the shares will be available to the Trust for working capital
purposes. The Trust is contingently liable on the first mortgage.
<PAGE>
The Trust's sole remaining substantial asset is an interest in Philips
International Realty Corp. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are currently under
investigation. Should the Trust be unable to acquire a new property(ies) by the
end of 1998, the Trustees will evaluate their options as to the best course of
action for the Trust.
ITEM 2. PROPERTIES.
The Shoppes at Lake Mary (Lake Mary, Florida)
On March 31, 1986, the Trust purchased The Shoppes at Lake Mary, a 38,125 square
foot neighborhood strip shopping center located on 4.7 acres of land in Lake
Mary, Florida, from an unaffiliated entity for $3,200,000 in cash. The Shoppes
at Lake Mary is a two-story shopping center and office facility consisting of
three buildings and a parking lot with 191 parking spaces. Lake Mary is located
in Seminole County, Florida, slightly north and to the east of Orlando.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the common stock of New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). The New REIT will indirectly own ten
shopping center properties in the New England, Mid-Atlantic and Southeast
regions of the United States. New REIT is not affiliated with the Trust or the
trustees of the Trust and the sale price for the Property was determined by
arm's-length negotiations between the parties.
The Trust's sole remaining substantial asset is an interest in Philips
International Realty Corp. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are currently under
investigation. Should the Trust be unable to acquire a new property(ies) by the
end of 1998, the Trustees will evaluate their options as to the best course of
action for the Trust.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
A lawsuit has been brought by a successor of the former Advisor ("Former
Advisor") in the State of Connecticut against the Trust, Peter Stein (the
Managing Trustee of the Trust) individually, and First Investment Properties,
Inc. (a former Advisor of the Trust) for $105,000 plus interest, costs and
attorney's fees. The suit contends that the Trust assumed and ratified the
contract between First Investment Properties, Inc., which succeeded the Former
Advisor as Advisor. The Trust contends it was never party to the contract and
intends to vigorously defend these actions which it considers groundless. The
ultimate resolution of these matters is not ascertainable at this time. No
provision has been made in the financial statements related to these claims.
Peter Stein, the Managing Trustee, has put 2,100 shares of Phillips
International Realty Corp. stock, owned by him individually, in escrow as
collateral pending a judicial outcome in Florida.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF HOLDERS OF BENEFICIAL INTEREST.
A special meeting was held on December 30, 1997. At this meeting, the
shareholders of the Trust voted to approve the acceptance of the "Contribution
and Exchange Agreement" between National Properties Investment Trust and the New
REIT, which agreement had been approved by the Trustees of the Trust in August,
1997 for the sale of the Lake Mary property and approve certain amendments to
the Restated Declaration of Trust of National Properties Investment Trust, and
both proposals were approved by a majority of the shareholders of the Trust.
499,097 of the 747,522 shares entitled to vote at such meeting approved the
transaction proposal, with 13,219 opposed and 10,624 abstaining. .
An annual meeting of the shareholders was not held during 1997. The Declaration
of Trust of National Properties Investment Trust requires an annual meeting to
be held within six months of the Trust's year end.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Trust was engaged in a public offering through April 30, 1987. The Trust has
the authority to issue unlimited number of shares of Beneficial Interest,
without par value. There is no established public trading market for the Trust's
shares. The Trust had 747,553 shareholders of record at March 15, 1998.
The Trusts old CUSIP number was 763-077-104 and its new CUSIP number is
637-255-100.
<PAGE>
On December 31, 1997, National Properties Investment Trust, sold its sole real
estate asset (the "Property") to a newly formed real estate investment trust
company, the Philips International Realty Corp., a Maryland corporation ("New
REIT"), in exchange for 32,000 shares of the Common Stock of New REIT pursuant
to a Contribution and Exchange Agreement, dated August 11, 1997, as amended,
among the Trust, the Board of Trustees of the Trust, New REIT and certain
affiliated partnerships or limited liability companies associated with a private
real estate firm controlled by Philip Pilevsky and certain partners and members
thereof (the "Contribution and Exchange Agreement"). The New REIT will
indirectly own ten shopping center properties in the New England, Mid-Atlantic
and Southeast regions of the United States. New REIT is not affiliated with the
Trust or the Trustees of the Trust and the sale price for the Property was
determined by arm's-length negotiations between the parties. The Property is an
approximately 38,125 square foot shopping center located in Lake Mary, Florida
and, as of the date of sale, was 100% occupied.
The Trust exchanged its sole real estate holding for 32,000 shares of the Common
Stock of New REIT plus the assumption of its first mortgage. The total selling
price was $2,161,940, resulting in a gain of $1,106,368. 3,744 shares of the New
REIT Common Stock were distributed to the Trust shareholders on December 31,
1997 and 20,256 of such shares were distributed to the Trust shareholders on
January 7, 1998 (representing in the aggregate not less than 75% of the Common
Stock received by the Trust). The remaining 8,000 shares are to be retained by
the Trust and any distributions on the shares or net proceeds from the sale of
the shares will be available to the Trust for working capital purposes.
The Trust's sole remaining substantial asset is an interest in Philips
International Realty Corp. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are currently under
investigation. Should the Trust be unable to acquire a new property(ies) by the
end of 1998, the Trustees will evaluate their options as to the best course of
action for the Trust.
The Trust declared and paid cash distributions on a monthly basis from February
1986 through September 1988. On April 11, 1989, the Trustees voted to suspend
the quarterly shareholders' dividend indefinitely, effective with the scheduled
distribution for the first quarter of 1989. This decision was predicated upon
the desire to direct all available funds into property operations. A one-time
dividend was declared in January 1996, paid in February 1996, payable to
shareholders of record as of September 30, 1995, of $0.05 per share. This
dividend was a return of capital to the shareholders. The dividend was declared
by the sole vote of the Managing Trustee (See Item 13 - Certain Relationships
and Related Transactions). The Trust declared and paid a property dividend on
December 31, 1997, payable to the shareholders of record as of December 4, 1997,
of 3,744 shares Philips International Realty Corp. common stock. The dividend
had an approximate value of $0.25 per share. The Trust declared and paid a
property dividend on January 7, 1998, payable to the shareholders of record as
of December 4, 1997, of 20,256 shares Philips International Realty Corp. common
stock. The dividend had an approximate value of $1.35 per share.
<PAGE>
The Trust has made for prior years, and intends to make for 1997, an election to
file as a real estate investment trust (REIT) for federal tax purposes, and if
so qualified, will not be taxed on earnings distributed to shareholders.
Dividends to shareholders will be taxable dividends to the extent the Trust has
taxable income. Dividends in excess of taxable income will be a return of
capital to the shareholders.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain selected financial data for the Trust for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993, and should be read
in conjunction with the accompanying financial statements.
<TABLE>
<CAPTION>
- ------------------------------------- ----------- ----------- ---------- ----------- -----------
Statement of Operations: ............ 1997 1996 1995 1994 1993
- ------------------------------------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Rental Income ................. $ 350,302 $ 340,768 $ 311,383 $ 293,882 $ 306,916
Net Income From
Property Operations (2&3) ........... (39,765) (20,187) 32,192 (272,220) (161,071)
Interest Income ..................... 656 1,589 1,260 -- 170
Gain (Loss) Due to
Disposition of Assets &
Loss Revenue (5) .................... 1,106,368 -- -- -- --
Net Income (Loss) ................... 1,067,259 (18,598) 33,452 (272,220) (160,901)
Per Share Data:
Net Income (Loss) (1) ............... 1.45 (0.03) 0.05 (0.39) (0.24)
Distributions Declared .............. 0.25 0.05 0.00 0.00 0.00
Weighted Average Number
of Shares of Beneficial
Interest Outstanding (1) ............ 735,288 718,496 718,649 693,436 684,395
Balance Sheet:
Total Assets (2,3,4&5) .............. 1,452,115 1,050,867 1,102,288 1,014,331 1,209,933
Mortgage Loans Payable
(2,3&5) ............................. -- 571,258 598,353 398,606 400,000
Shareholder's Equity ................ 1,321,964 405,681 460,618 386,800 629,020
- ------------------------------------- ----------- ----------- ---------- ----------- -----------
</TABLE>
[FN]
(1) Earnings (Loss) per Share of Beneficial Interest are computed based on the
weighted average number of Shares of Beneficial Interest outstanding
during the period.
(2) On November 30, 1993, the Trust borrowed $400,000 to extinguish old
payables, pay delinquent real estate taxes and accumulate working capital.
The Shoppes at Lake Mary were pledged as collateral for this loan.
(3) On May 4, 1994, the Trust borrowed $25,000 to accumulate working capital.
The Shoppes at Lake Mary were pledged as collateral for this loan.
(4) On October 26, 1995, the Trust borrowed $600,000 to extinguish the
mortgage payable, make capital and tenant improvements, pay delinquent
real estate taxes, accumulate working capital and to provide funds to pay
a one-time dividend. The Shoppes at Lake Mary were pledged as collateral
for this loan.
(5) On December 31, 1997, the Trust sold its sole remaining real property in
exchange for 32,000 shares of Philips International Realty Corp. common
stock and the assumption of the 1st mortgage of $546,940.
</FN>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
At December 31, 1997, the Trust has cash of approximately $32,171, which is
comprised almost entirely of net income from operations.
During 1995, the cash flow from the operation of The Shoppes at Lake Mary has
included funds received pursuant to refinancing of the first and second
mortgages on the Trust's property. The Advisor (See Item 13 - Certain
Relationships and Related Transactions) of the Trust refinanced the first and
second mortgages on the Trust's real property for $600,000 on October 26, 1995.
The proceeds were used to repay the first and second mortgages, in which the
first mortgage was due in December 1996, pay the prior year and current year
property taxes, provide working capital to perform tenant improvements for two
new tenants, provide capital to install sewer lines mandated by the Town of Lake
Mary, and to provide funds to issue a shareholder dividend.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, the Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the Common Stock of New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). The New REIT will indirectly own ten
shopping center properties in the New England, Mid-Atlantic and Southeast
regions of the United States. New REIT is not affiliated with the Trust or the
Trustees of the Trust and the sale price for the Property was determined by
arm's-length negotiations between the parties. The Property is an approximately
38,125 square foot shopping center located in Lake Mary, Florida and, as of the
date of sale, was 100% occupied.
The Trust exchanged its sole real estate holding for 32,000 shares of the Common
Stock of New REIT plus the assumption of its first mortgage. The total selling
price was $2,161,940, resulting in a gain of $1,106,368. 3,744 shares of the New
REIT Common Stock were distributed to the Trust shareholders on December 31,
1997 and approximately 20,256 of such shares were distributed to the Trust
shareholders on January 7, 1998 (representing in the aggregate not less than 75%
of the Common Stock received by the Trust). The remaining 8,000 shares are to be
retained by the Trust and any distributions on the shares or net proceeds from
the sale of the shares will be available to the Trust for working capital
purposes. The Trust continues to be contingently liable on the first mortgage.
<PAGE>
The Trust's sole remaining substantial asset is an interest in Philips
International Realty Corp. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are currently under
investigation. Should the Trust be unable to acquire a new property(ies) by the
end of 1998, the Trustees will evaluate their options as to the best course of
action for the Trust.
The principal assets of the Trust consists of an equity position in Philips
International Realty Corp. and cash.
Results of Operations
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
For the year ended December 31, 1997, the Trust reported a net loss from
property operations of $39,765, as compared to net loss from property operations
of $20,187 for the year ended December 31, 1996. Significant variances from 1996
are as follows; the increase in gross rental income for the year ended December
31, 1997 is the result of decreases in vacancies resulting in an increase of
gross rental of $5,641 and rent escalations resulting in an increase of gross
rental income of $10,586 and a decrease in gross rental income due to rent
concessions of $6,693. Rental expenses increased by $23,774 for the year ended
December 31, 1997 as a result of the write-off of the remaining balance of
capitalized loan origination costs of $7,478, increase in depreciation of $4,133
as a result of the new sewer construction and improvements, an increase in
property taxes of $7,104 over the prior year, and the write-off of the remaining
balance of capitalized leasing commissions of $5,531. General and administrative
expenses increased by $5,338 for the year ended December 31, 1997 over the year
ended December 31, 1996 due to increases in expenses related to the Trust's
preparation for the proposed sale of $3,831, decreases in travel and
entertainment of $3,571, and increases in health insurance premiums of $6,095.
Also, the Trust had net income of $1,067,259 for the year ended December 31,
1997, compared to a net loss of $18,598 for the year ended December 31, 1996.
The increase is the result of a gain on the sale of real estate of $1,106,368 on
December 31, 1997.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, the Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the Common Stock of New REIT plus the assumption of its first
mortgage. The total selling price was $2,161,940, resulting in a gain of $
1,106,368. 3,744 shares of the New REIT Common Stock were distributed to the
Trust shareholders on December 31, 1997 and approximately 20,256 of such shares
were distributed to the Trust shareholders on January 7, 1998 (representing in
the aggregate not less than 75% of the Common Stock received by the Trust). The
remaining 8,000 shares are to be retained by the Trust and any distributions on
the shares or net proceeds from the sale of the shares will be available to the
Trust for working capital purposes.
<PAGE>
The Trust's sole remaining substantial asset is an interest in Philips
International Realty Corp. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are currently under
investigation. Should the Trust be unable to acquire a new property(ies) by the
end of 1998, the Trustees will evaluate their options as to the best course of
action for the Trust.
Currently, there is no agreement with regards to compensation of the Managing
Trustee (See Item 13 - Certain Relationships and Related Transactions) and
compensation paid to the Managing Trustee was $48,000 for the year ended
December 31, 1997.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
For the year ended December 31, 1996, the Trust reported a net loss from
property operations of $20,187, as compared to net income from property
operations of $32,192 for the year ended December 31, 1995. Significant
variances from 1995 are as follows; repairs and maintenance expenses were higher
due to repairs to the sprinkler system, septic system and air conditioning
systems; interest expense increased due to the refinancing and additional
borrowing on October 25, 1995; property management costs increased due to a
monthly Trustee fee paid to the Managing Trustee as a result of the conversion
of the REIT to a self-managed REIT; Telephone expenses increased due to
increased contact with shareholders, contact with contractors in Florida, and
contacts by the Managing Trustee when he is traveling; and revenues increased
due to increased occupancy and rent escalations.
Year Ended December 31, 1995 compared to Year Ended December 31, 1994
For the year ended December 31, 1995, the Trust reported net income from
property operations of $32,192, as compared to a net loss from property
operations of $272,220 for the year ended December 31, 1994. Significant
variances from 1994 are as follows: general and administrative expenses were
reduced due to the waiving of the advisor fees by the advisor due to the
limitation of operating expenses per the Declaration of the Trust (See Item 13 -
Certain Relationships and Related Transactions) and a reduction in travel
expenses and costs related to the evaluation of new investments; repairs and
maintenance expenses were lower due to substantial reductions in the costs of
contracted services and less than average repairs were performed; promotion and
administration expense variances are the result of different expense
classifications between years; interest expense increased due to increases in
the interest rates and due to the refinancing and additional borrowing on
October 25, 1995; and revenues increased due to increased occupancy and rent
escalations.
<PAGE>
On October 27, 1995, the Trust changed its operating structure to a
self-administered trust. The Advisor and the Managing Trustee have made a
concerted effort to reduce the operating expenses and general and administrative
expenses of the Trust. They have terminated the lease for their administrative
offices located in Connecticut and are operating out of an office provided by
the Managing Trustee (See Item 13 - Certain Relationships and Related
Transactions). The travel and investigative expenses have been curtailed to a
level which the Managing Trustee feels will be supported by the Trust's Cash
Flow. The Trust had entered into a new leasing contract with a local (Florida)
real estate company to find new tenants, and the leasing commission is to be
paid on an annual basis, rather than entirely up front. This contract should
reduce the strain on cash flow due to substantial prepaid fees.
There was no agreement with regards to compensation of the Managing Trustee (See
Item 13 - Certain Relationships and Related Transactions) and no compensation
was provided for the period of October 27, 1995 to December 31, 1995.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
NATIONAL PROPERTIES INVESTMENT TRUST
INDEX
Independent Auditors' Reports
Comparative Balance Sheet as of December 31, 1997 and 1996
Comparative Statement of Operations for the Years Ended December 31,
1997, 1996 and 1995
Comparative Statement of Changes in Shareholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995
Comparative Statement of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Comparative Schedule of Rental Expenses for the Years Ended December 31,
1997, 1996 and 1995
Notes to the Financial Statements
Supplemental Financial Statement Schedules:
None
---------------
Schedules Not Filed:
All schedules except, those indicated above, have been omitted because
either the required information is not applicable or the information is
shown in the financial statements or notes thereto.
<PAGE>
[LETTERHEAD OF BERNARDI, ALFIN & KOOS, L.L.C.]
Trustees
National Properties Investment Trust
P.O. Box 148
Canton Center, Connecticut 06020
We have audited the accompanying balance sheet of National Properties Investment
Trust as of December 31, 1997 and 1996, and the related statements of
operations, changes in shareholders' equity, and cash flows for the years ended
December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Properties Investment
Trust as of December 31, 1997 and 1996 and the results of its operations and its
cash flows for the years ended December 31, 1997, 1996 and 1995 in conformity
with generally accepted accounting principles. Also in our opinion, the
financial statement schedules, when considered in relation to the basic
financial statements, presents fairly in all material respects the information
shown therein.
March 4, 1998 Respectfully submitted,
/s/ Bernardi, Alfin & Koos, L.L.C.
BERNARDI, ALFIN & KOOS, L.L.C.
Certified Public Accountants
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE BALANCE SHEET
December 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
Investments in real estate and personal property $ 4,287 $ 948,583
Cash and cash equivalents 32,171 44,403
Receivables 1,314 18,248
Investments 1,412,800 --
Prepaid expenses -- 21,019
Deposits 1,543 2,160
Deferred expenses -- 16,454
--------- --------
TOTAL ASSETS $1,452,115 $1,050,867
========== ==========
LIABILITIES:
Accounts payable $ 16,146 $ 17,307
Accrued expenses 15,609 35,800
Prepaid rent and security deposits 8,575 20,821
Note payable 89,821 --
Mortgage payable -- 571,258
--------- ---------
Total Liabilities 130,151 645,186
--------- ---------
SHAREHOLDERS' EQUITY:
Shares of beneficial interest, no par value, unlimited
authorization, shares issued and outstanding were
747,553 in 1997 and 718,496 in 1996 11,791,190 11,754,966
Accumulated deficit (10,469,226) (11,349,285)
--------- ---------
Total Shareholders' Equity 1,321,964 405,681
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,452,115 $ 1,050,867
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE STATEMENT OF OPERATIONS
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
INCOME (LOSS) FROM OPERATIONS OF DISCONTINUED
LAKE MARY REAL ESTATE:
<S> <C> <C> <C>
Gross rental income $ 350,302 $ 340,768 $ 311,383
Rental expenses (265,552) (241,778) (214,790)
General and administrative expenses (124,515) (119,177) (64,401)
----------- ---------- ---------
Net Income (Loss) from Property Operations (39,765) (20,187) 32,192
OTHER INCOME:
Interest income 656 1,589 1,260
GAIN ON DISPOSAL OF LAKE MARY REAL ESTATE (LESS
APPLICABLE INCOME TAXES OF $15,609) 1,106,368 -- --
----------- ---------- ---------
NET INCOME (LOSS) $ 1,067,259 $ (18,598) $ 33,452
=========== ========== =========
INCOME (LOSS) PER SHARE OF BENEFICIAL INTEREST $ 1.45 $ (0.03) $ 0.05
=========== ========== =========
AVERAGE NUMBER OF SHARES OF BENEFICIAL
INTEREST 735,288 718,496 718,649
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
Shares Amount Shares Amount Shares Amount
------- ------------ ------- ------------ -------- ------------
SHARES OF BENEFICIAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 718,496 $ 11,754,966 718,860 $ 11,754,966 714,395 $ 11,714,600
Shares issued 30,416 36,900 -- -- 847 847
Contributed capital -- -- -- -- -- 39,519
Redemption of shares (1,185) (676) -- -- -- --
Corrections of errors (174) -- (364) -- 3,618 --
------- ------------ ------- ------------ -------- ------------
Balance - December 31, 747,553 $ 11,791,190 718,496 $ 11,754,966 718,860 $ 11,754,966
======= ============ ======= ============ ======== ============
ACCUMULATED DEFICIT
Balance - January 1, $(11,349,285) $(11,294,348) $(11,327,800)
Net income (loss) 1,067,259 (18,598) 33,452
Dividends paid (187,200) (36,339)
------------ ------------ ----------
Balance - December 31, $(10,469,226) $(11,349,285) $(11,294,348)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
For the Years Ended December 31,
1997 1996 1995
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 1,067,259 $ (18,598) $ 33,452
---------- ------- -------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities
Depreciation and amortization 62,510 50,899 46,131
Gain on sale of asset (1,106,368) -- --
Changes in Assets and Liabilities:
Receivables 16,934 (4,337) 1,510
Prepaid expenses 21,019 1,753 13,188
Deferred expenses -- -- (26,927)
Deposits 617 (360) 12,957
Accounts payable (1,161) (1,589) (57,119)
Accrued expenses (35,800) 29,575 414
Prepaid rent and security deposits (12,246) 2,625 (3,056)
Due to Advisor -- -- (85,481)
---------- ------- -------
Total Adjustments (1,054,495) 78,566 (98,383)
---------- ------- -------
Net Cash Provided By (Used In)
Operating Activities 12,764 59,968 (64,931)
---------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Closing costs paid on the sale of assets (10,000) -- --
Purchase of personal property (131,723) (60,212) (30,113)
---------- ------- -------
Net Cash Flows Used In Investing Actvities (141,723) (60,212) (30,113)
---------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (24,318) (27,095) (400,253)
Mortgage proceeds -- -- 600,000
Proceeds from the issuance of shares 36,900 -- --
Redemption of shares (676) -- --
Dividends paid -- (36,339) --
Proceeds from note 104,821 -- --
---------- ------- -------
Net Cash Provided by (Used In)
Financing Activities 116,727 (63,434) 199,747
---------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (12,232) (63,678) 104,703
CASH AND CASH EQUIVALENTS, BEGINNING
OF THE YEAR 44,403 108,081 3,378
---------- ------- -------
CASH AND CASH EQUIVALENTS, END
OF THE YEAR $ 32,171 $ 44,403 $ 108,081
========== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE SCHEDULE OF RENTAL EXPENSES
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
RENTAL EXPENSES:
<S> <C> <C> <C>
Promotion and administration $ 23,507 $ 21,170 $ 21,193
Property management -- -- 15,569
Leasing commissions 18,244 12,713 12,688
Utilities 23,715 21,264 18,596
Maintenance and repair 22,870 26,234 11,811
Insurance 12,672 13,309 9,451
Property taxes 43,000 35,896 33,339
Interest expense and late charges 59,034 60,293 46,012
Amortization 16,454 8,976 7,481
Depreciation 46,056 41,923 38,650
------ ------ ------
Total Rental Expenses $ 265,552 $ 241,778 $ 214,790
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NATIONAL PROPERTIES INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Organization and Summary of Accounting Policies:
A. Organization:
National Properties Investment Trust (formerly Richard Roberts
Real Estate Growth Trust I) (the "Trust") was organized on January
16, 1985 as a Massachusetts Business Trust. The Trust invests
directly in equity interests in commercial, industrial and/or
residential properties in the United States which have
income-producing capabilities and intends to hold its properties
for long-term investment.
On December 31, 1997, National Properties Investment Trust,
sold its sole real estate asset (the "Property") to a newly formed
real estate investment trust company, the Philips International
Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the Common Stock of New REIT pursuant to a
Contribution and Exchange Agreement, dated August 11, 1997, as
amended, among the Trust, the Board of Trustees of the Trust, New
REIT and certain affiliated partnerships or limited liability
companies associated with a private real estate firm controlled by
Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). The New REIT will
indirectly own ten shopping center properties in the New England,
Mid-Atlantic and Southeast regions of the United States. New REIT
is not affiliated with the Trust or the Trustees of the Trust and
the sale price for the Property was determined by arm's-length
negotiations between the parties. The Property is an approximately
38,125 square foot shopping center located in Lake Mary, Florida
and, as of the date of sale, was 100% occupied. The consummation
of the transactions contemplated by the Contribution and Exchange
Agreement, including the sale of the Property, was approved by a
majority of the shareholders of the Trust at its special meeting
held on December 30, 1997. 499,097 of the 747,522 shares entitled
to vote at such meeting approved the transaction proposal, with
13,219 opposed and 10,624 abstaining.
3,744 shares of the New REIT Common Stock were distributed to
the Trust shareholders on December 31, 1997 and 20,256 of such
shares were distributed to the Trust shareholders on January 7,
1998 (representing in the aggregate not less than 75% of the
Common Stock received by the Trust). The remaining 8,000 shares
are to be retained by the Trust and any distributions on the
shares or net proceeds from the sale of the shares will be
available to the Trust for working capital purposes.
B. Method of Accounting:
The financial statements of the Trust have been prepared on
the accrual basis of accounting.
C. Cash Equivalents:
For financial statement purposes, the Trust considers all
highly liquid investments with original maturities of three months
or less to be cash equivalents.
<PAGE>
NOTE 1 - Organization and Summary of Accounting Policies: (Continued)
D. Income Taxes:
The Trust has made for prior years, and intends to make for
1997, an election to file as a real estate investment trust (REIT)
for federal tax purposes, and if so qualified, will not be taxed
on earnings distributed to shareholders. Accordingly, no provision
for federal income taxes has been made for the periods ended
December 31, 1996 and 1995. However, the Trust is subject to state
income taxes, where applicable.
E. Real Estate Assets and Depreciation:
On January 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121"
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." The statement requires
impairment losses to be recognized for long-lived assets, on a
property by property basis, used in operations when indicators of
impairment are present and the undiscounted future cash flows are
not sufficient to recover the assets, carrying value. If such
indicators are present, an impairment loss is recognized based on
the excess of the carrying amount of the impaired asset over its
fair value.
For long-lived assets to be disposed of, impairment losses are
recognized when the fair value of the asset, less the estimated
cost to sell, is less than the carrying value of the asset
measured at the time management commits to a plan to dispose of
the asset. Assets are classified as assets to be disposed of when
management has committed to sell and is actively marketing the
property. Assets to be disposed of are carried at the lower of
carrying value or fair value less cost to dispose, determined on
an asset by asset basis. Depreciation is not recorded during the
period in which assets are held for disposal and gains (losses)
from initial and subsequent adjustments to the carrying value of
the assets, if any, are recorded as a separate component of income
from continuing operations. Adoption of this standard did not have
a material impact on the Company's financial position or results
of operations.
Depreciation was computed using the straight-line method over
an estimated depreciable life of 40 years for real property, 7
years for personal property, and over the life of the related
lease for tenant improvements. The only property owned by the
Trust was written down to its realizable value at December 31,
1991.
<PAGE>
F. Accumulated Deficit:
The accumulated deficit, reported as a reduction of
Shareholders' Equity, includes net losses recognized and
distributions made to Shareholders as a return of capital
invested.
G. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
NOTE 2 - Related Party Transactions:
The Trust paid the Managing Trustee $48,000 and $46,000 as
compensation for managing the Trust property for the years ended
December 31, 1997 and 1996, respectively. In addition, Effective
in November 1995, the Trust offices are located at premises owned
by the Managing Trustee. No rent was charged to the Trust in 1997
and 1996, however, the Trust paid utility bills for the office of
$2,325 in 1997 and $1,647 in 1996.
In 1997, the Trust paid health insurance premiums of $17,269
on behalf of two Trustees. The Trust paid $11,727 to a credit card
account of the Managing Trustee for reimbursement of Trust
expenses. The Trust reimbursed two Trustees $3,391 for travel
expenses.
The Trust had entered into an agreement (the "Advisory
Agreement") with First Investment Properties, Inc., (the
"Advisor"), a Connecticut Corporation, pursuant to which the
Advisor was acting as an investment advisor and administrator of
the Trust's day-to-day affairs. Peter Stein, the Managing Trustee,
was the manager of First Investment Properties, Inc. The Advisory
Agreement expired on October 27, 1995 and was not renewed by the
Trust.
Under the terms of the Advisory Agreement, the Trust pays to
the Advisor: (a) a reimbursement for organizational, offering and
selling expenses advanced on behalf of the Trust by the Advisor;
(b) an annual Advisory Fee equals to 2.5% of all cash receipts
from operations in the ordinary course of business after deducting
payments for operating expenses, debt service, capital
expenditures with respect to real property investments, amounts
set aside for reserves, after the reimbursement of expenses
incurred in the performance of advisory duties described below,
which is subordinate to an annual cumulative (but not compounded)
return to the investors of 10% per annum on the original Price Per
Share to the public in the offering, less all distributions of the
net proceeds from the sale or refinancing of the Trust's
properties (the "Adjusted Price Per Share"); (c) an Acquisition
Fee equal to 6% of the purchase price of any real property
acquired by the Trust, from which fee, the Advisor, will pay all
real estate and mortgage commissions due to unaffiliated parties;
(d) a Disposition Fee equal to 15% of any net proceeds from a
sale, refinancing or other capital transaction with respect to any
of its investments, after the Shareholders have received a return
of their capital plus a cumulative (but not compounded) return of
10% per annum on the Adjusted Price Per Share, of which
Disposition Fee, the Advisor, may pay up to 10% to any
consultants;
<PAGE>
NOTE 2 - Related Party Transactions: (Continued)
and (e) a Real Estate Brokerage Commission upon the sale of any
Trust real property investments, equal to 3% of the gross sale
price. The Trust will also reimburse the Advisor for any expenses
attributable to the performance of its duties pursuant to the
Advisory Agreement. The Advisor will refund to the Trust within
120 days after the end of the fiscal year, the greater of the
amount, if any, by which the Operating Expenses of the Trust (as
defined in the Prospectus) exceeded either (a) 2% of the Book
Value of Invested Assets (as defined in the Prospectus) or (b) 25%
of net income of the Trust, whichever is greater, or (c) 2% of the
Trust's base assets defined as total assets of the Trust less
cash, cash items and unsecured indebtedness. The Trust had
Operating Expenses in excess of the above limits of $85,481 during
1995 which were applied to a note payable due to the Advisor.
The prior financial statements referred to the note payable
to the Advisor as a Due to Consultant. This liability arose as a
result of the costs associated from replacing the prior Advisor
and Trustees in 1993. The contract with the consultant was
entered into with First Investment Properties, Inc. and the Trust
was not a party to the agreement. The Declaration of the Trust
prohibits the Trust from directly paying third party contractors
of the Advisor, but instructs the Trust to pay the Advisor
directly and the Advisor is responsible for paying the third
party. The Trust has no liability to the consultant. First
Investment Properties, Inc. is solely liable to the consultant.
First Investment Properties, Inc. has received $85,481 directly
and indirectly as payment of this note. The remaining $19,519 due
to the Advisor has been forgiven by First Investment Properties,
Inc. and recorded as contributed capital. Additionally, First
Investment Properties, Inc. has waived all rights to Advisory
fees accrued in 1995 of $32,607 and any fees accrued in prior
years, which are not payable until such time as the shareholders
receive a cumulative, but not compounded ten percent return on
their investment. First Investment Properties, Inc. has agreed to
this waiver due to the fact they recognize that such a condition
will never be met.
In March 1995, the Trust issued 847 shares of Beneficial
Interest to Gretchen Stein, spouse of Peter Stein, in exchange for
the note payable at $1 per share per the agreement with the Trust
in 1994. The remaining $20,000 balance was contributed to the
Trust as capital.
On March 3, 1997, the Trust issued 30,416 shares of beneficial
interest to a Profit Sharing Retirement Plan for the benefit of a
Trustee of the Trust. The shares were issued for $1.2132 per
share, totaling $36,900.
<PAGE>
NOTE 2 - Related Party Transactions: (Continued)
As part of their compensation for their involvement in the
sale of the real estate by the Trust to Philips International
Realty Corp., two Trustees received a total of 5,000 shares of
Philips International Realty corp. common stock, valued at
$250,000. In addition the two Trustees received warrants to
purchase an additional 8,000 shares of Philips International
Realty Corp. common stock.
NOTE 3 - Earnings Per Share:
Earnings per Share of Beneficial Interest are computed on the
weighted average number of Shares of Beneficial Interest
outstanding during the period.
NOTE 4 - Investment in Real Estate and Personal Property:
The Trust purchased The Shoppes at Lake Mary, a 38,125 square
foot shopping center located in Lake May, Florida on March 31,
1986 for $3,200,000. Pursuant to the purchase agreement, the
seller guaranteed that the revenues generated by the project
during the first two years of its operation would be at least
equal to the aggregate of all expenses incurred in connection with
the use and operation of the project during each such year plus
$360,000. The seller placed $300,000 of the purchase price in an
interest bearing escrow account as security for the guarantee. On
September 26, 1986, the Trust released the seller from the
guarantee in consideration for the funds held in escrow. The funds
held in escrow were forwarded to the Trust on October 2, 1986. The
basis of the property acquired has been reduced by the amount
received under the terms of the cash flow guarantee. On December
31, 1991 the Trust reduced the book value of real property by
$1,677,901 to its net realizable value .
All of the Trust's property are recorded at historical cost,
except for it's real property which is recorded at its historical
cost, less $310,762 for the reduction in basis due to the release
of funds escrowed at closing, and less $1,677,901 loss reserve to
reduce the property value to its net realizable value.
On December 31, 1997, National Properties Investment Trust,
sold its sole real estate asset to a newly formed real estate
investment trust company, the Philips International Realty Corp.,
a Maryland corporation.
<PAGE>
NOTE 4 - Investment in Real Estate and Personal Property: (Continued)
The Trust's property and equipment are as follows:
<TABLE>
<CAPTION>
The Shoppes at Lake Mary
1997 1996
---- ----
<S> <C> <C>
Land $ -- $ 230,299
Buildings -- 1,147,584
Tenant Improvements -- 210,742
Furnishings and Equipment 6,545 19,544
----- ------
Total 6,545 1,608,169
Less: Accumulated Depreciation ( 2,258) ( 659,586)
----- -------
Net Investment in Real Estate
and Personal Property $4,287 $ 948,583
====== ==========
</TABLE>
NOTE 5- Receivables:
Receivables consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Tenant Receivables $1,314 $18,248
Allowance for Doubtful Accounts -- --
----- ------
Tenant Receivables net of Allowance $1,314 $18,248
====== =======
</TABLE>
NOTE 6 - Accrued Expenses:
Accrued Expenses consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accrued real estate taxes $ -- $35,800
Accrued corporation taxes 15,609 --
------ ------
Accrued Expenses $15,609 $35,800
======= =======
</TABLE>
NOTE 7 Note Payable:
As part of the sale of the Lake Mary property, the Trust
entered into a secured non-recourse note agreement for settlement
adjustments in favor of the purchaser. The note balance as of
December 31, 1997 was $89,821. The note is secured by 4,000
shares of Phillips International Realty Corp. stock.
<PAGE>
NOTE 8 - Mortgage Payable:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Mortgage payable in monthly installments
of $7,201 of principal plus interest,
at 10.25% charged at 2% over prime on
the outstanding balance. The balance of
principal & interest is due in full in
October, 1998. The loan is secured by a
first mortgage lien on the Shoppes at Lake
Mary. The Trust is contingently liable for
this mortgage $ -- $ 571,258
====== =======
</TABLE>
NOTE 9- Going Concern:
The Trust's sole remaining substantial asset is an interest
in Philips International Realty Corp. The Trust does not
currently own any operating assets. The Trust is contractually
bound to operate for one year until December 31, 1998. The
Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are
currently under investigation. Should the Trust be unable to
acquire a new property(ies) by the end of 1998, the Trustees will
evaluate their options as to the best course of action for the
Trust.
NOTE 10- Sale of Lake Mary Property:
The Trust exchanged its sole real estate holding for 32,000
shares of the Common Stock of New REIT, valued at $1,600,000 plus
the assumption of its first mortgage. The total selling price was
$2,161,940, resulting in a gain of $1,106,368. The Trust remains
contingently liable on the first mortgage.
The value of the Philips International Realty Corp. stock and
the value of the Lake Mary real property were determined based
upon the opinions of the each parties financial advisors. The
relative valuations of the Partnership Properties, and the Trust's
Property, were considered independently by the Philips Group and
the Trust, and negotiated on an arm's-length basis. The Trust and
the Philips Group are not related parties and retained separate
legal counsel and financial advisors. The terms of the
Contribution and Exchange Agreement were the result
<PAGE>
NOTE 10- Sale of Lake Mary Property: (Continued)
of lengthy negotiations. However, no third-party appraisals of the
Properties or any other assets were used to value such property
for purposes of the Transaction.
Accordingly, no assurance can be given that the valuation of
Philips International Realty Corp. implied by the market
capitalization of Philips International Realty Corp. does not
exceed the aggregate value of the Properties that might have been
obtained from an independent appraisal, or that the common stock
received by the Trust in the Transactions reflects the fair value
of the Trust's Property.
NOTE 11- Dividends Paid to Shareholders:
The Trust declared and paid cash dividends on a monthly basis
from February 1986 through September 1988. On April 11, 1989, the
Trustees voted to suspend the quarterly shareholders' dividend
effective with the scheduled distribution for the first quarter of
1989.
A one-time dividend was declared in January 1996, paid in
February 1996, and payable to shareholders of record as of
September 30, 1995, of $0.05 per share. This dividend was a return
of capital to the shareholders. The dividend was declared by the
sole vote of the Managing Trustee.
A specific date of re-establishment of the quarterly
shareholders' dividend has not yet been determined. Distributions
made by the Trust are at the discretion of the Trustees. Future
distributions, if any, will be dependent upon the earnings and
cash flow of the Trust, its financial condition and other relevant
factors.
Dividends declared per share, are based upon the actual number
of shares outstanding on the date of declaration and not upon the
weighted average number of shares outstanding during the period
used in computing earnings per share.
The Trust declared a property dividend of 3,744 shares of the
New REIT common stock distributed to the Trust shareholders on
December 31, 1997 to the shareholders of record on December 4,
1997 and declared a property dividend of 20,256 of such shares
distributed to the Trust shareholders on January 7, 1998 to the
shareholders of record on December 4, 1997 (representing in the
aggregate not less than 75% of the Common Stock received by the
Trust). The remaining 8,000 shares are to be retained by the Trust
and any distributions on the shares or net proceeds from the sale
of the shares will be available to the Trust for working capital
purposes.
<PAGE>
NOTE 12- Contingencies:
Salvatore R. Carabetta, an Independent Trustee, resigned on
June 30, 1996. A successor Trustee was not appointed until June
16, 1997, which is greater than the 60 day period required by the
Declaration of Trust for the appointment of a successor Trustee.
The Declaration of the Trust requires a new Trustee to be
appointed within 60 days. On June 16, 1997 Robert Reibstein was
appointed as Trustee of the Trust.
On January 6, 1996 the Managing Trustee, Peter Stein, declared
a dividend without the express approval of Mr. Carabetta. Mr.
Stein believes that the request for a vote sent to Mr. Carabetta
twice by certified mail and not responded to, constitutes a
presence at a vote and abstention from the vote. Additionally
until June 25, 1996 when Jay Goldman was elected as Trustee of the
Trust, Peter Stein, the Managing Trustee, had been acting on
behalf of the Trust without the express approval of the majority
of the Trustees. Peter Stein and Salvatore Carabetta were the sole
remaining Trustees and since a majority of Trustees need to be
present to have a vote, both Trustees needed to be present to hold
a vote. On June 16, 1997, a Trustee meeting was held and the
Trustees acknowledged that the Trust was operating without the
full complement of Trustees and approved and ratified all actions
carried out by the officers of the Trust.
On June 16, 1997, the Trustees adopted an Amended and Restated
Declaration of Trust, which provides that the Trust may choose to
elect officers, including a President who shall act as Managing
Trustee, and which further defines the powers and limitations of
the officers of the Trust. As of September 30, 1997, no officers
of the Trust have been appointed to oversee the management of the
Trust.
In July 1993, the then trustees of Trust amended the
Declaration of Trust, without seeking or obtaining shareholder
approval, to, among other things, create an open-end trust such
that National would have an infinite life. Since the date of such
amendment, National and its trustees have been acting at all times
in a manner consistent with such infinite life status. Although
the current Trustees believe that such trustees acted within their
discretionary authority under the original Declaration of Trusts
in effecting such amendment without seeking shareholder approval
and that such amendment was properly adopted, there can be no
assurance that one or more shareholders of the Trust will not
challenge the validity of such amendment premised upon the need
for such shareholder approval under the terms of the original
Declaration of Trust or seek damages for breach of the contractual
provisions of the original Declaration of Trust. If such a
challenge was successfully brought, Trust may be required to
obtain shareholder approval of such amendment in order to maintain
its infinite life status (as opposed to liquidating one year after
the completion of the Formation Transactions), and there can be no
assurances that such shareholder approval, if required, would be
obtained.
<PAGE>
NOTE 12- Contingencies: (Continued)
A lawsuit has been brought by a successor of the former
Advisor ("Former Advisor") in the State of Connecticut against
the Trust, Peter Stein (the Managing Trustee of the Trust)
individually, and First Investment Properties, Inc. (a former
Advisor of the Trust) for $105,000 plus interest, costs and
attorney's fees. The suit contends that the Trust assumed and
ratified the contract between First Investment Properties, Inc.,
which succeeded the Former Advisor as Advisor. The Trust contends
it was never party to the contract and intends to vigorously
defend these actions which it considers groundless. The ultimate
resolution of these matters is not ascertainable at this time. No
provision has been made in the financial statements related to
these claims. Peter Stein, the Managing Trustee, has put 2,100
shares of Phillips International Realty Corp. stock, owned by him
individually, in escrow as collateral pending a judicial outcome
in Florida.
Management is unable to determine the effects the above events
will have on the financial condition of the Trust, if any.
NOTE 13- Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Cash paid during the year -
<S> <C> <C> <C>
Income taxes $ -- $ -- $ --
Interest $ 59,034 $ 60,293$ 46,012
Non-cash transactions -
Issuance of shares of beneficial interest
in exchange for debt $ -- $ -- $ 847
Cancellation of indebtedness on
Due to Advisor $ -- $ -- $ 19,519
Conversion of note payable to
contributed capital $ -- $ -- $ 20,000
32,000 shares of Philips International
Realty Corp. common stock received
in exchange for real estate $ 1,600,000 $ -- $ --
Assumption of 1st mortgage by
Philips International Realty Corp.
$ 546,940 $ -- $ --
3,733 share of Philips international
Realty Corp. common stock
distributed as a dividend $ 187,200 $ -- $ --
Income taxes to be paid by Philips
International Realty Corp. as a
condition of the sale of the real
estate $ 15,000 $ -- $ --
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Trustees collectively have ultimate control over the management of the
Trust and the conduct of its affairs. Peter Stein, the Managing Trustee, (See
Item 13 - Certain Relationships and Related Transactions) administers the
day-to-day operations of the Trust.
Under the Declaration of Trust, the Trustees or their nominees hold legal
title to the property of the Trust. Independent Trustees will at all times
comprise a majority of the Trustees in office. The Trustees serve for a term of
one year or until their successors are elected and qualified. Trustees were
re-elected at the annual meeting. The Declaration of Trust calls for a minimum
of three Trustees, and a majority of the Trustees must be independent Trustees.
Should a trustee resign and there are less than three trustees, then the Trust
may operate as if it has the required minimum Trustees until a new Trustee is
appointed, which shall be done within sixty days. A Trustee may be removed with
cause by all the remaining Trustees, or with or without cause by the holders of
a majority of the outstanding Shares. The independent Trustees do not serve the
Trust on a full-time basis and will devote only so much of their time to the
Trust as is necessary or required for the conduct of the Trust's business. Each
of the independent Trustees has, and will continue to have, a principal
occupation and/or source of income other than that of the Trust and it is
contemplated that they will not devote a substantial portion of their time to
the discharge of their duties as Trustees.
The Trustees are as follows:
PETER M. STEIN
Mr. Stein, who is 46 years old, has a 24-year involvement in investment
real estate, being involved in over 55 investment programs. Mr. Stein has
directed his own firm since graduating from Lafayette College in 1973. As
Managing Trustee (See Item 13 - Certain Relationships and Related Transactions)
of the Trust, Mr. Stein oversees the administration of the Trust, and as such,
is empowered to implement the intentions of the Trustees.
<PAGE>
JAY GOLDMAN
Jay Goldman, a lawyer in Boston, Massachusetts, received a B.A. from Lake
Forrest College, a J.D. from Boston University Law School, and a L.L.M.
(Taxation) from Boston University Law School. He has extensive experience in
various segments of the real estate industry including development, finance, and
tax related syndications.
In addition to his decades of real estate experience, Mr. Goldman has been
involved in a broad range of investment banking and financial advisory services
for principals and joint venture partners, including such services for start up
and emerging companies. Mr. Goldman has also been active in international
merchant banking transactions.
ROBERT H. REIBSTEIN
Robert H. Reibstein graduated from Boston University with a B.A. in
Economics in 1978 and a Masters in Business Administration with a concentration
in Finance in 1984. He began working in the real estate industry in 1984,
acquiring commercial and multi-family properties for growth and income
syndication funds. Since 1988, Mr. Reibstein has provided consulting and
advisory services to private and institutional real estate companies and pension
funds. Currently, he is involved with analysis and valuation of commercial debt
and equity portfolios for portfolio management purposes. Mr. Reibstein is
experienced in structuring portfolios and managing the due diligence process for
commercial mortgage backed security transactions.
Salvatore R. Carabetta, an Independent Trustee, resigned on June 30, 1996.
A successor Trustee was not appointed until June 16, 1997, which is greater than
the 60 day period required by the Declaration of Trust for the appointment of a
successor Trustee. The Declaration of the Trust requires a new Trustee to be
appointed within 60 days. On June 16, 1997 Robert Reibstein was appointed as
Trustee of the Trust. (See Item 13 - Certain Relationships and Related
Transactions).
ITEM 11. EXECUTIVE COMPENSATION.
Under the Declaration of Trust, the Independent Trustees are entitled to
receive reasonable compensation for their services as Trustees (See Item 13 -
Certain Relationships and Related Transactions). In addition, the Trust will
reimburse the Trustees (including those who are affiliates) for travel and other
expenses incurred in connection with their duties as Trustees.
The Managing Trustee was paid $48,000 in 1997 as compensation for managing
the Trust's property.
As part of their compensation for their involvement in the sale of the real
estate by the Trust to Philips International Realty Corp., two Trustees received
a total of 5,000 shares of Philips International Realty Corp. common stock,
valued at $250,000. In addition the two Trustees received warrants to purchase
an additional 8,000 shares of Philips International Realty Corp. common stock.
<PAGE>
Management does not anticipate any management fees or other trustee fees to
be paid to any trustee unless the Trust is able to acquire new real property.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
To the best knowledge of the Trust, on March 15, 1998, one shareholder of
record owned more than five percent of its Shares of Beneficial Interest. The
following Trustees hold shares of beneficial interest of the Trust.
<TABLE>
<CAPTION>
Name of Amount and Nature
Beneficial Of Beneficial Percentage
Owner Ownership Ownership
<S> <C> <C>
Gretchen Stein.......... 46,109 Shares 6.1680
Peter Stein ............ Indirectly - 46,109 Shares 6.1680
(same shares as above)
Jay Goldman ............ Indirectly - 50,679 Shares 6.7793
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Trust paid the Managing Trustee $48,000 and $46,000 as compensation for
managing the Trust property for the years ended December 31, 1997 and 1996,
respectively. In addition, Effective in November 1995, the Trust offices are
located at premises owned by the Managing Trustee. No rent was charged to the
Trust in 1997 and 1996, however, the Trust paid utility bills for the office of
$2,325 in 1997 and $1,647 in 1996.
In 1997 the Trust paid health insurance premiums of $17,269 on behalf of
two Trustees. The Trust paid $11,727 to a credit card account of the Managing
Trustee for reimbursement of Trust expenses. The Trust reimbursed two Trustees
$3,391 for travel expenses.
The Trust had entered into an agreement (the "Advisory Agreement") with
First Investment Properties, Inc. (the "Advisor"), a Connecticut Corporation,
pursuant to which the Advisor was acting as an investment advisor and
administrator of the Trust's day-to-day affairs. Peter Stein, the Managing
Trustee of the Trust, was the manager of First Investment Properties, Inc. The
Advisory Agreement, which was renewed annually at the Meeting of Shareholders,
expired October 26, 1995 and was not renewed. For a description of the Trust's
former Advisory Agreement, See Note 2 to the Financial Statements.
<PAGE>
Jay Goldman was elected by the shareholders of the Trust as a Trustee of
the Trust on June 25, 1996 at a Special Meeting of the shareholders.
Salvatore R. Carabetta, an Independent Trustee, resigned on June 30, 1996.
A successor Trustee was not appointed until June 16, 1997, which is greater than
the 60 day period required by the Declaration of Trust for the appointment of a
successor Trustee. The Declaration of the Trust requires a new Trustee to be
appointed within 60 days. On June 16, 1997 Robert Reibstein was appointed as
Trustee of the Trust.
George Knude, a Trustee, resigned on November 13, 1995. A successor Trustee
was appointed June 25, 1996.
On January 6, 1996 the Managing Trustee, Peter Stein, declared a dividend
without the express approval of Mr. Carabetta. Mr. Stein believes that the
request for a vote sent to Mr. Carabetta twice by certified mail and not
responded to, constitutes a presence at a vote and abstention from the vote.
Additionally until June 25, 1996 when Jay Goldman was elected as Trustee of the
Trust, Peter Stein, the Managing Trustee, had been acting on behalf of the Trust
without the express approval of the majority of the Trustees. Peter Stein and
Salvatore Carabetta were the sole remaining Trustees and since a majority of
Trustees need to be present to have a vote, both Trustees needed to be present
to hold a vote. On June 16, 1997, a Trustee meeting was held and the Trustees
acknowledged that the Trust was operating without the full complement of
Trustees and approved and ratified all actions carried out by the officers of
the Trust.
On June 16, 1997, the Trustees adopted an Amended and Restated Declaration
of Trust, which provides that the Trust may choose to elect officers, including
a President who shall act as Managing Trustee, and which further defines the
powers and limitations of the officers of the Trust. As of September 30, 1997,
no officers of the Trust have been appointed to oversee the management of the
Trust.
In July 1993, the then trustees of Trust amended the Declaration of Trust,
without seeking or obtaining shareholder approval, to, among other things,
create an open-end trust such that National would have an infinite life. Since
the date of such amendment, National and its trustees have been acting at all
times in a manner consistent with such infinite life status. Although the
current Trustees believe that such trustees acted within their discretionary
authority under the original Declaration of Trusts in effecting such amendment
without seeking shareholder approval and that such amendment was properly
adopted, there can be no assurance that one or more shareholders of the Trust
will not challenge the validity of such amendment premised upon the need for
such shareholder approval under the terms of the original Declaration of Trust
or seek damages for breach of the contractual provisions of the original
Declaration of Trust. If such a challenge was successfully brought, Trust may be
required to obtain shareholder approval of such amendment in order to maintain
its infinite life status (as opposed to liquidating one year after the
completion of the Formation Transactions), and there can be no assurances that
such shareholder approval, if required, would be obtained.
<PAGE>
The Advisor was paid $50,286 for reimbursement for compensation and related
fringe benefits paid to the employees of the Advisor in 1995. Due to a
limitation of the Operating Expenses allowed under the Declaration of the Trust,
none of the reimbursements are deductible by the Trust and are due back to the
Trust from the Advisor. In addition, due to the limitation of Operating Expenses
contained in the Declaration of the Trust, an additional $35,195 was due from
the Advisor totaling $85,481. In 1994 the Independent Trustees voted to waive
the limitation on Operating Expenses due to the Declaration of the Trust being
written on the premise that a substantially larger investment portfolio would
support the general and administrative expense base. Due to the current
composition of the Trust's portfolio, the Trust has a necessary, but unfair
burden of absorbing administrative expenses in excess of the limits provided in
the Declaration of the Trust. No waiver has been provided for the Operating
Expenses incurred in excess of the limitation in 1995 due to the Trust's lack of
a Trustee's meeting. The Managing Trustee believes all of the expenses are
necessary to the operation of the Trust and would have been allowed had the
Independent Trustees voted on such expenses. Peter Stein, the Managing Trustee
and the manager of First Investment Properties, Inc., the former Advisor, will
not ask the Independent Trustees to waive the excess expenses, but instead will
apply such amounts paid or deemed paid to the Advisor as payments towards the
note payable due to the Advisor. Mr. Stein believes under the current
circumstances, this action would be in the best interests of the shareholders,
the Trustees, and any new Trustees. If such waiver were to be approved, the
Trust would have had a net loss of $53,289 for 1995 compared to income of
$32,192.
The prior financial statements referred to the note payable to the Advisor
as a Due to Consultant. This liability arose as a result of the costs associated
from replacing the prior Advisor and Trustees in 1993. The contract with the
consultant was entered into with First Investment Properties, Inc. and the Trust
was not a party to the agreement. The Declaration of the Trust prohibits the
Trust from directly paying third party contractors of the Advisor, but instructs
the Trust to pay the Advisor directly and the Advisor is responsible for paying
the third party. The Trust has no liability to the consultant. First Investment
Properties, Inc. is solely liable to the consultant. First Investment
Properties, Inc. has received $85,481 directly and indirectly as payment of this
note. The remaining $19,519 due to the Advisor has been forgiven by First
Investment Properties, Inc. Additionally, First Investment Properties, Inc. has
waived all rights to Advisory fees accrued in 1995 of $32,607 and any fees
accrued in prior years, which are not payable until such time as the
shareholders receive a cumulative, but not compounded ten percent return on
their investment. First Investment Properties, Inc. has agreed to this waiver
due to the fact they recognize that such a condition will never be met.
In March 1995, the Trust issued 847 shares of Beneficial Interest to
Gretchen Stein, spouse of Peter Stein, in exchange for the note payable at $1
per share per the agreement with the Trust in 1994. The remaining $20,000 was
contributed as capital. Mr. Stein filed the required Forms 4 and 5 on March 22,
1996 to the Trust and the Securities and Exchange Commission, which was not in
compliance with Section 16(a) of the Exchange Act. These were the only Reports
not filed on a timely basis.
<PAGE>
In December 1994, the Trust issued 30,000 shares of beneficial interest at
$1 per share to the shareholders of the Advisor in lieu of cash remuneration.
On March 3, 1997, the Trust issued 30,416 shares of beneficial interest to
a Profit Sharing Retirement Plan for the benefit of a Trustee of the Trust. The
shares were issued for $1.2132 per share, totaling $36,900.
As part of their compensation for their involvement in the sale of the real
estate by the Trust to Philips International Realty Corp., two Trustees received
a total of 5,000 shares of Philips International Realty Corp. common stock,
valued at $250,000. In addition, the two Trustees received warrants to purchase
an additional 8,000 shares of Philips International Realty Corp. common stock.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) The following documents are enclosed:
(1) Financial Statements (See index to financial statements filed as part
of Item 8).
(2) Supplemental Financial Statement Schedules (See index to financial
statements filed as part of Item 8).
(3) Exhibits:
3.1 Amended and Restated Declaration of Trust of the Registrant (Exhibit
3.1 to Amendment No. 2 Filed on April 10, 1985 to the Registrant's Registration
Statement on Form S-ll, File No. 2-95449, is incorporated herein by reference).
3.2. Trustee's Regulations of the Registrant (Exhibit 3.2 to Amendment No.
1 filed on March 14, 1985, to the Registrant's Registration Statement on Form
S-ll, File No. 2-95449, is incorporated herein by reference).
10.1 Advisory Agreement between the Registrant and First Investment
Properties, Inc. (Exhibit 10.1 to Amendment No. 2 filed on August 3, 1993 to the
Registrant's Registration Statement on Form S-ll, File No. 2-95449, incorporated
herein by reference).
10.2 Dividend Reinvestment Plan (Exhibit 10.2 to Amendment No. 2 filed on
April 10, 1985 to the Registrant's Registration Statement on Form S-ll, file No.
2-95449, is incorporated herein by reference).
The Trust filed a Form 10-Q/A, Amendment No. 1 to the Quarterly Report
pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for
the quarter ended September 30, 1997.
The Trust filed a Form 10-Q/A, Amendment No. 2 to the Quarterly Report
pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for
the quarter ended September 30, 1997.
(b) The following Reports on Form 8-K ("Reports") were filed during the last
quarter of the fiscal period.
None.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NATIONAL PROPERTIES INVESTMENT TRUST
Date: 3/23/98 By: /s/ Peter M. Stein
Peter M. Stein
Managing Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated:
Signature Title Date
/s/ Preter M. Stein Managing Trustee 3/23/98
Peter M. Stein
/s/ Jay Goldman Trustee 3/28/98
Jay Goldman
/s/ Robert Reibstein Trustee 3/28/98
Robert Reibstein
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000761236
<NAME> NATIONAL PROPERTIES INVESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> 12/31/97
<PERIOD-START> 1/1/97
<PERIOD-END> 12/31/97
<CASH> 32,171
<SECURITIES> 1,412,800
<RECEIVABLES> 1,314
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,028
<PP&E> 6,545
<DEPRECIATION> 2,258
<TOTAL-ASSETS> 1,452,115
<CURRENT-LIABILITIES> 130,151
<BONDS> 0
0
0
<COMMON> 11,791,190
<OTHER-SE> (10,469,226)
<TOTAL-LIABILITY-AND-EQUITY> 1,452,115
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 1,106,368
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,106,368
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
</TABLE>
