Master Realty Properties, Inc.
410 W. 8th Street
Kansas City, MO 64105
(816) 474-9333
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be April 19, 2000
Notice is hereby given that the 1999 Annual Meeting of the Shareholders of
Master Realty Properties, Inc. (the "Company") will be held at 612 Central,
Kansas City, Missouri 64105, on April 19, 2000 at 10:00 a.m. for
the following purposes:
1. To vote on a proposal to authorize the Board of Trustees to terminate the
Company's election to qualify as a real estate investment trust under the
Internal Revenue Code of 1986 in the event that they determine it to be in the
best interest of the Shareholders.
2.In the event that Proposal 1 above is passed by the Shareholders, and in the
event that the Board of Trustees determines that such election is in the best
interest of the Shareholders, to vote on a proposal to amend and restate the
Bylaws of the Company to remove references to the Company's status as a real
estate investment trust under the Internal Revenue Code of 1986.
3.To vote on a proposal to amend the Bylaws to provide for a stock transfer
restriction for the purposes of protecting the Company's net operating losses
pursuant to Delaware Corporation Code Section 202.
4.To elect trustees for the terms expiring at the Annual Meeting of
Shareholders.
5.To vote on the recommendation of management that Mayer, Hoffman & McCann
be appointed auditors of the Company for 2000.
6.To transact such other business as may properly come before the Annual
Meeting.
The close of business on March 27, 2000 has been fixed as the record date for
the determination of shareholders entitled to notice of, and to vote at the
Annual Meeting. It is important that your shares be represented and voted at
the Meeting. You can vote your shares by completing and returning the
enclosed Proxy Card, either in the enclosed envelope or by fax t
(816) 474-5720.
Please be advised that the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1999 is included with this mailing
to all shareholders of record.
By Order of the Board of Trustees
Byron Constance, Secretary
Master Realty Properties, Inc.
410 W. 8th Street
Kansas City, Missouri 64105
Proxy Statement for
Annual Meeting of Shareholders
To Be Held April 19, 2000
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 April 19, 2000, 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 March 27, 2000. 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.
At the Annual Meeting, the Shareholders will be asked to consider and act upon
the following:
1.To vote on a proposal to authorize the Board of Trustees to terminate the
Company's election to qualify as a real estate investment trust under the
Internal Revenue Code of 1986 in the event that they determine it to be in the
best interest of the Shareholders.
2.In the event that Proposal 1 above is passed by the Shareholders, and in the
event that the Board of Trustees determines that such election is in the best
interest of the Shareholders, to vote on a proposal to amend and restate the
Bylaws of the Company to remove references to the Company's status as a real
estate investment trust under the Internal Revenue Code of 1986.
3.To vote on a proposal to amend the Bylaws to provide for a stock transfer
restriction for the purposes of protecting the Company's net operating losses
pursuant to Delaware Corporation Code Section 202.
4.To elect trustees for the terms expiring at the Annual Meeting of
Shareholders.
5.To vote on the recommendation of management that Mayer, Hoffman & McCann
be appointed auditors of the Company for 2000.
6.To transact such other business as may properly come before the Annual
Meeting.
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.
When you sign and return the enclosed Proxy, the shares represented thereby
will be voted for the nominees for Trustee listed on the Proxy, and for the
approval of Mayer, Hoffman & McCann as the Company auditors unless otherwise
indicated on the Proxy. A vote of the Shareholders owning more than 50 percent
of the outstanding Common and Preferred Shares, voting without regard to class,
shall be required to approve Proposals 1, 2 and 3. Only Shareholders voting
in favor of Proposal 3 will be subject to the provisions contained therein.
At December 31, 1999, the Company's outstanding voting stock consists of
1,215,809 shares of Common Stock and 28,425 shares of Preferred Stock. Only
holders of stock of record at the close of business on March 27, 2000 (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.
The Company is mailing its annual report for the year ended December 31, 1999
together with this Proxy Statement and the enclosed Proxy commencing on March
27, 2000, to shareholders entitled to vote at the Annual Meeting.
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. 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. In the absence of a quorum, the holders of shares
representing a majority of the voting power of the shares represented at the
Annual Meeting have the power to adjourn the annual meeting without further
notice, other than by announcement at the Annual Meeting at the time of its
adjournment.
All references in this Proxy Statement to the Company's last fiscal year
refer to the period from January 1, 1999 to December 31, 1999.
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 1percent 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 2000 Annual Meeting of Shareholders is scheduled to be held in
March, 2001. 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
410 W. 8th Street, Kansas City, Missouri 64105 on or before November 18, 2000.
PROPOSAL 1
Proposal to Terminate the Company's Election to Qualify as a Real Estate
Investment Trust Under the Internal Revenue Code of 1986
You are being asked to give the Board of Trustees the authority to terminate
the Company's election to be treated as a real estate investment trust under
the Internal Revenue Code of 1986 in the event that they deem such a
termination to be in the best interest of the Shareholders.
Termination of the Company's REIT status will not have any immediate
adverse tax consequences on the Company or its shareholders (due to the
existence of a $26,000,000.00 net operating loss), and will allow the Company
to create shareholder value in the form of increased income through the
Development Transactions described below (sheltered by the net operating
loss), which income would not be available to the Company if it continues
to maintain it's REIT status.
The Development Transactions
The Company and the Board of Trustees have recognized an opportunity to
increase shareholder value in the form of participation in the
rehabilitation of certain historical and other real estate projects in the
downtown Kansas City, Missouri area. The Company, has currently identified
several properties which are available for redevelopment in accordance with
the Standards for Rehabilitation for Historic Structures as published by the
United States Department of Interior (collectively, the "Projects"). The
Company, by participating in the development of these Projects, could realize
income benefits associated with fees earned in connection with federal and
state tax credits, as well as an ongoing ownership in the Projects. It is
anticipated that each Project will be structured in the form of ownership
by a limited partnership, in which the Company will have (directly and/or
indirectly) a general partner ownership interest and an unrelated third
party will make limited partnership investment. It is anticipated that the
Company will be required to contribute a portion of its fee income as
capital in consideration of its partnership interest in the ownership
entity. The Independent Trustees, together with Company counsel and
independent accountants, are currently evaluating the Company's potential
involvement with respect to the Projects. It is anticipated that these
Projects will be developed in conjunction with affiliated entities that
have presented these opportunities to the Company.
In the event that the Independent Trustees determine that it is in the
Company's best interest to participate in the development of these Projects,
the income generated and payable to the Company will not be characterized as
"qualified income" for a real estate investment trust under the Internal
Revenue Code. Accordingly, in order for the Company to take advantage of this
potentially profitable opportunity, it must terminate its REIT status or its
REIT status will be revoked by law for excessive unqualified fee income. This
revocation has the same tax effect as a voluntary termination.
There is no immediate tax consequence to the Shareholders or to the Company
as a result of the termination of REIT status and continuation as a C
corporation. Income will create tax at the Company level only after
utilization by the Company of all net operating losses, which are in excess
of $26,000,000.00. If the Board of Trustees elect to pay dividends, these
distributions will likely be a return of capital at the Shareholder level.
In addition, unlike a real estate investment trust, there is no requirement
for a C-corporation to distribute earnings. If the Company remained a "C"
corporation after the utilization of its net operating loss and elected to
sell its assets, any gain from this sale would be subject to corporate tax
at the Company level and all distributions of the proceeds from the sale would
be subject to tax at the Shareholder level. As a REIT only the Shareholders
would be taxed on a sale of the Company's assets after utilization of the
Company's net operating loss. In the event that the Shareholders approve
Proposal 1, and the Board of Trustees elects to terminate the REIT status,
the tax status will terminate upon filing notice of such termination with
the Internal Revenue Service. The Company will be prohibited from re-electing
REIT status for a period of five (5) years. The Board of Trustees believes
that the income derived from the Development Transactions will outweigh any
long term disadvantages to terminating the REIT status. PROPOSAL 2Proposal to
Amend and Restate the Company's Bylaws to Remove References to the Company's
Status as a Real Estate Investment Trust
Provided the shareholders approve Proposal 1, and the Board of Trustees elects
to terminate the Company's REIT status, you are also being asked to approve
the amendment of the Bylaws to remove any reference to the Company's current
status as a real estate investment trust and to give the Board of Trustees the
authority to re-elect REIT status in the future, should it deem it to be in
the best interest of the Company. Amendment of the Bylaws to reflect such a
change is necessary to maintain the accuracy and integrity of the Company's
organizational documents. The form of the proposed Amended and Restated
Bylaws is included with this proxy statement.
Section 13.1 of the Company's Bylaws states that "[T]he Trustees, by a
majority vote, may amend these Bylaws to change the name of the Fund or to
alter the provisions hereof with respect to Trustee meetings, Trustee
compensation, registration and transfer of Shares, lost share certificates or
distribution record dates. All other amendments to these Bylaws shall require
the Majority Vote of the Shareholders".
The effect of amending and restating the Bylaws is to make them applicable
to the business operations of the Company upon its election to terminate its
REIT status. In the event that the Shareholders do not vote to approve Proposal
1, the Bylaws will remain unchanged.
PROPOSAL 3
Proposal to Amend the Company's Bylaws to Provide for a Stock Transfer
Restriction for the Purposes of Protecting the Company's Net Operating Losses
Pursuant to Delaware Corporation Code Section 202
As a REIT, 50percent or more ownership of the Company cannot be held by fewer
than 5 individuals. In order to prevent a violation of this requirement, the
Company has adopted an "Excess Share" provision, which is contained in Section
7.9 of the current Bylaws. Generally, this Section limits the ownership of
Company stock by any individual to no more than 9.9percent. Upon approval by
Proposals 1 and 2 above, the underlying purpose for this section (to protect
against the loss of REIT status) will be eliminated.
The Board has determined that enacting a similar provision to restrict the
change in ownership of the Company's shares is paramount. As a result of past
transactions, the Company currently has a significant net operating loss (the
"NOL"). Management has recognized the potential value of the NOL to the Company
and obtained a detailed analysis of the NOL from the Company's independent
accountants. It is anticipated that the present value of the NOL is
approximately $5,200,000.00 to $7,100,000.00, depending on the timing of the
NOL utilization. The NOL may be the single most important asset of the
Company, and is critical to the pursuit of the Company's business plan and
the potential increase in Shareholder value. The utilization of the NOL is
subject to substantial reduction in the event that a "change of ownership"
(under Section 382 of the Internal Revenue Code) occurs within a three (3)
year period. This reduction is in the form of an annual limitation which
could diminish the value of the NOL as much as ninety percent (90percent).
The change of ownership is a 50 percentage point change in the ownership group
made up of those shareholders who own 5percent or more of the Company's stock.
If a change of ownership does occur, the annual utilization of the NOL is
limited to the product of the applicable federal rate (approximately 6 percent)
and the value of the Company. Accordingly, it is important to the business
plan of Company that the NOL be protected from reduction by virtue of
shareholder transfers. The Trustees, officers and certain major
Shareholders, representing a majority of the outstanding shares of the Company,
have recognized the importance of protecting this asset and have agreed to
enter into an agreement whereby they will not sell any shares of the Company
beneficially owned by them for a period of five (5) years. The sole purpose
of this agreement is to limit the change in ownership of the Company's shares,
so as to protect the value of the NOL.
Section 7.9 of the Bylaws currently contains an ownership restriction which
limits any shareholder from owning more than 9.9percent of the Company stock.
The purpose of this restriction was to prevent the Company from being owned
by 5 or fewer individuals, which is a requirement for real estate investment
trusts under the Internal Revenue Code. In the event that Proposals 1 and 2
are approved by the shareholders, this restriction would be eliminated. The
Board of Trustees recommends that a similar restriction be put in place for
the purpose of protecting the NOL. The restriction would not limit a
shareholder's ability to sell their shares, only their ability to obtain more
than 4.9percent of the Company's shares. The proposed restriction would read
as follows:
7.9Shareholders' Disclosure; Trustees' Right to Refuse to Transfer Shares;
Limitation on Holdings; Repurchase of Shares.
(a)..The Shareholders shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of the Shares
as the Trustees deem necessary to comply with the provisions of this Section.
b.Whenever it is deemed by them to be reasonably necessary to protect the tax
attributes of the Company (including, without limitation, net operating
losses), the Trustees may require a statement or affidavit from each proposed
transferee of Common or Preferred Shares setting forth the number of Common
and Preferred Shares already owned by him and any related person specified in
the form prescribed by the Trustees and, in connection therewith, if the
proposed transfer shall cause the transferee to hold Excess Shares (as defined
below), the Trustees shall have the right, but not a duty, to refuse to
transfer the Shares to the proposed transferee. All contracts for the sale
or other transfer of Shares of Common or Preferred Stock shall be subject
to this provision.
(c).From and after the date of this amendment, notwithstanding any other
provision of these Bylaws to the contrary and subject to the provisions of
Section 7.9(f), the Company may prohibit any person from directly or
indirectly acquiring ownership (beneficial or otherwise) in the aggregate
of more than 4.9percent of the outstanding Common or Preferred Shares of the
Company (the "Limit"). Either Common or Preferred Shares owned by a person
or group of persons in excess of the Limit at any time shall be deemed
"Excess Shares." If any person knowingly holds Excess Shares and the tax
attributes of the Company are damaged, such person shall indemnify the
Company for the full amount of any damages and expenses (including increased
corporate taxes, attorneys' fees and administrative costs) resulting from
violation of this Section. For the purposes of this Section 7.9, "person" shall
have the meaning set forth in Section 7701(a)(1) of the Code and shall also
mean any partnership, limited partnership, syndicate or other group deemed to
be a "person" pursuant to Section 13(d)(3) of the Securities Exchange Act of
1934, as amended; and a person shall be deemed to own (i) Shares actually
owned by such person, (ii) Shares constructively owned by such person after
applying the rules of Section 544 of the Code, and (iii) Shares of which such
person is beneficial owner as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934. All Common and Preferred Shares which any
person has the right to acquire upon exercise of outstanding rights, options
and warrants, and upon conversion of any securities convertible into either
Common or Preferred Shares, if any, shall be considered outstanding for
purposes of the Limit if such inclusion will cause such person to own more
than the Limit.
(d)The Company may require a holder of Excess Shares to sell the Excess
Shares within 30 days of written notice given by the Company to such holder.
If the holder does not sell the Excess Shares within such 30-day period, the
Board of Trustees shall have the right to (i) prohibit the holder from voting
the Excess Shares, (ii) place any dividends on such Excess Shares in an escrow
account for payment when those Shares are no longer classified as Excess
shares and (iii) repurchase any or all Excess Shares as set forth below.
The Company may prohibit the exercise of any option, warrant or right to
purchase either Common or Preferred Shares if such exercise would result in
any person holding Excess Shares or if the person so exercising already holds
Excess Shares.
(e)After the 30-day period provided in Section 7.9(d), the Trustees, by notice
of the holder thereof, may cause the Company to repurchase any or all Shares
that are Excess Shares (including Shares that remain or become Excess Shares
because of the decrease in outstanding Shares resulting from such repurchase),
provided that such repurchase complies with the Delaware Corporate Statute,
and from and after the date of giving of such notice of repurchase
("Repurchase Date") the Shares called for repurchase shall cease to be
outstanding and the holder thereof shall cease to be entitled to dividends,
voting rights and other benefits with respect to such Shares excepting only
the right to payment by the Company of the repurchase price determined and
payable as set forth below. The Company shall not be required to purchase
or redeem any exercised option, warrant or right to purchase either Common or
Preferred Shares which is restricted against exercise in accordance with this
Section. The repurchase price of each Excess Share called for repurchase
shall be its fair market value as reflected by the mean between the average
per Share closing bid and asked prices during the 30 calendar day period
ending on the business day prior to the Repurchase Date, or if there have been
no published bid quotations and no published asked quotations with respect
to such Shares during such 30 calendar day period, the repurchase price shall
be the price determined by the Trustees in good faith. Payment of such
purchase price shall be made by delivery to the holder of a non-interest
bearing promissory note of the Company payable to the holder only to the
extent that the Company has funds legally available for such purchase and
only if such payment under the note would not otherwise reduce the
Distributions payable to the other Shareholders as if the Excess Shares
were still outstanding.
(f)The Trustees in their discretion may exempt from the Limit ownership of
certain designated Common or Preferred Shares while owned by a person who
has provided the Trustees with evidence and assurance acceptable to the
Trustees that the tax attributes, including net operating loss, would not
be jeopardized thereby. Restrictions of the type proposed are authorized
by corporate law. Section 202 of the Delaware General Corporation Code
specifically authorizes the restriction on the transfer of a company's
shares for the purposes of maintaining or preserving any tax attribute,
including net operating losses. Under Delaware law, only these
Shareholders who vote in favor of Proposal 3 will be subject to the
restriction contained therein, provided Proposal 3 is approved by the
Shareholders.
PROPOSAL 4
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 7.
Three 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
thetrustees have been selected as such. The following table sets forth the
name and age of each nominee for election to the Board of Trustees the
principal occupation of each during the past five (5) years and the period
during which each has served as a Trustee. Each nominee is currently serving
as a Trustee.
Name Age Principal Ocupation Trustee Since
John J. Bennett 56 Chairman of the Board 1988
And President of Master
Realty Properties, Inc.
Richard Polcari, 64 Private Investor 1991
Independent Trustee
James Trimmer, 68 Private Investor 1991
Independent Trustee
Byron Constance, 74 Private Investor 1991
Independent Trustee
The following is a biographical summary of each of the Company's Trustees
and Executive Officers:
John J. Bennett, 56, has served as Chairman of the Board, an Affiliated
Trustee and President of the Company since 1988. His is also the President
of Master Realty Corp., Master Mortgage Realty II, Inc., Master Mortgage
Realty, III, Inc., Master Mortgage Realty V, Inc., and Soho III, 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 served as a Director and President
of Benchmark Management Group, Inc. from May, 1994 until December, 1996.
Benchmark is the general partner of Foxridge Limited Partnership, a Kansas
limited partnership, that filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code in September, 1998. A final decree was issued
in this matter in September, 1999.
Roger E. Buford, 51, has served as an Affiliated Trustee since 1995. He is
also the Executive Vice President and a shareholder of Embassy Properties,
Inc., which provides management services to most of the Company's assets and
Embassy Hotel Management Company, Inc., the lessee of the Company's hotel
properties. 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 which 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 Company, Inc., property management assistance
to certain properties in which the Company is either owner or a lender. Mr.
Buford is also the President or 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 Office Center, L.P. and Soho West V, L.P. and
is a limited partner in New Historic Suites Partners, L.P. and Soho West III,
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 Benchmark Management Group, Inc., a wholly
owned subsidiary of Embassy Properties, Inc. Benchmark Management Group,
Inc. is the general partner in Foxridge Limited Partnership, a Kansas limited
partnership that filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code in September, 1998. A final decree was issued in this
matter in September, 1999. Mr. Buford was a general partner in Tiffany Plaza
South, L.P. and Tiffany Plaza Associates, L.P., both Missouri limited
partnerships. An involuntary petition under Chapter 11 of the United States
Bankruptcy Code was filed on behalf of both these entities in January, 1998.
A final decree was issued in this matter in January, 1999.
Richard Polcari, 64, has been an Independent Trustee since 1991. He has
served as the Chief Executive Officer and President of the Sandrick Associates,
Inc., an investment firm, from 1976 to present.
Robert K. Brown, 55, has been an Independent Trustee and Treasurer of the
Company since 1996. He has been a partner in Floyd R. Brown & Co., a
certified public accounting firm in Independence, Missouri, since 1969.
Mr. Brown is also a Co-Manager of Wellington, LLC, a Kansas limited
liability company, of which the Company has a 20percent ownership interest.
Byron Constance, 73, has been an Independent Trustee and Secretary of the
Company since 1991. He was a Partner in the law firm of Constance, Stewart &
Cook in Independence, Missouri, from 1949-1995. He is currently of counsel to
Stewart, Cook, Constance, Stewart & Minton. He is also the President of I-470
Development, Inc., a shopping center development company.
James Trimmer, 68, has been an Independent Trustee since 1991. He acted as
the Chief Executive Officer of Precise Forms, Inc., a manufacturing company
in Kansas City, Missouri, from 1968 to 1995.
James Threatt, 73, has been an Independent Trustee since 1995. Mr. Threatt
held the position of Assistant City Manager of Kansas City, Missouri from
James A. Threatt and Associates, a private consulting firm. He also serves on
the Board of Directors of the Downtown Minority Development Corporation.
Thomas H. Trabon, 50, has been the Executive Vice President of the Company
since 1991. He is also the President and a shareholder in Trabon Consulting
company, an accounting service firm located in Kansas City, Missouri. He is
also a partner in Trabon & Company, a certified public accounting firm located
in Kansas City, Missouri, which provides accounting services to the Company.
He is also the President of River Market Venture, Inc. and Master Mortgage
Realty IV, Inc., and the Vice President of Master Mortgage Realty II, Inc.,
Master Mortgage Realty V, Inc., Master Realty Corp., Mezzanine, Inc., Soho,
Inc. and Master Mortgage Realty VI, Inc., all of which are wholly owned
subsidiaries of the Company.
PROPOSAL 5
Ratification of the Appointment of Mayer, Hoffman & McCann as the Auditors for
the Company for 2000.
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.
If the foregoing appointment of Mayer, Hoffman & McCann is not ratified by the
Shareholders, the Board of Trustees will appoint other independent accountants
whose appointment for any period subsequent to the 2000 Annual Meeting of
Shareholders will be subject to approval of Shareholders at that meeting.
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.
What does the Board of Trustees recommend that you do in response to Proposal
1, Proposal 2, Proposal 3, Proposal 4 and Proposal 5?
The Board of Trustees believes that Proposal 1 is in the best interest of
the Company and its stockholders and recommends that you vote for the approval
of Proposal 1.
The Board of Trustees believes that Proposal 2 is in the best interest of the
Company and its stockholders and recommends that you vote for the approval of
Proposal 2.
The Board of Trustees has unanimously approved the amendment of the Bylaws to
provide for a stock transfer restriction for the purposes of protecting the
Company's NOL. The Board believes that Proposal 3 is in the best interest of
the Company and its stockholders and recommends that you vote for the approval
of Proposal 3.
The Board of Trustees has recommended that the Shareholders of the Company
vote for each of the Nominees listed above.
The Board of Trustees has recommended that the Shareholders of the Company
vote for the appointment of Mayer, Hoffman & McCann as the auditors of the
Company for 2000.
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, 1999. Each individual listed
is a Trustee, other than Dr. Richard Padula, who is a 5percent beneficial owner,
and Thomas H. Trabon, who is the Executive Vice President of the Company.
BOARD OF TRUSTEES
Meetings and Committees of the Board of Trustees
During the Company's last fiscal year, the Board of Trustees met, either in
person or telephonically, three times. All members of the Board of Trustees
were present at each meeting, except Mr. Threatt, who did not attend any
meetings in 1999 (due to health reasons) and Mr. Polcari who attended one of
the three board meetings.
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 $7,500.00
annual fee and $500.00 per meeting. At the option of each Independent
Trustee, these fees may be paid in Company securities based on current
market value.
The Affiliated Trustees do not receive compensation for services rendered
as a member of the Board of Trustees.
Amount of Beneficial Percentage of Beneficial
Name Ownership Preferred Ownership Preferred
John J. Bennett
3850 W. 171st
Stilwell, KS 66085 0.00 0.00
Byron Constance
3729 S. Union
Independence, MO 64055 0.00 0.00
Richard Polcari
27 Thayer Road
P.O. Box 79191
Belmont, MA 02179 75(3) 0.2
James E. Trimmer
3130 Wheeling
Kansas City, MO 64129 0.00(5) 0.00
Robert K. Brown
3200 South M-291 Hwy.
Independence, MO 64057 0.00 0.00
Dr. Richard Padula
6420 Prospect, Ste T-211,
Kansas City, MO 64132 0.00 0.00
Thomas H. Trabon
3441 West 131st Street
Leawood, KS 66209 0.00 0.00
Roger E. Buford
37055 Shawnee Mission
Overland Park, KS 66205 0.00 0.00
Executive Officers and Trustees
as a Group (7 persons) 75 0.2
Amount of Beneficial Percentage of Beneficial
Name Ownership Common Ownership Common
John J. Bennett
3850 W. 171st
Stilwell, KS 66085 117,750(1) 8.7
Byron Constance
3729 S. Union
Independence, MO 64055 31,500(2) 2.3
Richard Polcari
27 Thayer Road
P.O. Box 79191
Belmont, MA 02179 131,400(4) 9.7
James E. Trimmer
3130 Wheeling
Kansas City, MO 64129 139,593(6) 10.4
Robert K. Brown
3200 South M-291 Hwy.
Independence, MO 64057 50,325(7) 0.00
Dr. Richard Padula
6420 Prospect, Ste T-211,
Kansas City, MO 64132 109,500(8) 8.1
Thomas H. Trabon
3441 West 131st Street
Leawood, KS 66209 50,250 3.7
Roger E. Buford
37055 Shawnee Mission
Overland Park, KS 66205 37,231 2.8
Executive Officers and Trustees
as a Group (7 persons) 558,049 41.4
*Percentage is calculated based on 1,347,421 Common Shares, which includes
131,612 shares currently outstanding in the form of convertible debentures.
1.Includes 1,875 shares held in American Fiduciary Corp. 401(K) Plan;
900 shares held in family trusts; and 25,500 shares held in individually
directed account.
2.Includes 12,900 shares held jointly with spouse and 11,550 shares held
in individually directed account.
3 Owned by Lewco Securities, Inc.
4.Includes 75 shares owned by family members.
5.Includes 21,525 shares held in spouse's trust; 4,800 shares held by
Precise Forms, Inc.
6.Includes 43,200 shares held in Floyd R. Brown, Jr. and Company Profit
Sharing Plan and Trust.
7.Includes 5,250 shares held in spouse's trust.
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 10percent 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
10percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on review of
the copies of such reports furnished to the Company, the Company believes
that, during the 1999 fiscal year, all filings were made timely.
EXECUTIVE COMPENSATION
Report on Executive Compensation
All issues relating to executive officer compensation are addressed by the
Independent Trustees, who are responsible for establishing, reviewing and
revising the compensation structure for the Company's executive officers.
This report is submitted by the Independent Trustees, none of which are
employees or former employees of the Company.
This report is being included pursuant to the Securities and Exchange
Commission rules designed to enhance disclosure of public companies' executive
compensation policies.
The elements of the Company's executive compensation program consists of
competitive base salaries, together with 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 and competitive benefits. The Company's objective
is to determine a compensation package which is sufficient to attract, motivate
and retain executives of outstanding ability and potential. The Company's
compensation package is designed and administered to support the Company's
business objectives.
In general, it is the policy of the Independent Trustees to fix executive base
salaries at levels at the median amount paid to executives with similar
qualification, experience and responsibilities at other comparable businesses.
Executives' base salaries are subjectively determined by individual
performance evaluations and potential future contributions to the Company
It is also the policy of the Independent Trustees to provide an attractive
ncentive bonus pool to the Company's executives. The result of these policies
is to provide the Company's executives with attractive total compensation,
but with a large amount of such compensation at risk and dependent upon
continuously improving the Company's performance.
Base Salaries. Each executive officer's base salary is based on the
recommendations of the Independent Trustees. 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.
Bonus Pool. The Company's Bonus Pool consists of:
(1)an amount equal to one-half of one percent (1/2 of 1percent) 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
(20percent) of the Company's increase in equity in a calendar year that
exceeds the base return defined as three percent (3percent) 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 shall 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, any
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, in the sole discretion of the
President, on a quarterly basis to Company employees, and may be made either
in cash or Company securities. There were no distributions made pursuant to
the Bonus Pool in 1999.
Respectfully submitted,
Byron Constance
Richard Polcari
Robert K. Brown
James E. Trimmer
James I. Threatt
The following table sets forth certain compensation information as to the
Chief Executive Officer and Executive Vice President of the Company for each
of the years ended December 31, 1997, 1998 and 1999. There are no other
compensated executive officers of the Company.
Name and Principal All Other
Position Year Salary Bonus (1) Compensation (4)
John J. Bennett,
Chairman of 1999 $250,000.00 $152,355.42(2) $ 30,000.00
the Board, 1998 $207,796.54 $649,832.00(3) $ 30,000.00
President 1997 $192,602.70 $225,435.00 $225,546.00
Thomas H. Trabon, 1999 $149,241.63 $ 5,975.41 $23,851.39
Executive Vice 1998 $133,570.00 $ 27,425.00 $23,526.14
President 1997 $123,850.00 $ 45,000.00 $61,788.50
(1)Bonuses calculated under the Bonus Pool, the terms of which are specified
in the Report on Executive Compensation. No bonuses were earned in 1999.
(2)Includes $5,975.41 bonus earned and expensed in 1998 and paid in 1999;
$146,380.01 bonus earned in 1994, 1995, 1996 and 1997, expensed in 1996
and 1997 and paid 1999.
(3)Includes bonuses earned in 1994, 1995, 1996 and 1997 and expensed in 1996
and 1997.
(4)The following chart represents other compensation to Mr. Bennett and
Mr. Trabon in 1997 through 1999.
John J. Bennett Thomas H. Trabon
1997 1998 1999 1997 1998 1999
Defined
Contribution
Plan $30,000 $30,000 $30,000 $25,042.50 $23,526.14 $23,851.39
Securities
Bonus 195,546 480.000* 0 36,746.00 0 0
Total Other
Compensation
$225,546 $510,000 $30,000 $61,788.50 $23,526.14 $23,851.39
Employment Contracts
The Company renewed an Employment Agreement with Mr. Bennett for a period
of five (5) years. Pursuant to the terms of the Employment Agreement, Mr.
Bennett's base salary is $250,000.00 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; and (iii) 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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. Mr. Bennett
participated in the deliberations of the Independent Trustees concerning
executive officer compensation.
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 publically traded during the period covered by
this Proxy Statement. Due to the non-existence of a public 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, 1993 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, 1993 through December 31, 1999
12/93 12/94 12/95 12/96 12/97 12/98 12/99
355 ?
293 ?
228 ?
193 A
171 ?
160 A
159 A
152 A
139 ?
118 A
103 A
101 ?
100 A?M
0 M M M M M M
12/93 12/94 12/95 12/96 12/97 12/98 12/99
12/93 12/94 12/95 12/96 12/97 12/98 12/99
M-Master Realty
Properties, Inc. 100 0 0 0 0 0 0
? S&P 500
Index 100 101.31 139.23 171.19 228.32 293.57 355.30
A-All Equity
REITS 100 103.17 118.92 160.86 193.45 159.59 152.22
CERTAIN TRANSACTIONS
The Company engages Embassy Properties, Inc., a Kansas corporation ("EPI"),
to manage most real estate assets of the Company. EPI is an experienced
property management company employing approximately 200 people. The
management services include, among other things, rent billing and collection,
leasing, maintenance, construction supervision, compliance with regulatory
statutes and rules, loan servicing, human resource administration and
property disposition. In 1999, the Company paid EPI $ 351,150 in fees.
Janet Gatz-Bennett, John Bennett's spouse, is the President and majority
shareholder of EPI and Roger E. Buford, an Affiliated Trustee of the Company,
is the Executive Vice President and a minority shareholder 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 $2,001,000 in lease payments to the Company and affiliates of the Company
in 1999.
EHM is indebted to the Company in the amount of $760,490.00 in connection
with amounts due under the hotel leases and funds advanced for operations of
the hotel properties.
The Company owns a 20percent ownership interest in Wellington, LLC, a Kansas
limited liability company ("Wellington"). The remaining ownership interests
of Wellington are owned by certain members of the Board of Trustees.
Wellington owns a 99percent limited partnership interest in Foxridge, L.P.,
a Kansas limited partnership ("Foxridge"). The general partner of Foxridge,
Benchmark Management Group, Inc., a Missouri corporation, is owned by EPI.
The Company has guaranteed bank debt of Wellington.
The Company is a Co-General Partner in B & F Properties, L.P., a Missouri
limited partnership ("B&F"). B&F owns certain real and personal property
located in Kansas City, Missouri which is to be rehabilitated by MRP Historic
Development Company, a Missouri general partnership ("MRP Historic"). The
Company is a 33percent owner in MRP Historic. The remaining ownership
interests in MRP Historic are owned equally be Recon Development, Inc.,
a Missouri corporation ("Recon") and Embassy Properties, Inc., a Missouri
corporation ("EPI").
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. On September 1, 1997, the
participants in the ATP accepted a Promissory Note from the Company, which
note is to be repaid on September 1, 2000 (the "Note"). It bears interest
at the rate of 9percent, which interest is payable quarterly. The following
reporting persons and/or their qualified retirement plans or affiliated
entities currently have the following outstanding balances under the Note:
John J. Bennett $366,977.62
Robert K. Brown $ 58,856.95
Dr. Richard Padula $126,542.43
John Bennett, President and Affiliated Trustee of the Company, advanced
the Company $200,000.00 under the ATP in 1999.
In 1999, the Company paid to Recon Development Company, a Missouri
corporation, $133,736 for tenant improvement services provided to various
properties owned by the Company. Recon Development Company is controlled
by Roger E. Buford, an Affiliated Trustee of the Company.
In 1999, the Company sold to Bennett Family Partners, L.L.C., an affiliate
of John Bennett, the President and Affiliated Trustee of the Company,
128 limited partnership units in Opp IX, L.P., a Missouri limited partnership
for the sum of $172,800. The Board of Trustees determined that these limited
partnership units were a non-strategic asset of the Company and this purchase
was unanimously approved by the Independent Trustees on September 21, 1999.
There was no gain or loss on the sale.
In 1999, the Company sold to Bennett Family Partners, L.L.C., an affiliate
of John Bennett, the President and Affiliated Trustee of the Company,
forty-eight (48) limited partnership units in Opp X, L.P., a Missouri limited
partnership for the sum of $18,373.00. The Board of Trustees determined that
these limited partnership units were a non-strategic asset of the Company and
this purchase was unanimously approved by the Independent Trustees on
September 21, 1999. There was no gain or loss on the sale.
Other Matters
The Board of Trustees does not know of any matters that are to be presented
at the Annual Meeting other than those stated in the Notice of Annual Meeting
and referred to in this Proxy Statement.
Financial Statements
The financial statements of the Company, in comparison form for the years
ended December 31, 1999, is contained in the 1999 Annual Report to
Shareholders, a copy of which is enclosed with this Proxy Statement.
By Order of the Trustees
John J. Bennett, President
