S.E.C. FILING
MASTER REALTY PROPERTIES, INC.
f/k/a MASTER MORTGAGE INVESTMENT FUND, INC.
DEF 14A
December 31, 1996
Filed: July 2 , 1997
TABLE OF CONTENTS
NOTICE OF MEETING
VOTING ISSUES
GENERAL SUMMARY INTRODUCTION
SHAREHOLDER PROPOSALS
BENEFICIAL OWNERSHIP
BOARD OF TRUSTEES
EXECUTIVE COMPENSATION
PERFORMANCE GRAPH
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
RECAPITALIZATION
EXTENSION OF LIFE OF COMPANY
ELECTION OF TRUSTEES
APPOINTMENT OF AUDITORS
<<NOTICE OF MEETING>>
Master Realty Properties, Inc.
712 Broadway, Suite 700
Kansas City, MO 64105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
<<VOTING ISSUES>> Notice is hereby given that the 1996 Annual Meeting of
the shareholders of Master Realty Properties, Inc. (the "Company") will be
held at 612 Central, Kansas City, Missouri 64105, on September 17, 1997 at
10:00 a.m. for the following purposes:
1. To consider and vote upon a plan of recapitalization, pursuant to
which the Common Stock and Preferred Stock of the Company would be
consolidated via a 2,500-to-1 reverse split; the issuance and existence of
fractional shares will be prohibited; and the Articles of Incorporation of
the Company would be amended to authorize 50,000 Common Shares and 1,000
Preferred Shares.
2. To consider and vote upon an amendment to the Articles of
Incorporation of the Company to extend the life of the Company in
perpetuity.
3. To elect trustees for the terms expiring at the Annual Meeting of
Shareholders.
4. To vote on the recommendation of management that Mayer, Hoffman &
McCann be appointed auditors of the Company for 1997.
5. To transact such other business as may properly come before the
Annual Meeting.
The close of business on September 1, 1997 has been fixed as the
record date for the determination of shareholders entitled to notice of,
and to vote at the Annual Meeting.
Please be advised that the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1996 is included with this
mailing to all shareholders of record.
By Order of the Board of Trustees
Byron Constance,
Secretary
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual
Meeting, please sign and date the enclosed Proxy and mail it promptly in
the envelope provided for your convenience, which requires no postage if
mailed in the United States.
</PROXY-INTRO>
<<GENERAL SUMMARY INTRODUCTION>>
Master Realty Properties, Inc.
712 Broadway, Suite 700
Kansas City, Missouri 64105
Proxy Statement for
Annual Meeting of Shareholders
To Be Held September 17, 1997
This Proxy Statement (the "Proxy Statement") is furnished to shareholders
of Master Realty Properties, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Trustees of the Company for use at
the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
September 17, 1997, at 612 Central, Kansas City, Missouri 64105 at 10:00
a.m., and at any adjournment thereof. The approximate mailing date of this
Proxy Statement and the accompanying proxy is August 11, 1997. ANY PROXY
MAY BE REVOKED IN PERSON AT THE ANNUAL MEETING, OR BY SUBMITTING A PROXY
DATED LATER THAN THE PROXY TO BE REVOKED OR BY NOTIFYING THE SECRETARY OF
THE COMPANY IN WRITING AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
In addition to the solicitation of proxies by mail, officers and other
representatives of the Company may solicit the return of proxies by
telephone, telegraph or personal contact. The Company will bear the
expense of preparing, printing, assembling and mailing this Proxy Statement
and accompanying material to its Shareholders and will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in forwarding proxy solicitation
material to beneficial owners.
Pursuant to Section 3.8 of the Bylaws of the Company and Section 2.31 of
the Delaware Corporation Code, the Board of Trustees is required to appoint
an Inspector of Election. The Board of Trustees has appointed Thomas H.
Trabon as the Inspector of Election (the "Inspector of Election") of the
Annual Meeting. The Inspector of Election shall determine the outstanding
Common and Preferred shares of the Company, the number of shares
represented at the Annual Meeting and the existence of a quorum. The
Inspector of Election shall receive votes, proxies, ballots and consents,
will count and tabulate all votes and determine the result. The Inspector
of Election will determine the authority, validity and effect of each
proxy, hear and determine all challenges and questions and do all other
ministerial acts as may be proper to conduct the election or vote with
fairness to all Shareholders.
In connection with all meetings of Shareholders, all proxies, ballots and
vote tabulations that identify the particular vote of a Shareholder are
kept confidential, except that disclosure may be made (i) to allow the
Inspector of Election to certify the results of the vote; or (ii) as
necessary to meet applicable legal requirements, including the pursuit or
defense of judicial actions. Comments written on proxies, consents or
ballots may be transcribed and provided to the Secretary of the Company
with the name and address of the Shareholder without reference to the vote
of the Shareholder, except where such vote is included in the comment or
disclosure is necessary to understand the comment.
At December 31, 1996, the Company's outstanding voting stock consists of
29,961,042 shares of Common Stock and 2,491,622 shares of Preferred Stock.
Only holders of stock of record at the close of business on September 1,
1997 (the "Record Date") will be entitled to notice of, and to vote at, the
Annual Meeting. Each outstanding share of Common Stock and each
outstanding share of Preferred Stock is entitled to one vote on each matter
to be acted upon at the Annual Meeting.
At the Annual Meeting, the Shareholders will be asked to consider and vote
upon a plan of Recapitalization (the "Plan of Recapitalization") which will
include a 2500-to-1 reverse stock split. In addition, the Plan of
Recapitalization will prohibit the issuance of fractional shares and amend
the Articles of Incorporation to authorize 50,000 Common Shares and 1,000
Preferred Shares. The Shareholders will also be asked to amend the
Articles of Incorporation to extend the life of the Company in perpetuity.
The Board of Trustees recommends the above stated proposals for several
reasons. When the substantial majority of the Shareholders approved the
Company's Plan of Reorganization, management was compelled to actively
pursue the implementation of the Strategic Redirection Plan (the "SRP").
The SRP is divided into the three following Phases:
Phase I: ASSET PRESERVATION - The Company was forced to take aggressive
steps to protect the Company's interests in its assets. These steps
included foreclosures, workouts and litigation.
Phase II: CASH FLOW ENHANCEMENT - The Company has focused its energy to
the re-establishing of cash flow to its shareholders. This phase
encompasses asset monitoring, collection efforts and control procedures
over Phase I workout programs.
Phase III: SHAREHOLDER LIQUIDITY - The final phase of the SRP is to
provide shareholders of the Company with liquidity options. The first and
foremost goal of this phase will be the creation of a marketplace for the
Company's stock.
The Board recommends the proposals submitted to the Shareholders because,
in the Board's opinion, they enhance the ability of management to
successfully implement Phase II and Phase III of the SRP, which represents
the Company's current operating guidelines. The basic investment objective
of the Company is to provide current income and capital appreciation while
at the same time protecting the Company's capital. The extension of the
life of the Company in perpetuity provides management with greater
flexibility in making property acquisitions, which may, in the future,
provide opportunities to achieve this objective. In addition, the adoption
of Proposal 2 would be the first step toward making a market for the
Company's stock, as is required by Phase III. In the event that the
proposals are adopted, the Company plans to continue pursuing the goals set
forth in the SRP.
A majority of the Company's outstanding voting Common Stock and Preferred
Stock, represented in person or by proxy, is necessary to constitute a
quorum to take action at the Annual Meeting. Cumulative voting is not
permitted. If a quorum is present at the Annual Meeting, the simple
majority of those shares voting is required for the Amendment of the
Articles of Incorporation to effect a 2,500-to-1 reverse stock split; to
recapitalize the Company to authorize 50,000 Common Shares and 1,000
Preferred Shares; to prohibit the issuance and existence of fractional
shares; to extend the life of the Company in perpetuity; and for the
election of the trustees. A Shareholder who abstains from voting on any or
all proposals will be included in the number of Shareholders present at the
Annual Meeting for the purpose of determining the presence of a quorum.
Abstentions will not be counted either in favor of or against the election
of nominees for trustee or other proposals.
All references in this Proxy Statement to the Company's last fiscal year
refer to the period from January 1, 1996 to December 31, 1996.
<<SHAREHOLDER PROPOSALS>>
Subject to the rules of the Securities Exchange Act of 1934, any
Shareholder who intends to submit a proposal for action at the Annual
Meeting must be a record or beneficial owner of at least 1% or $1,000 in
market value of securities entitled to be voted at the Annual Meeting and
must have held such securities for at least one year. Further, the
Shareholder must continue to own such securities through the date on which
the Annual Meeting is held. Currently, the 1997 Annual Meeting of
Shareholders is scheduled to be held in February, 1998. To be considered
for inclusion in the proxy material for the next Annual Meeting, proposals
must be received by the Secretary of the Company at 712 Broadway, Suite
700, Kansas City, Missouri 64105 on or before November 30, 1997.
<<BENEFICIAL OWNERSHIP>>
Under the Securities Exchange Act of 1934, a person is deemed a beneficial
owner if he/she has the right to acquire beneficial ownership of stock
within sixty (60) days, whether upon the exercise of a stock option or
otherwise. The following table sets forth information regarding the
beneficial ownership of the Company's shares by the Trustees, nominees for
Trustee, management and five percent beneficial owners as of December 31,
1996. Each individual listed is a Trustee, other than Dr. Richard Padula,
who is a 5% beneficial owner, and Thomas H. Trabon, who is the Executive
Vice President of the Company.
<PAGE>
Amount of % of Amount of % of
Beneficial Beneficial Beneficial Beneficial
Ownership Ownership Ownership Ownership
Name Preferred Preferred Common(1) Common
- ------------------ ----------- ---------- ------------- ----------
John J. Bennett 63,534.316 2.55% 1,281,842.371 4.28%
3850 W. 171st (1) (2)
Stilwell KS
66085
Byron Constance 55,820.457 2.24% 349,897.813 1.17%
3729 S. Union (3) (4)
Independence MO
64055
Richard Polcari 33,840.703 1.36% 475,196.023 1.59%
27 Thayer Road (5)
P.O. Box 79197
Belmont, MA 02179
James E. Trimmer 184,218.635 7.39% 1,401,114.255 4.68%
3130 Wheeling (6) (7)
Kansas City, MO 64129
Robert K. Brown 12,685.264 .51% 279,797.149 .93%
3200 S. M-291 Highway (8) (9)
Independence, MO
64057
Dr. Richard Padula 108,509.440 4.35% 3,371,721.407 11.25%
6420 Prospect (10) (11)
Ste T211
Kansas City, MO 64132
Thomas H. Trabon 14,358.263 .57% 108,342.679 .36%
3441 W. 131st Street (12) (13)
Leawood, KS 66209
Executive Officers 364,457.638 14.62% 3,896,209.240 13.00%
and Trustees as a
Group (6 Persons)
- ------------
(1) Includes 62,378.292 shares held in American Fiduciary Corp.
401(k) Plan; 14,282.410 shares held in Master Realty Properties, Inc.
Target Benefit Plan; and 11,639.462 shares held in family trust.
(2) Includes 24,505.794 shares held in family trust; 575.602 shares
held in American Fiduciary Corp. 401(k) Plan; and 347,946.617 shares held
in Master Realty Properties, Inc. Target Benefit Plan.
(3) Includes 39,751.39 shares held by Constance, Stewart & Cook
pension and profit sharing plans and 15,780.00 owned jointly with spouse.
(4) All shares held by Constance, Stewart & Cook pension and profit
sharing plans.
(5) Includes 958 shares held by spouse.
(6) Includes 120,941.812 shares held by spouse.
(7) Includes 11.140 shares held in Precise Forms, Inc. Profit Sharing
Plan; 333.426 shares held by wife; 462,833.970 shares held in wife's trust;
and 462,838.437 shares held by James Trimmer, Trustee.
(8) All shares held by Floyd R. Brown & Co., P.C. Profit Sharing
Plan.
(9) 154,463.661 shares held in Floyd R. Brown & Co., P.C. Profit
Sharing Plan, and 125,333.488 shares held by Floyd R. Brown &. Co., P.C.
(10) Includes 6,483.873 shares held in trust by spouse and
102,025.567 shares held by Richard T. Padula, Trustee.
(11) Includes 904.667 shares held in trust by spouse and 3,370,816.74
shares held by Richard T. Padula, Trustee.
(12) All shares owned by Master Realty Properties, Inc., Target
Benefit Plan.
(13) All shares owned by Master Realty Properties, Inc., Target
Benefit Plan.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
- ---------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires executive officers, directors, trustees, and persons who
beneficially own more than 10% of the Company's shares, to file with the
Securities Exchange Commission reports of ownership and changes in
ownership of Common stock of the Company. Officers, directors, trustees
and greater than 10% shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, Richard Padula is the only
Shareholder beneficially owning a greater than 10% interest in the Company.
Based solely on review of the copies of such reports furnished to the
Company, the Company believes that, during the 1996 fiscal year, the filing
requirements were not complied with on a timely basis, however, all
appropriate filings have been made at this time.
<<BOARD OF TRUSTEES>>
Meetings and Committees of the Board of Trustees
- ------------------------------------------------
During the Company's last fiscal year, the Board of Trustees met two times.
All members of the Board of Trustees were present at each meeting, either
in person or by telephone.
During the Company's last fiscal year, the Independent Trustees were paid
their reasonable expenses incurred in connection with their services as
Trustees, including, without limitation, travel to and attendance at each
meeting of the Board of Trustees, as well as each Annual Meeting of the
Shareholders. In addition, each Independent Trustee received a $5,000.00
annual fee and $250.00 per meeting.
The Affiliated Trustees do not receive compensation for services rendered
as a member of the Board of Trustees.
<<EXECUTIVE COMPENSATION>>
The current executive officers of the Company are as follows:
John J. Bennett, 53
3850 W. 171st Street
Stilwell, KS 66085
President, Chairman of the Board of Master Realty Properties, Inc. since
1988.
Mr. Bennett is the President of Integrated Financial Services, Inc., a
private corporation which provided banking and financial services to the
Company from 1988 until June 1, 1994. He has held that position since
1974. He is the President of Master Realty Corp., Master Mortgage Realty
II, Inc., Master Mortgage Realty III, Inc. and Master Mortgage Realty V,
Inc., and the Vice President of Master Mortgage Realty IV, Inc., River
Market Venture, Inc. and Real Estate Equities, Inc., all of which are
wholly owned subsidiaries of the Company. Mr. Bennett has also been a
Director of First Trust of MidAmerica since 1989.
Mr. Bennett was the general partner of Embassy Properties, North, L.P., a
Missouri limited partnership, that filed a voluntary petition under Chapter
11 of the Federal Bankruptcy Code in October, 1993. A plan was confirmed
in that case in 1996. Mr. Bennett was also a member of Thirty Five Corp.,
L.L.C., a Kansas limited liability company, who filed a voluntary petition
under Chapter 11 of the Federal Bankruptcy Code in November 22, 1994 in the
United States Bankruptcy Court for the District of Kansas. A plan was
confirmed in that case on June 26, 1996.
In 1993, Mr. Bennett was named Defendant in a lawsuit filed by Robert
Reich, Secretary of the United States Department of Labor, in the United
States District Court for the District of Kansas wherein the Secretary
alleged various ERISA violations. Mr. Bennett filed an answer denying all
allegations and specifically denying that he ever exercised discretionary
authority and control over the management and disposition of ERISA plan
assets. In lieu of a lengthy and expensive litigation, Mr. Bennett entered
into a Settlement Agreement and Consent Order on May 27, 1994 , which has
now expired, wherein he agreed to not act as a fiduciary by reason of
exercising any discretionary authority or control over the assets of an
ERISA plan for a period of three years. Mr. Bennett continues to assert
that he has never acted as a fiduciary to an ERISA plan by reason of
exercising discretionary authority or control.
Thomas H. Trabon, 47
3441 W. 131st Street
Leawood, KS 66209
Executive Vice President since 1991.
Mr. Trabon was a partner in Laventhol & Horwath, a National Certified
Public Accounting firm from January 1, 1984 to November, 1990. Laventhol
& Horwath filed a voluntary petition under Chapter 11 of the Federal
Bankruptcy Code on November 21, 1990 as case number 90-B13839 in the
Southern District of New York. A plan was confirmed in that case on August
25, 1992. Mr. Trabon is currently the President and shareholder of Trabon
Consulting Company, an accounting service firm located in Kansas City,
Missouri. Trabon Consulting provides, through a contractual relationship
with Embassy Properties, Inc. and Embassy Hotel Management Company, Inc.,
accounting services to certain assets of the Company and its subsidiaries.
He is also currently a partner in Trabon & Company, a certified public
accounting firm located in Kansas City, Missouri. Trabon & Company also
provides tax return preparation services to the Company and its affiliates.
Mr. Trabon was the Executive Vice President of Integrated Financial
Services, Inc. from November, 1991 until June, 1994, a private corporation
which provided banking and financial services to the Company from 1988
until June, 1994.
Mr. Trabon is the President of River Market Venture, Inc., Master Mortgage
Realty IV, Inc. and Real Estate Equities, Inc., and the Vice President of
Master Realty Corp., Master Mortgage Realty II, Inc., Master Mortgage
Realty V, Inc. and Master Mortgage Realty VI, Inc., all of which are
wholly owned subsidiaries of the Company.
Byron Constance, 70
3729 S. Union
Independence, MO 64055
Secretary of Master Realty Properties, Inc. since January 26, 1991.
Mr. Constance is the retired Senior Partner in Constance Stewart & Cook,
L.C., a law firm located in Independence, Missouri, and is presently of
counsel to the firm. He has practiced law since 1949, and serves on the
Advisory Board of Directors of Hillcrest Bank, located in Kansas City,
Missouri.
Robert K. Brown, 52
3200 South M-291 Hwy.
Independence, MO 64057
Treasurer since 1996.
Mr. Brown has been a partner in Floyd R. Brown & Co., P.C., a certified
public accounting firm in Independence, Missouri, since 1969.
The following table discloses compensation received for the last three (3)
fiscal years by the Company's President and executive officers.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and All Other
Principal Position Year Salary Bonus(1) Compensation(2)
- ------------------ ---- -------------- ----------- ---------------
John J. Bennett 1996 $185,262.58 $152,485.00 $130,000.00
Chairman of the 1995 $184,400.00 $152,401.00 $ 30,000.00
Board, President 1994 $ 92,092.78(3) $0 $ 8,055.00
Thomas H. Trabon 1996 $ 94,075.00 $ 28,046.50 $ 11,573.71
Executive 1995 $ 91,500.00 $ 12,000.00 $ 9,397.73
Vice President 1994 $ 67,750.00(3) $0 $ 7,008.00
- --------------------
(1) As employees of the Company, Mr. Bennett and Mr. Trabon are
entitled to participate in the Company's Bonus Pool (the "Pool") which
became effective on June 15, 1994. The minutes of the Company dated July
26, 1994 provide that the following amounts will be calculated and
contributed to the Pool on an annual basis commencing January 1, 1995;
An amount equal to one-half of one percent (1/2 of 1%) of the increase
in the net assets of the Company during the calendar year. Net assets
being defined as the gross assets of the Company determined on a
consolidated basis in the certified audited financial statements, less all
reserves provided for in those financial statements;
An amount equal to the calculated return defined as twenty percent
(20%) of the Company's increase in equity in a calendar year that exceeds
the base return defined as three percent (3%) over the average one (1) year
treasury bill rate in effect at the end of each quarter of the calendar
year applied to the average equity of the Company for the calendar year.
The amounts owed under this subsection will be payable over a three year
term beginning with the year immediately after the computation year
(deferral payments). However, to the extent the Company recognizes a net
decline in the equity in any subsequent year or the actual calculated
return does not exceed the base return, the deferral payment will be offset
by the calculated negative return taking into consideration the equity
declines or the less than expected returns; and
An amount based on subjective criteria or special performance as
determined by the Board of Trustees of the Company.
Distributions of the Bonus Pool will be made on a quarterly basis
commencing in the first quarter of 1995, to Company employees in the sole
discretion of the President.
(2) In 1994, Mr. Bennett received $8,055.00 as a Company contribution
to the Company's Employee Defined Contribution Plan. Mr. Trabon received
$7,008.00 as a Company contribution to the Company's Employee Contribution
Plan. In 1995, Mr. Bennett received $30,000 as a Company contribution to
the Company's Employee Defined Contribution Plan and Mr. Trabon received
$9,397.73 to the Company's Employee Defined Contribution Plan. In 1996,
Mr. Bennett received $30,000.00 as a Company contribution to the Company's
Employee Defined Contribution Plan, and Mr. Trabon received $11,573.71 as a
Company contribution to the Company's Employee Defined Contribution Plan.
During the Company's last fiscal year, Mr. Bennett, pursuant to the terms
of his Employment Contract, agreed to accept a portion of the bonus
attributable to him under the Bonus Pool in the form of Company securities.
Accordingly, in 1996, Mr. Bennett was issued a Convertible Subordinated
Debenture in the face amount of $333,333.33. The market value of this
debenture, based on purchases and sales of debentures at that time, was
estimated at that time by Management to be $100,000.00.
(3) Amounts disclosed were earned and paid between July 1, 1994 and
December 31, 1994.
Employment Contracts
- --------------------
The Company entered into a five (5) year Employment Agreement with Mr.
Bennett dated June 15, 1994. His base salary is $185,000.00 per year. In
addition, the Company agreed to negotiate increases in base salary and
bonus compensation based on (i) comparable salaries and benefits then
provided to the chief executive officers of other business enterprises
similar to the business of the Company; (ii) objective performance criteria
of the Company, including, without limitation, total shareholder returns,
return on equity and growth in funds from operations; (iii) proper
execution of the Company's Strategic Redirection Plan and (iv) other
special circumstances which would warrant a further increase in base salary
or bonus compensation. As an employee of the Company, Mr. Bennett is
entitled to participate in the Bonus Pool.
In the event that the Employment Agreement is terminated by the Company
because of the misconduct of Mr. Bennett, the mental or physical disability
of Mr. Bennett or the voluntary or involuntary liquidation or sale of the
assets of the Company, the Company will pay to Mr. Bennett all compensation
accrued up to the date of such termination, liquidation or sale. In
addition, if the Employment Agreement is terminated due to Mr. Bennett's
mental or physical disability, the Company will pay a lump sum aggregate
amount equal to all base salary plus the aggregate value of all other
benefits which the Company would have been required to pay Mr. Bennett
during the remainder of the term of the Agreement. In the event that the
Employment Agreement is terminated by the Company for any other reason, the
Company is obligated to pay Mr. Bennett all compensation accrued up to the
event of such termination and a lump sum aggregate amount equal to all base
salary plus the aggregate value of all other benefits which the Company
would have been required to pay Mr. Bennett during the remainder of the
term of the Agreement.
Executive Compensation Report of the Board of Trustees
- ------------------------------------------------------
During the last fiscal year, the Company did not have a Compensation
Committee. The Independent Trustees are responsible for advising
Management on matters pertaining to compensation arrangements for executive
employees, as well as administration of the Company's bonus pool. The
Company's employee compensation policy is to offer a package including a
competitive salary, an incentive bonus pool based upon the scope of the
employee's duties and the relationship of these duties to the performance
of the Company, competitive benefits and an efficient workplace
environment. The Company's objective is to determine salaries that are
sufficient to attract, motivate and retain executives of outstanding
ability and potential.
The Company's Bonus Pool consists of (1) an amount equal to one-half of one
percent (1/2 of 1%) of the increase in the net assets of the Company during
the calendar year. Net assets are defined as the gross assets of the
Company determined on a consolidated basis in the certified audited
financial statements, less all reserves provided for in those financial
statements;
(2) an amount equal to the calculated return defined as twenty percent
(20%) of the Company's increase in equity in a calendar year that exceeds
the base return defined as three percent (3%) over the average one (1) year
treasury bill rate in effect at the end of each quarter of the calendar
year applied to the average equity of the Company for the calendar year.
(The amounts owed under this subsection will be payable over a three year
term beginning with the year immediately after the computation year
(deferral payments). However, to the extent the Company recognizes a net
decline in the equity in any subsequent year or the actual calculated
return does not exceed the base return, the deferral payment will be offset
by the calculated negative return taking into consideration the equity
declines or the less than expected returns); and
(3) an amount based on subjective criteria or special performance as
determined by the Board of Trustees of the Company.
Distributions of the Bonus Pool are made on a quarterly basis to Company
employees in the sole discretion of the President.
Base salaries are intended to be competitive with those paid to senior
executives at other real estate investment trusts with less than $200
million in assets whose property focus is in diversified properties and
are determined in a manner that takes into account an individual's
performance and contributions to the Company and the Company's operating
performance. The Company's employee base compensation policy is subjective
in nature and is not based on any specific formula. In determining
compensation for the 1996 fiscal year, the Board of Trustees took into
account managerial competence which the executive officers demonstrated in
managing the business of the Company. This expertise was evident in the
increased activities of the executive officers in administering the
Company's real estate portfolio, including the refinancing of the majority
of the Company's assets with Salomon Brothers Realty Corp., and the
significant increase in the book value of the Company, as reported by the
Company's independent auditors since 1994. When the Company confirmed its
Plan of Reorganization in April, 1994, the book value of the Company was
reported as $8,111.00. On December 31, 1994, the book value had increased
to $3,334,136.
On December 31, 1995, the book value had further increased to $5,215,535
and, at the Company's last fiscal year end, the book value was reported as
$9,814,936.
In determining compensation of the President and other executive officers
of the Company, the Independent Trustees reviewed the expertise with which
Management implemented the Company's Strategic Redirection Plan (the
"SRP"). The SRP was developed by the Board of Trustees in 1994 and sets
forth a comprehensive 3-part business plan. Phase I of the SRP
concentrated on preservation of the Company's assets. Management has done
an exceptional job of protecting the Company's assets through loan workout
negotiations, litigation and, where necessary, foreclosure. As of December
31, 1996, Management had successfully secured and protected the Company's
interests in the vast majority of the Company's assets, with only two
assets remaining subject to Phase I monitoring.
Phase II of the SRP involves the establishment and monitoring cash flow
from the asset to the Company. This phase required Management to closely
analyze the physical and financial status of each project, and take
whatever steps were necessary to stabilize the assets in order to provide
the greatest possible cash flow to the Company. In addition, Management is
required to work closely with the property manager to monitor the progress
of the asset. Management's performance under Phase II of the SRP has far
exceeded the targeted performance objectives set forth therein by the Board
of Trustees.
The final phase of the SRP is the development of shareholder liquidity and
a market for the Company's stock. Management is currently beginning its
efforts to meet these objectives. The initial steps toward effectuating
Phase III are to be considered by the Shareholders at the 1996 Annual
Meeting.
The Independent Trustees report that, upon a final calculation of the Bonus
Pool allocations, pursuant to the formula previously approved by the
Independent Trustees, there is required a significant cash outlay in
payment of the Bonus Pool allocation. Mr. Bennett's portion of this Bonus
Pool allocation was calculated to be $252,485. Mr. Bennett has agreed to
accept a portion of his Bonus Pool allocation in Company securities, rather
than cash, in an attempt to reduce the cash outlay of the Company.
Accordingly, Mr. Bennett was issued Company subordinated debentures valued
at $100,000. The Independent Trustees believe that the issuance of these
securities, together with the Bonus Pool payments of $152,485 to Mr.
Bennett and $28,046.50 to Mr. Trabon are fair and reasonable. In addition,
the Independent Trustees believe that the Company, under the direction of
Management, exceeded the performance objectives set forth in the SRP. In
view of Management's performance, the Independent Trustees have determined
that Mr. Bennett's base annual salary for the 1996 fiscal year of
$185,262.58 and Mr. Trabon's annual base salary for the 1996 fiscal year of
$94,075.00 were reasonable.
Respectfully submitted,
Byron Constance
Richard Polcari
Robert K. Brown
James E. Trimmer
James I. Threatt
<<PERFORMANCE GRAPH>>
The Securities Exchange Act of 1934 requires that the Company provide a
line graph comparing, over a five year period, cumulative shareholder
return against an acceptable industry index. However, it must be noted
that the data listed below is market weighted and that, to the Company's
knowledge, stock of the Company has not been traded during the period
covered by this Proxy Statement. Due to the non-existence of a market for
the shares, the computation of value shown is not according to market
value. The following graph compares the performance of the Company's
shares with the Standard & Poor's 500 Stock Index and a peer group index
consisting of publicly traded equity REITs prepared by the National
Association of Real Estate Investment Trusts. The graph assumes $100.00
invested on December 30, 1991 in the Company's shares, the S & P 500 Index
and the peer group index, and assumes the reinvestment of dividends. The
comparisons in this table are not intended to forecast or be indicative of
any future performance of the Company's shares.
Comparison of Five Year Cumulative Total Return
December 31, 1991 through December 31, 1996
PERFORMANCE GRAPH DELETED
12/92 12/93 12/94 12/95 12/96
----- ----- ----- ----- -----
Master Realty Properties, Inc. 100 0 0 0 0
S&P 500 Index 100 111 125 130 169
All Equity REITS 100 119 123 142 192
<<COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION>>
The Company engages Embassy Properties, Inc., a Kansas corporation ("EPI"),
to manage most real estate assets of the Company. The management services
include, among other things, rent billing and collection, leasing,
maintenance, construction supervision, compliance with regulatory statutes
and rules and property disposition. In the Company's last fiscal year, the
Company paid EPI $119,948. Janet Gatz-Bennett, John Bennett's spouse, is
the President and sole shareholder of EPI and Roger E. Buford, an
Affiliated Trustee of the Company, is Executive Vice President of EPI. The
Board of Trustees has determined that the Company's relationship with EPI
is on terms as favorable to the Company as would be available from a
non-affiliated party.
Under regulations governing real estate investment trusts, the Company is
not allowed to operate hotels. Accordingly, the Company has entered into
lease agreements for its hotel properties with Embassy Hotel Management
Co., Inc. ("EHM"), a Missouri corporation wholly owned by EPI. Roger E.
Buford, an Affiliated Trustee of the Company, is Executive Vice President
of EHM. The Company believes the lease terms and provisions are as
favorable to the Company as would be available from a non-affiliated party.
EHM paid a total of $996,706 in lease payments to the Company and
affiliates of the Company in 1996.
From its incorporation in 1988 until June 14, 1995, the Company was
operated under an advisory agreement (the "Advisory Agreement") with
Integrated Financial Services, Inc., a Kansas corporation ("IFS"), of which
John Bennett is the sole shareholder and President. Pursuant to the
Advisory Agreement, and pursuant to the Company's Fourth Amended Plan of
Reorganization approved by the United States Bankruptcy Court for the
Western District of Missouri, the Company paid IFS, as an unsecured
creditor of the Company, in 1996 the sum of $86,656.00. This amount
represents fees for various services performed for the Company by IFS and
reimbursement for certain expenses incurred by IFS on the Company's behalf
prior to 1992 .
Under the terms of the Company's Chapter 11 Plan of Reorganization, certain
individuals, or qualified plans under which they participated, who held the
Company's Convertible Subordinated Debentures (the "Debentures")
participated in the Company's Alternative Treatment Plan (the "ATP").
Under the terms of the ATP, these individuals or entities converted all or
part of their Debentures, together with an equal cash contribution, into a
direct loan participation interest in a collateral pool loan. The loan is
collateralized by certain assets of the Company, and is to be repaid in 10
years, in quarterly installments including interest at 9% based on a 20
year amortization. The following reporting persons and/or their qualified
retirement plans have made cash contributions in the amounts listed
opposite their name:
John J. Bennett $388,965.00
Robert K. Brown $ 50,000.00
James Trimmer $474,579.00
Richard Polcari $100,000.00
Dr. Richard Padula $200,000.00
<<RECAPITALIZATION>>
PROPOSAL 1. APPROVAL OF A PLAN OF RECAPITALIZATION TO EFFECT A 2,500-TO-1
REVERSE SPLIT WITH REGARD TO COMMON SHARES AND A 2,500-TO-1 REVERSE SPLIT
WITH REGARD TO PREFERRED SHARES AND THE AMENDMENT OF THE COMPANY'S ARTICLES
OF INCORPORATION TO PROHIBIT THE ISSUANCE AND EXISTENCE OF FRACTIONAL
SHARES AND THE AUTHORIZATION OF 50,000 COMMON SHARES AND 1,000 PREFERRED
SHARES
The shareholders will be asked to approve a proposal to effect a 2,500-to-1
reverse stock split (the "Reverse Stock Split"). The Reverse Stock Split,
if approved, will result in conversion of each 2,500 shares of the
Company's Common Stock into one new share of Common Stock ("New Common
Stock"). In addition, each 2,500 shares of the Company's Preferred Stock
would be converted into one new share of Preferred Stock ("New Preferred
Stock"). The rights and privileges of the holders of Common Stock and
Preferred Stock will be substantially unaffected by the Reverse Stock
Split. No fractional shares resulting from the Reverse Stock Split will be
issued. Instead, the Company will pay in cash, the sum of $.31 per share,
or will make available for sale from its treasury stock additional shares
of stock in an amount sufficient to equal one share of New Common Stock or
New Preferred Stock. There are 1,537 Shareholders who own less than 2,500
shares. Therefore, the Reverse Stock Split could potentially reduce the
number of Shareholders of the Company to less than 1,000. Proposal 1 may
be abandoned by the Board of Trustees at any time before or after the
Annual Meeting if for any reason the Board of Trustees deems it advisable.
In April, 1994, the Company issued certain Convertible Subordinated
Debentures (the "Debentures") which contain a conversion privilege into
Common Stock of the Company at any time prior to maturity, which is
December 31, 2003. The number of Common Shares issuable upon conversion is
based on the Company's book value on December 31, 1993, or $.22 per share.
At December 31, 1996, there were $3,227,043.00 Debentures remaining
outstanding. The 2,500-to-1 Reverse Stock Split would reduce the amount of
authorized shares to 18,000, which amount is insufficient to cover the
amount of Common Shares necessary for the Company to satisfy the conversion
obligation under the Debentures. Accordingly, in connection with the
Reverse Stock Split , the Shareholders will be asked to approve a proposal
to amend the Company Articles of Incorporation to authorize, immediately
after the reverse stock split is effectuated, 50,000 shares of Common Stock
and 1,000 shares of Preferred Stock.
Background
- ----------
The Company is a Delaware corporation which has conducted its operations
with the intention of meeting the requirements of the Internal Revenue Code
of 1986 for qualification as a real estate investment trust. The Company
was incorporated on May 12, 1988 and commenced operations on December 15,
1988. Currently, the Company has approximately 2,500 Shareholders. This
large number of Shareholders imposes a significant administrative and
financial burden on the Company. The cost of Shareholder communications
and registrar fees for such a large number of Shareholders is substantial.
Many of these Shareholders own a very small amount of Company stock. If
the Reverse Stock Split is approved, the number of Shareholders could
potentially be reduced to under 1,000, thus reducing the administrative
expense of Shareholder communication and maintenance by over 50%. The
Board of Trustees believes that the reduced administrative expenditures
which could result from the Reverse Stock Split are a sound business reason
for the approving this proposal.
Reasons for the Reverse Stock Split
- -----------------------------------
The current number of outstanding shares of Common Stock is atypical for a
company the size of Master Realty Properties, Inc. The large number of
shares of Common Stock currently outstanding is largely a result of the
issuance of convertible subordinate debentures which were issued as part of
the Company's Plan or Reorganization in 1994. The conversion of these
debentures into Common Stock of the Company has substantially diluted the
book value of the Company stock.
The Board of Trustees believes that the Reverse Stock Split is in the best
interests of the Company. Management has met with numerous market makers
who have indicated the necessity of establishing a book value of the
Company's stock at a level which would be acceptable on the market. The
Company believes that the adoption of the Reverse Stock Split is the
initial step in increasing the acceptance of the stock by the financial
community and the investing public and, accordingly, enhance shareholder
value and liquidity. This is precisely the goal of Phase III of the SRP.
Management, under the direction and supervision of the Board of Trustees,
is currently analyzing additional action which would assist in making a
market for the Company's stock.
The adoption of the Reverse Stock Split would decrease the number of shares
outstanding and establish a per share book value for the New Common Stock
and the New Preferred Stock. Theoretically, the number of shares
outstanding should not, by itself, affect the marketability of the stock,
the type of investor who acquires it, or the Company's reputation in the
financial community, but in reality, this is not necessarily the case, as
many investors look upon a low priced stock as unduly speculative in nature
and, as a matter of policy, avoid such investments.
Moreover, many leading brokerage firms are reluctant to recommend lower-
priced securities to their clients and a variety of brokerage house
policies and practices currently tend to discourage individual brokers
within firms from dealing in lower-priced stocks. Some of those policies
and practices pertain to the payment of brokers' commissions and to
time-consuming procedures that function to make the handling of
lower-priced stocks unattractive to brokers from an economic standpoint.
In addition, the structure of trading commissions also tends to have an
adverse impact upon holders of lower-priced stocks because the brokerage
commission on a sale of a lower-priced stock generally represents a higher
percentage of the sales price than the commission on a relatively
higher-priced issue.
In addition, since the broker's commissions on low-priced stock generally
represent a higher percentage of the stock price than commissions on higher
priced stock, a lower share price can result in individual shareholders
paying transaction costs (commissions, markups or markdowns) which are a
higher percentage of their total share value than would be the case if the
share price were substantially higher.
Although there can be no assurance that the price of the Company's shares
after the Reverse Stock Split will actually increase in an amount
proportionate to the decrease in the number of outstanding shares, the
Reverse Stock Split is intended as the first step in establishing a price
level for the New Common Stock and the New Preferred Stock that will
broaden investor interest.
Holders of Old Common Stock and Old Preferred Stock are advised to consult
their own tax advisers regarding the federal income tax consequences of the
proposed Reverse Stock Split in light of their personal circumstances and
the consequences under state, local and foreign tax laws.
Amendment of the Articles of Incorporation
- ------------------------------------------
The Company's Articles of Incorporation currently identify 45,000,000
shares of Common Stock, par value $.01, as Common Stock. In addition, the
Company's Articles of Incorporation identify 2,500,000 shares of Preferred
Stock, par value $.01, as Preferred Stock. Article Fourth of the Articles
of Incorporation of the Company would be amended to read as follows:
"FOURTH: The total number of shares of capital stock which the
Corporation has authority to issue is 50,000 shares of Common Stock with
$.01 par value and 1,000 shares of Preferred Stock with $.01 par value.
The Preferred Stock shall have the rights, privileges, designations and
preferences as determined by the Board of Trustees. There shall be no
fractional shares."
If approved, the Amendment to the Articles of Incorporation will be filed
with the Secretary of State of Delaware. The Amendment will become
effective on the date of such filing.
Cash Payment or Additional Shares for Fractional Shares
- -------------------------------------------------------
If the Reverse Stock Split is approved, the Company will not issue
fractional shares to Shareholders whose holdings are not evenly divisible
by 2,500. Instead, it will, at the option of the each such Shareholder,
purchase for cash any shares, or sell from its treasury stock additional
shares of Common Stock or Preferred Stock, as applicable, for which
fractional shares would otherwise have been issued. The purchase or sale
price for such fractional shares will be $.31 per share. This computation
assumes that all Debentures have converted into Common Stock as of March
31, 1997. The Company believes that this value is a reasonable
approximation of book value of stock of the Company.
Uncertificated Stock
- --------------------
The Board of Directors has adopted a resolution authorizing the issuance of
uncertificated shares of stock. If the Reverse Stock Split is adopted, the
Shareholders will be required to return their stock certificates to the
Company for cancellation. The Company will then send each Shareholder a
written statement containing a description of the shares, the number of
shares registered and the date of registration. The Company will not
forward such written statement to a Shareholder until the Shareholder has
surrendered all certificates currently representing shares of Common or
Preferred Stock.
Board Recommendation
- --------------------
Based on the foregoing consideration, the Board of Trustees approved a
resolution to provide for the effectuation of a 2,500-to-1 reverse stock
split and for an amendment to the Company's Articles of Incorporation to
prohibit fractional shares and to authorize, immediately after the reverse
stock split is effectuated, 50,000 shares of Common Stock and 1,000 shares
of Preferred Stock.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY VOTE FOR THE PROPOSAL.
Vote Required for Approval of the Proposal
- ------------------------------------------
The Shareholders will be asked to approve the proposal to effect a
2,500-to-1 Reverse Stock Split and for an amendment to the Company's
Articles of Incorporation to prohibit fractional shares and to authorize,
immediately after the Reverse Stock Split is effectuated, 50,000 shares of
Common Stock and 1,000 shares of Preferred Stock at the Annual Meeting of
Shareholders on September 17, 1997.
The affirmative vote of the majority of the shares entitled to vote,
represented in person or by proxy, will be necessary to approve Proposal 1.
<<EXTENSION OF LIFE OF COMPANY>>
PROPOSAL 2. AMENDMENT OF THE ARTICLES OF INCORPORATION OF THE COMPANY TO
EXTEND THE LIFE OF THE COMPANY IN PERPETUITY
The Shareholders will be asked to approve a proposal to amend the Articles
of
Incorporation of the Company to extend the life of the Company in
perpetuity. Currently, Article Sixth of the Articles of Incorporation of
the Company, as filed with the Delaware Secretary of State on October 27,
1988, provides that the Company shall remain in existence until and
including December 31, 2010, unless sooner dissolved and terminated in
accordance with the Bylaws of the Company. Initially, the Company was
organized for the primary purpose of realizing income from originating and
investing in short-term loans, junior mortgage loans, wraparound
construction loans and pre-development loans secured by real estate. Under
this business plan, a definite dissolution date was practical because the
Company would be able to coordinate maturity dates of its debt assets to
the date of dissolution. However, the Company's Plan of Reorganization, as
approved by the Shareholders, required the implementation of the SRP, the
majority of the Company's assets have been converted from debt to equity.
Accordingly, this dissolution date has become impractical, because now,
instead of debt maturing on a specific date, the vast majority of the
Company's assets consist of real estate owned. While it is feasible for
the Company to dissolve on December 31, 2010 by liquidating its assets,
Management does not believe this to be an advisable course of action. Such
a liquidation would force the Company to sell assets within a definite
period of time, regardless of market conditions. Management believes the
market for many of its assets is still developing and a forced sale to
comply with the original liquidation could cause the Shareholders to not
realize an optimum return. The Board believes that the extension of the
life of the Company puts the Company in a position where it can maintain
and protect its assets, maximize their cash flow and evaluate market
conditions to determine how the greatest return can be achieved, whether
through sale or continued ownership.
While a perpetual life has clearly become more appropriate for the current
business objectives of the Company, it is also necessary in order for the
Company to pursue future, more favorable, financing arrangements. The
current dissolution date of December 31, 2010 is an obvious impediment to
any debt restructuring because the term of any financing arrangement could
not exceed the remaining life of the Company. In December, 1996, the
Company entered into a $19,200,000 refinancing of certain of its assets.
This note matures on December 12, 1998, but can be extended to December 12,
1999. It is secured by the substantial majority of the Company's assets.
Management is currently in the process of negotiating permanent financing
with this Lender, and analyzing which properties are appropriate for
permanent refinancing. The ability of Management to enter into these
negotiations is contingent upon the extension of the life of the Company.
Procedure Upon Dissolution
- --------------------------
In the event that Proposal 2 is approved by the Shareholders, the Company
would not liquidate its assets on December 31, 2010, but would continue to
own and operate its assets. If Proposal 2 is not approved, the Company
will dissolve at that time. Upon dissolution of the Company, the Preferred
Shareholders will have a liquidation preference over the Common
Shareholders which will entitle the Preferred Shareholders to a
preferential distribution aggregating five percent (5%) of the Company's
assets in liquidation in the event such net assets are less than the total
capital of the Company at the time of liquidation. Once this preferential
distribution is made, all remaining distributions will be made to all
Shareholders of the Company. At this time, the Company has no way of
determining what amounts would be available for distribution to the
Shareholders upon liquidation.
Amendment of the Articles of Incorporation
- ------------------------------------------
If approved, Article Sixth of the Articles of Incorporation of the Company
would be amended to read as follows:
"SIXTH: The duration of the Corporation is to be perpetual"
If approved, the Amendment to the Articles of Incorporation will be filed
with the Secretary of State of Delaware. The Amendment will become
effective on the date of such filing.
Impact on Debenture Holders
- ---------------------------
In the event that Proposal 2 is adopted by the Shareholders, the
dissolution
of the Company shall no longer occur on a date certain. The Company's
Convertible Subordinated Debentures have a stated maturity of December 31,
2003. Payment of the Debentures are subordinated to any senior debt of the
Company, as that term is defined in the Debenture document. Accordingly,
if the Company has senior debt on December 31, 2003, payment of the
Debentures could conceivably be delayed, pursuant to the terms of the
Debentures, until liquidation of the Company. Currently, liquidation of
the Company will occur on December 31, 2010. If the Shareholders approve
Proposal 2, the life of the Company will be extended to a perpetual
duration and the liquidation of the Company will no longer occur on a date
certain. Therefore, as long as the Company has senior debt, no payment
will be made on the Debentures.
Board Recommendation
- --------------------
Based on the foregoing consideration, the Board of Trustees approved a
resolution to provide for the amendment to the Company's Articles of
Incorporation to extend the life of the Company in perpetuity.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY VOTE FOR THE PROPOSAL.
Vote Required for Approval of the Proposal
- ------------------------------------------
The Shareholders will be asked to approve the proposal to amend the
Company's Articles of Incorporation to extend the life of the Company in
perpetuity at the Annual Meeting of Shareholders on September 17, 1997.
The affirmative vote of the majority of the shares entitled to vote,
represented in person or by proxy, will be necessary to approve Proposal 2.
<<ELECTION OF TRUSTEES>>
PROPOSAL 3. ELECTION OF TRUSTEES
Pursuant to the Articles of Incorporation of the Company, the Board of
Trustees is divided into two classes. A First Class Trustee is elected to
hold office for one year, or until the next Annual Meeting following their
election. A Second Class Trustee is elected to hold office for two years,
or until the next Annual Meeting following their election. The Bylaws of
the Company provide that the number of Trustees shall be between 3 and 9,
the exact number to be determined by a majority of the entire Board of
Trustees. The Board of Trustees has set this number at seven.
Four trustees are to be elected at the Annual Meeting, to hold office until
the next Annual Meeting of Shareholders and until their successors are
elected and qualified. It is intended that the accompanying proxy will be
voted in favor of the following persons to serve as trustees unless the
Shareholder indicates to the contrary on the proxy. Management expects
that all of the nominees will be available for election, but if any of them
is not a candidate at the time the election occurs, it is intended that
such proxy will be voted for the election of another nominee to be
designated by the Board of Trustees to fill any such vacancy. There are no
arrangements or understandings between any of the listed trustees, or any
other persons, pursuant to which any of the trustees have been selected as
such.
Nominees:
- --------
Byron Constance, 70
Independent Trustee since 1991.
Nominee for First Class Trustee
Mr. Constance is the retired Senior Partner in Constance Stewart & Cook,
L.C., a law firm located in Independence, Missouri, and is presently of
counsel to the firm.
Robert K. Brown, 52
Independent Trustee since 1991.
Nominee for First Class Trustee
Mr. Brown has been a partner in Floyd R. Brown & Co., P.C., a Certified
Accounting firm in Kansas City, Missouri, since 1969.
James E. Trimmer, 64
Independent Trustee since 1991.
Nominee for Second Class Trustee
Mr. Trimmer has been the President of Precise Forms, Inc., a manufacturer
of aluminum forms located in Kansas City, Missouri since 1967 and is a
former director of Grain Valley Bank.
Roger Buford, 49
Nominee for Affiliated First Class Trustee.
Mr. Buford has been the Vice President and Secretary of Recon Development
Company since 1993. Recon Development Company is a development and
construction management firm. It supervises all maintenance, building
improvements, marketing and construction for several of the Company's
assets. It also provides, through contractual relationships with Embassy
Properties, Inc. and Embassy Hotel Management Co., Inc., property
management assistance to certain properties in which the Company is either
owner or lender. Mr. Buford is also the President of Metro West
Properties, Inc., which is a real estate brokerage licensed in both
Missouri and Kansas. Metro West Properties is the general partner of Soho
West III, L.P., Soho Office Center, L.P., and Soho West V, L.P., and is a
limited partner in New Historic Suites Partners, L.P. The Company either
has an ownership interest in or holds a mortgage on the properties owned by
each of these entities. Mr. Buford is also the Executive Vice President of
Embassy Properties, Inc., which provides management services to most of the
Company's assets, and Embassy Hotel Management Co., Inc., the lessee of the
Company's hotel properties.
From 1984 to 1994, Mr. Buford was the President of Vista Construction
Company, a real estate broker/real estate construction firm. Vista
Construction Company was the general partner of Soho III, L.P., a Missouri
limited partnership. The Company has a second mortgage on Soho III, L.P.'s
assets. Soho III, L.P. filed a voluntary petition under Chapter 11 of the
Federal Bankruptcy Code in 1990. A plan was confirmed in December, 1992.
Mr. Buford was also a general partner in Tiffany Plaza South, L.P., a
Missouri limited partnership. An involuntary petition under Chapter 11 of
the Federal Bankruptcy Code was filed against Tiffany Plaza South, L.P.,
but was dismissed in January, 1996.
James I. Threatt, 72
Independent Trustee since 1995.
Nominee for First Class Trustee
Mr. Threatt was duly appointed as an Independent Trustee by the Board of
Directors on November 1, 1995. Mr. Threatt held the position of Assistant
City Manager of Kansas City, Missouri from January, 1974 to January, 1994.
Mr. Threatt is currently the President of James A. Threatt and Associates,
a private consulting firm, and serves as Trustee and on the Board of
Directors of the Kansas City Public School Retirement Systems and on the
Board of Directors of the Downtown Minority Development Corporation and the
Kansas City Neighborhood Alliance.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED.
<<APPOINTMENT OF AUDITORS>>
PROPOSAL 4. THE APPOINTMENT OF MAYER, HOFFMAN & MCCANN AS THE AUDITORS FOR
THE COMPANY FOR 1997
The Company retained Mayer, Hoffman & McCann as its independent certified
public accountants effective 1990, and they have been selected to continue
in such capacity for the current fiscal year.
Representatives of Mayer, Hoffman & McCann will be present at the Annual
Meeting, will be available to respond to questions and may make a statement
if they so desire.
Financial Statements
- --------------------
The financial statements of the Company, in comparison form for the years
ended December 31, 1996, is contained in the 1996 Annual Reports to
Shareholders, a copy of which is enclosed with this proxy statement.
By Order of the Trustees
John J. Bennett, President
