<PAGE> 1
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
RESORT INCOME INVESTORS, INC.
(Name of Registrant as Specified In Its Charter
and Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
RESORT INCOME INVESTORS, INC.
ONE NORWEST CENTER
1700 LINCOLN
49TH FLOOR
DENVER, COLORADO 80203-4549
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------
To the Stockholders of
Resort Income Investors, Inc.:
The Annual Meeting of Stockholders (the "Meeting") of Resort Income
Investors, Inc., a Delaware corporation (the "Company"), will be convened in the
John D. Hershner Room, One Norwest Center, 1700 Lincoln, Denver, Colorado 80203
on June 29, 1995, at 9:00 a.m. (Mountain Standard Time) (the "Meeting Date")
pursuant to this notice. All Stockholders are entitled to attend the Meeting on
the Meeting Date if they so elect. The Company is soliciting proxies, pursuant
to the attached Proxy Statement, for use at the Meeting on the Meeting Date. The
Company expects that a quorum will be present on the Meeting Date and that the
matters to be considered by the Stockholders will be acted upon at the Meeting.
The Meeting of Stockholders will be held for the following purposes:
(1) To elect four directors to hold office until the next Annual
Meeting of Stockholders or otherwise as provided in the by-laws of the Company;
(2) To consider and act upon the selection of Deloitte & Touche LLP
as independent public accountants of the Company for the year 1995; and
(3) To transact such other business as may properly come before the
Meeting, or any adjournment thereof.
The Board of Directors has fixed the close of business on May 8, 1995,
as the record date for the determination of Stockholders entitled to notice of
and to vote at the Meeting.
Whether or not you plan to attend the Meeting in person, please
complete, sign and return the enclosed form of proxy. Thank you.
/s/ Mark Hemmeter
---------------------------------
Mark Hemmeter
Executive Vice President,
Secretary and Treasurer
The Company's 1994 Annual Report is being mailed to Stockholders
concurrently with this Proxy Statement.
<PAGE> 3
RESORT INCOME INVESTORS, INC.
------------------
PROXY STATEMENT
------------------
This proxy statement is furnished, on May 23, 1995 to stockholders of
record as of the Record Date (the "Stockholders") of Resort Income Investors,
Inc. (the "Company"), in connection with the solicitation of proxies by and on
behalf of the Board of Directors of the Company to be voted at the Annual
Meeting of Stockholders (the "Meeting") when it is convened on June 29, 1995 at
9:00 a.m. (the "Meeting Date"), or any subsequent adjournment thereof.
THE PROXIES SOLICITED BY THE COMPANY PURSUANT TO THIS PROXY STATEMENT
ARE SOLICITED FOR USE AT THE MEETING WHEN CONVENED ON THE MEETING DATE AND ANY
SUBSEQUENT ADJOURNMENTS AND MAY NOT BE USED FOR ANY PURPOSE, INCLUDING THE
DETERMINATION OF WHETHER A QUORUM IS PRESENT, PRIOR TO THE MEETING DATE.
THEREFORE, IT IS ANTICIPATED THAT THE BUSINESS OF THE COMPANY TO BE CONSIDERED
AT THE MEETING, WITH RESPECT TO WHICH PROXIES ARE SOLICITED PURSUANT TO THIS
PROXY STATEMENT, WILL BE ADDRESSED ON THE MEETING DATE.
The by-laws of the Company (the "Bylaws") require that the Annual
Meeting of Stockholders of the Company for any year be held on or before June 30
of the following year. Therefore, the 1994 Annual Meeting of Stockholders of the
Company will be convened on June 29, 1995. Stockholders who wish to attend the
Meeting are urged to contact Kristen Sorice at (303) 863-2406, to advise the
Company of their intention to attend the Meeting so that appropriate
arrangements can be made.
The solicitation of proxies will be by mail and the cost will be borne
directly by the Company. The Company may retain the services of a proxy
solicitor in connection with this solicitation but shall not pay more than
$15,000 for such services. Upon request, the Company will reimburse banks,
brokers, nominees and related fiduciaries for reasonable expenses incurred by
them in sending annual reports and proxy materials to beneficial owners of
shares of common stock of the Company (the "Shares") to the extent required by
Rule 14a-13(a-b) under the Securities Exchange Act of 1934, as amended.
The Shares represented by properly executed proxies in the accompanying
form received by the Board of Directors prior to the Meeting Date will be voted
at the Meeting on the Meeting Date. Shares not represented by properly executed
proxies will not be voted. Where a Stockholder specifies a choice in a proxy
with respect to any matter to be acted upon, the Shares represented by such
proxy will be voted as specified. When a Stockholder does not specify a choice,
in an otherwise properly executed proxy, with respect to any proposal referred
to therein, the Shares represented by such proxy will be voted with respect to
such proposal in accordance with the recommendations of the Board of Directors
described herein. A Stockholder who signs and returns a proxy in the
accompanying form may revoke it by: (i) giving written notice of revocation to
the Secretary of the Company before the proxy is voted at the Meeting on the
Meeting Date; (ii) executing and delivering a later-dated proxy; or (iii)
attending the Meeting on the Meeting Date and voting his or her Shares in
person.
The affirmative vote of a majority of the Shares present in person or
represented by proxy at the Meeting is required for the election of Directors
and the ratification of the independent auditors. With regard to the election of
Directors, votes may be cast in favor or withheld; votes that are withheld will
be excluded entirely from the vote and will have no effect. Broker non-votes
(Shares not voted by brokers due to the absence of instructions from street name
holders) on a matter are not considered voted, present or represented on that
matter and thus have no effect on the outcome of the election of Directors.
2
<PAGE> 4
The close of business on May 8, 1995 has been fixed as the record date
(the "Record Date") for the determination of Stockholders entitled to notice of
and to vote at the Meeting. On such date, the Company had outstanding 4,156,000
Shares, each of which entitled the holder thereof to one vote at the Meeting.
Only Stockholders of record as of the Record Date will be entitled to vote at
the Meeting or any adjournments thereof. A quorum, consisting of the holders of
at least a majority of the issued and outstanding Shares eligible to vote, must
be present, in person or by proxy, at the Meeting for valid Stockholder action
to be taken. Stockholders do not have any appraisal or similar rights of
dissenters with respect to the matters to be considered at the Meeting.
The mailing address of the principal executive offices of the Company
is One Norwest Center, 1700 Lincoln, 49th Floor, Denver, Colorado 80203-4549.
This Proxy Statement and the related proxy card are being mailed to the
Stockholders on or about May 23, 1995.
MATTERS TO BE CONSIDERED BY STOCKHOLDERS
1. ELECTION OF DIRECTORS
Four (4) Directors will be elected at the Meeting, each to serve until
the next Annual Meeting of Stockholders or otherwise as provided in the Bylaws
and until their respective successors are elected and qualified. Pursuant to the
Bylaws, a majority of the Directors (the "Independent Directors") must be
unaffiliated with the Investment Manager, as hereinafter defined, while the
remaining Directors shall be affiliated with the Investment Manager (the
"Affiliated Directors"). Unless instructions to the contrary are given, the
persons named as proxy voters ("Proxies") in the accompanying proxy, or their
substitutes, will vote for the following nominees for Director with respect to
all proxies received by the Company. If any nominee should become unavailable
for any reason, it is intended that votes will be cast for a substitute nominee
designated by the Independent Directors with respect to the Independent
Directors and by the remaining Directors, after considering the recommendation
of the Investment Manager, with respect to the Affiliated Directors.
The Bylaws provide that an Independent Director may not, directly or
indirectly (including through a member of his immediate family), own any
material interest in, be employed by, have any present material business or
professional relationship with, or serve as an officer or director of, the
Investment Manager or its Affiliates. Additionally, an Independent Director may
not serve as a director or trustee for more than two other programs sponsored by
the Investment Manager or its Affiliates, and may not perform other services for
the Company, except as a Director. The names of the nominees for Independent
Director and certain information regarding them, including their principal
occupations for the past five years, are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS DIRECTOR
---- --- ------------------------------------------- --------
<S> <C> <C> <C>
Daniel D. Lane ................. 60 Director of the Company and member of the audit 1990
committee. Mr. Lane is one of two founding principals and
serves as Chairman and Chief Executive Officer of Newport
Beach, California-based Lane/Kuhn Pacific, Inc. The
company presently consists of several master-planned
community development and home-building partnerships,
including East Lake Development Company, Lane/Kuhn
Pacific Communities and Lane/Kuhn Pacific Homes. In
1960, Mr. Lane founded Lan Ron Enterprises and its
related entities. These companies engaged in the
development of thousands of single-family homes. Mr.
Lane also served as managing partner of Cadillac Fairview
Homes West from 1977 to 1983. Mr. Lane has been a member
of the Board of Directors of Fidelity National Financial,
Inc. since 1992 and a member of the University of
Southern California Board of Trustees since 1987.
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
John R. Young .................. 61 Director of the Company and Chairman of the audit 1988
committee. Since 1988, Mr. Young has been a consultant
to the hotel industry and since 1990 he has also been a
Director and Senior Vice President - real estate and
development of Horizon Hotels, Ltd. From 1980 until
1988, he was Senior Vice President and Treasurer of ITT
Sheraton Corporation and Executive Vice President of ITT
Sheraton Realty Corporation. Mr. Young was responsible
for directing all domestic and international treasury and
corporate finance activities regarding corporate finance
requirements, cash management, bank relationships,
corporate insurance requirements and risk management. As
Executive Vice President of ITT Sheraton Realty
Corporation, Mr. Young participated and consulted in the
acquisition, disposal and development of hotel properties
and he has performed similar services for Horizon since
1990. Mr. Young had been employed by ITT Sheraton
Corporation and its predecessors since 1967. Mr. Young
is a member of the American Hotel and Motel Association
and the Urban Land Institute; and a past Treasurer and
founding member of the Citizens Housing and Planning
Association of Greater Boston.
</TABLE>
4
<PAGE> 6
The Bylaws provide that the two (2) Affiliated Directors shall be
nominated by the Directors, after considering the recommendations of the
Investment Manager. The names of the nominees for Affiliated Director and
certain information regarding them, including their principal occupations for
the past five years, are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS DIRECTOR
---- --- ------------------------------------------- --------
<S> <C> <C> <C>
Christopher B. Hemmeter ........ 55 Chairman of the Board and President of the Company. Mr. 1990
Hemmeter has been Chairman of the Board of Grand Palais
Enterprises, Inc. since May 1992 and Chairman of the
Board of Hemmeter Enterprises, Inc. ("HEI") since its
inception in August 1993 and its Chief Executive Officer
since November 1, 1993. Mr. Hemmeter has been a member
of the Executive Committee of Harrah's Jazz Company since
December 1993. Harrah's Jazz Company is a general
partnership formed to develop and own the single legally
permitted land-based casino in New Orleans, Louisiana.
For the past 25 years, Mr. Hemmeter had been developing
real estate, first with an emphasis on luxury resort
hotels and, more recently, with an emphasis on casinos.
Mr. Hemmeter has developed over $1 billion of real estate
including destination resort and casino properties. Mr.
Hemmeter is a member of the Board of Directors of
Morrison Knudsen Corporation and the Advisory Board of
the Carter Center at Emory University, member of the
Board of Overseers of the John Anderson Graduate School
of Business at the University of California at Los
Angeles, the Board of Trustees of the National Symphony
Orchestra and the Board of Directors of The Music Center
of Los Angeles. Mr. Hemmeter holds a key license from
the Colorado Gaming Commission. Mr. Hemmeter is the
father of Mr. Mark Hemmeter, a Director and the Executive
Vice President, Secretary and Treasurer of the Company.
Mark Hemmeter .................. 31 Director, Executive Vice President, Secretary and 1990
Treasurer of the Company, a Director and senior executive
of HEI since November 1, 1993 and was Chief Executive
Officer of HEI and its predecessors from October 1991
until November 1, 1993. Mr. Hemmeter has been involved
in real estate development since 1985 with predecessors
of HEI and was the President of Hemmeter Design Group,
Inc. and Hemmeter Aviation, Inc. and a partner in
Projects International. Mr. Hemmeter holds a key license
from the Colorado Gaming Commission. He is the eldest
son of Mr. Christopher B. Hemmeter, the Company's
President and Chairman of the Board.
</TABLE>
5
<PAGE> 7
The Board of Directors is required to meet at least four times per year
either in person or by telephone conference. The Board of Directors met 12 times
during 1994, either in person or telephonically. The Board has not established
any nominating, compensation or other committees or groups performing similar
functions other than an audit committee which is comprised solely of the
Independent Directors. The function of the audit committee is to work with the
Company's independent auditors and generally oversee the management-auditor
relationship. The audit committee met once in 1994. All of the members of the
Board of Directors attended more than 80% of the meetings of the Board of
Directors and all the Independent Directors attended the one audit committee
meeting (which only the Independent Directors are required to attend).
RECOMMENDATION OF THE BOARD: THE FOREGOING NOMINEES FOR DIRECTOR WILL
BE PRESENTED FOR ELECTION BY THE STOCKHOLDERS AT THE ANNUAL MEETING OF
STOCKHOLDERS AND THE BOARD OF DIRECTORS RECOMMENDS THAT THEY BE ELECTED.
The affirmative vote of a majority of the votes cast by Stockholders
present in person or by proxy and eligible to vote at the Meeting, a quorum
being present, is required to elect each of the nominees listed above.
2. APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company are included in the Company's
Annual Report furnished to all Stockholders. The Board of Directors has
appointed Deloitte & Touche LLP ("Deloitte & Touche") as independent public
accountants for the Company to examine its financial statements for the year
1995 and has determined that it would be desirable to request that the
Stockholders approve such appointment. Deloitte & Touche is knowledgeable about
the Company's operations and accounting practices and is well qualified to act
in the capacity of independent public accountants to the Company.
Deloitte & Touche acted as the Company's principal accountants for the
fiscal years ended December 31, 1992, 1993 and 1994. The total fees for services
paid by the Company to Deloitte & Touche in each of 1992, 1993 and 1994 were
approximately $45,500, $34,300 and $44,500, respectively. Fees applicable to the
audit of the Company's financial statements are reviewed by the Board of
Directors before the services are provided. Other services are not normally
approved by the Board of Directors before the services are provided, but are
subsequently reviewed by the Board of Directors.
If the Stockholders do not approve the appointment of Deloitte &
Touche, the Board of Directors would reconsider the appointment. In view of the
difficulty and expense involved in changing independent public accountants on
short notice, if the resolution is not approved it is contemplated that the
appointment for 1995 will be permitted to stand unless the Board of Directors
finds other compelling reasons for making a change. Disapproval of the
resolution will be considered as advice to the Board of Directors to select
other independent public accountants for the following year. Representatives of
Deloitte & Touche are expected to be present at the Meeting and will have the
opportunity to make a statement if they desire to do so and are also expected to
be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD: THE FOLLOWING RESOLUTION WILL BE PRESENTED
FOR A VOTE OF THE STOCKHOLDERS AT THE ANNUAL MEETING OF STOCKHOLDERS AND THE
BOARD OF DIRECTORS RECOMMENDS THAT IT BE APPROVED:
RESOLVED, that the Stockholders concur in the appointment by the Board
of Directors of Deloitte & Touche to serve as independent public accountants for
the Company for 1995.
The affirmative vote of a majority of the votes cast by Stockholders
present in person or by proxy and eligible to vote at the Meeting, a quorum
being present, is required for the adoption of the foregoing resolution.
6
<PAGE> 8
EXECUTIVE OFFICERS
The Executive Officers of the Company are selected by the Board of
Directors and each serves until his successor is elected and qualified or until
his death, resignation or removal by the Board of Directors. The Executive
Officers of the Company are Christopher B. Hemmeter, President, and Mark
Hemmeter, Executive Vice President, Secretary and Treasurer. The biographies of
Messrs. Christopher B. Hemmeter and Mark Hemmeter are set forth above.
COMPENSATION OF DIRECTORS AND
EXECUTIVE OFFICERS AND RELATED INFORMATION
The Independent Directors are paid an annual fee of $20,000, payable
quarterly, and are reimbursed for out-of-pocket expenses incurred in connection
with attending meetings of the Board of Directors. Each Independent Director
received a fee of $20,000 in 1994. Each Independent Director who served for all
of the first quarter of 1995 also received $5,000 in April 1995 as his first
quarterly payment for 1995. Neither the Affiliated Directors nor the Executive
Officers of the Company received any compensation from the Company in 1994 nor
will they in 1995. However, the Affiliated Directors have been and will be
reimbursed by the Company for their travel expenses incurred in connection with
attending meetings of the Board of Directors. During the year ended December 31,
1994, the Company paid Independent Directors reimbursements aggregating $5,433.
The Affiliated Directors and Executive Officers are employees, officers,
directors and/or beneficial owners of the Investment Manager and/or its
Affiliates and are compensated by such entities, in part, for their services to
the Company.
COMPARATIVE PERFORMANCE GRAPH
The graph set forth below compares cumulative stockholder return on the
Company's Shares with a cumulative total return on the companies listed on the
American Stock Exchange (U.S. Companies) ("AMEX Market Index") and an industry
group consisting of publicly-traded mortgage lending real estate investment
trusts (the "Industry Index") for the period January 1, 1990 to December 31,
1994. The comparison assumes the investment of $100 in the common stock of the
Company, the AMEX Market Index and the Industry Index on January 1, 1990 and the
reinvestment of all dividends. The stockholder return of each of the companies
in the Industry Index has been weighted according to market capitalization at
the beginning of each measurement period.
The stock price performance shown on the graph is not necessarily
indicative of future price performance.
PERFORMANCE GRAPH
Comparison of Five Year Cummulative Total Return Among Resort Income
Investors, Inc., AMEX Market Index and NAREIT Mortgage REIT Total Return Index.
FISCAL YEAR ENDING
<TABLE>
<CAPTION>
COMPANY 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
RESORT INCOME INV INC 97.83 123.28 167.47 248.85 201.72
NAREIT MORTGAGE INDEX 81.63 107.62 109.68 125.64 95.11
AMEX MARKET INDEX 84.80 104.45 105.88 125.79 111.12
</TABLE>
Assumes $100 Invested on January 1, 1990
Assumes Dividend Reinvested
Fiscal Year Ending December 31, 1994
7
<PAGE> 9
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of April 1, 1995 by: (i)
each Director of the Company who beneficially owns common stock; (ii)each
Executive Officer of the Company; (iii) each person that is known by the Company
to beneficially own more than 5% of the outstanding Shares; and (iv) all
Directors and Executive Officers of the Company as a group. The Stockholders
named below have sole voting and investment power with respect to the Shares
shown as beneficially owned by them, except as expressly disclosed to the
contrary.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Christopher B. Hemmeter ... 71,900 shares (1)(2) approximately 1.7%
Hemmeter Enterprises, Inc.
One Norwest Center
1700 Lincoln
49th Floor
Denver, Colorado 80203-4549
Common Stock Mark Hemmeter ............. 22,114 shares (2)(3) less than 1%
Hemmeter Enterprises, Inc.
One Norwest Center
1700 Lincoln
49th Floor
Denver, Colorado 80203-4549
Common Stock Daniel D. Lane ............ 13,000 shares less than 1%
Lane/Kuhn Pacific, Inc.
14 Corporate Plaza
Newport Beach, California 92660
Common Stock John R. Young ............. 500 shares less than 1%
155 Walpole Street
Dover, Massachusetts 02030
All Directors and 105,514 shares (3) approximately 2.5%
Executive Officers of the
Company as a group
</TABLE>
(1) Of the 71,900 Shares attributable to Mr. Christopher B. Hemmeter, 1,000
Shares are owned by a trust of which his granddaughter, Taylor, is the
sole beneficiary and of which he is the trustee; 1,000 Shares are owned
by a trust of which his granddaughter, Madeline, is the sole
beneficiary of which he is the trustee; and 9,600 Shares are owned by
his wife, Patricia. Mr. Hemmeter disclaims ownership of the Shares
owned by his wife.
(2) Mr. Mark Hemmeter disclaims ownership of any Shares owned by his
father, Mr. Christopher B. Hemmeter, either directly or indirectly. Of
the 22,114 Shares attributable to Mr. Mark Hemmeter, 114 are owned
directly by his wife, Lisa; 1,000 Shares are owned by a trust of which
his daughter, Taylor, is the sole beneficiary; and 1,000 Shares are
owned by a trust of which his daughter, Madeline, is the sole
beneficiary.
(3) The total indicated is less than the sum of the Shares indicated as
attributable to Messrs. Christopher B. and Mark Hemmeter, Daniel D.
Lane and John R. Young individually to avoid double counting of the
Shares held in trust for Miss Taylor Hemmeter and Miss Madeline
Hemmeter.
8
<PAGE> 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. GENERAL
The original business plan of the Company contemplated the Company
principally making mortgage loans ("Mortgage Loans") which would generally be
secured by either luxury destination resorts or unimproved property anticipated
to be developed into luxury destination resorts. In light of the state of the
real estate market during the early 1990's in general, and the resort
development market in particular, the Company has shifted its focus to making
mortgage loans secured by gaming-related developments or unimproved property
anticipated to be developed into gaming-related developments. The Mortgage Loans
will continue to consist primarily of: (i) loans made for the purpose of
acquiring, carrying out and engaging in pre-development activities with respect
to real property (the "Pre-Development Loans"); and (ii) loans made for the
purpose of developing, constructing or refurbishing real property improvements
(the "Mini-Permanent Loans"). Although the Company may make Mortgage Loans to
borrowers which are affiliates (the "Affiliated Borrowers") of RII Advisors,
Inc., the Company's investment manager (the "Investment Manager"), or which are
not affiliates of the Investment Manager (the "Non-Affiliated Borrowers")
(collectively, the "Borrowers"), most Mortgage Loans will be to Affiliated
Borrowers. Mortgage Loans will be secured by a lien on the Borrowers' real
property or by other REIT-qualifying security approved by the Directors,
including, without limitation, an interest in the Borrower, or by a similar
security interest.
Generally, the Company will make Mortgage Loans which are either
Pre-Development Loans or Mini-Permanent Loans. The Borrowers of such Mortgage
Loans will be required to pay Points to the Company in an amount equal to a
percentage (generally 2% or more) of the Principal of such Mortgage Loans and
also may be required to pay Bonus Interest in the form of a participation,
generally 10% to 25% of the appreciation of the underlying property for
Pre-Development Loans and 10% of the "added value" for Mini- Permanent Loans.
Mortgage Loans generally will have maturities of between one and five years,
subject to extension; more specifically, Mini-Permanent Loans will have
maturities of between four and five years and Pre-Development Loans are
anticipated to have terms of between one and three years. The maturity of each
Mortgage Loan can be extended for up to two additional years with each 12 month
extension requiring the payment of additional Points (2% of the outstanding
Principal and Interest Reserve) plus the potential for additional Bonus Interest
equal to an additional 2-1/2% of the "increase in value" or "added value" of the
collateral property.
The Company's balance of cash, cash equivalents and investments at
market value as of December 31, 1994 was $1,339,298. Cash and cash equivalents
represent cash invested in bank accounts and institutional money market funds. A
portion of the cash balance is made up of the Company's working capital reserve.
The Company maintains a working capital reserve of 1% of its gross offering
proceeds received (approximately $500,000). The Company may alter the percentage
of such reserves if deemed necessary or advisable.
Net income for the year ended December 31, 1994 was $3,975,315 or $.96
per Share based on 4,156,000 Shares outstanding during the period. The Company
made distributions in the amount of $0.375 per Share on each of May 13, August
12 and November 14, 1994 and January 31, 1995. Thus total distributions for
operations in calendar year 1994, some of which was paid in early 1995, were
$1.50 per Share. On April 17, 1995, the Company declared a $0.375 per Share
distribution paid on May 15, 1995 to Stockholders of record on April 15, 1995.
As required under the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the distributions, in the aggregate, are at least 95% of
the Company's taxable income, thus permitting the Company to continue qualifying
as a real estate investment trust ("REIT").
9
<PAGE> 11
2. CURRENT INVESTMENTS
The Company may invest available funds temporarily in investments such
as: mortgage-backed securities issued or guaranteed by the United States
government or its agencies; other short-term, interest-bearing debt instruments
or investment-grade securities; or short-term mortgage loans to Affiliated
Borrowers if such temporary investments: (i) mature before the Company expects
to have other investment opportunities in Mortgage Loans; (ii) are anticipated
to generate yields higher than other temporary investments; and (iii) conform to
the Temporary Investments criteria established by a majority of the Directors,
including a majority of the Independent Directors. Temporary mortgage loan
investments will not generate Bonus Interest and are generally expected to
achieve rates of returns less than presently anticipated to be attainable from
the Mortgage Loans the Company intends to make.
The Company currently has eight temporary investments outstanding
totalling $41,855,000 in principal. Each of the borrowers is an Affiliated
Borrower. No Bonus Interest will be payable in connection with any of the
Temporary Investments and the Temporary Investments are not covered by the
Mortgage Loan Purchase Guaranty.
The Company made a loan to Canadian Pavilion Limited Partnership (the
"Canadian Pavilion Borrower") in the amount of $2,600,000 (the "Canadian
Pavilion Investment"), on or about November 19, 1991. The proceeds were applied
as follows: $1,000,000 to purchase the $2,900,000 of defaulted mortgages and
notes encumbering the subleasehold interest in the Canadian Pavilion and
approximately $800,000 was advanced to an affiliate of the Canadian Pavilion
Borrower for it to purchase the subleasehold interest from a third party. The
remaining $800,000 was used to provide working capital to the Canadian Pavilion
Borrower. Immediately after the closing of the Company's loan, the interest of
this third party was transferred to the Canadian Pavilion Borrower. The Canadian
Pavilion is a wharf-front property on the Mississippi River in downtown New
Orleans. It is part of the International Pavilion which was erected as an
exhibition hall for the 1984 World's Fair. The maturity of the Canadian Pavilion
Investment has been extended by the Company, most recently on December 16, 1994,
to the earlier of demand or June 30, 1995. Until May 18, 1994, the Canadian
Pavilion Investment interest rate was 9 1/2% per annum, payable quarterly in
arrears; thereafter, the Canadian Pavilion interest rate increased to 22% per
annum, payable quarterly in arrears, of which 11.5% accrues and will be payable
upon repayment of the loan. The Company did not receive fees in connection with
any of the extensions. The Canadian Pavilion Borrower is current on its interest
payments to the Company. The Canadian Pavilion Borrower is currently marketing
the Canadian Pavilion for sale as a storage or similar facility to third-party
buyers.
On February 11, 1992, the Company funded the initial draws for two
demand loans to Outlaws Casino, Ltd. (the "Outlaws Borrower") with current
balances of $1,600,000 (the "Crook Investment") and $605,000 (the "Hudspeth
Investment") (collectively, the "Outlaws Investments"). The Outlaws Borrower
sought the loans in order to fund a portion of the acquisition of a small
casino, the Outlaws Casino, located on two adjacent parcels of land in Black
Hawk, Colorado, known as the Crook Parcel (approximately 16,000 square feet) and
the Hudspeth Parcel (approximately 5,500 square feet). The Outlaws Borrower
originally planned to combine the Crook Parcel and the Hudspeth Parcel and
construct an approximately 50,000 square foot casino containing approximately
800 slot machines. The Outlaws Investments are secured by an assignment of a
partnership interest in the Outlaws Borrower; the Crook Investment is also
secured by a second mortgage on the Crook Parcel which is subordinated to a
seller note in the amount of $3,400,000; and the Hudspeth Investment is also
secured by a second mortgage on the Hudspeth Parcel which is subordinate to a
first mortgage in the amount of $700,000.
The plans for the expansion and renovation of the Outlaws Casino have
since been abandoned by the Outlaws Borrower because of the perceived
competition from other casinos in Black Hawk, including Bullwhackers, a casino
owned by an affiliate of the Outlaws Borrower. The Outlaws Borrower is currently
marketing the parcels, and the 74 slot casino currently operating thereon, for
sale. The maturity of the Outlaws Investments has been extended by the Company,
most recently on September 14, 1994, to June 30, 1995. The Outlaws Investments
bear interest at 9 1/2% per annum, payable quarterly in arrears. The Outlaws
Borrower is current on its interest payments to the Company.
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On May 12, 1992, the Company made a loan in the amount of $900,000 (the
"Waikiki Investment") to Hemmeter Investment Company, a Hawaii general
partnership. Mideast China and Trading Company (the "Waikiki Borrower") is the
successor to Hemmeter Investment Company and has assumed its obligations under
the Waikiki Investment. The proceeds of the Waikiki Investment, which was funded
on May 27, 1992, were used to acquire options on various properties in New
Orleans, Louisiana, in connection with gamingrelated developments by affiliates
of the Investment Manager. The Waikiki Investment is secured by a leasehold
mortgage on the International Marketplace, an upscale retail center in Honolulu,
Hawaii (the "Waikiki Property"), Mr. Christopher B. Hemmeter's personal guaranty
and a collateral assignment of the Waikiki Borrower's interest as the
sub-sublessor of the Waikiki Property. The Waikiki Investment bears interest at
9 1/2% per annum, payable quarterly in arrears. The maturity of the Waikiki
Investment was extended by the Company on September 14, 1994, to the earlier of
demand or March 31, 1995 in consideration for which the interest rate was
increased to 19.5%, 10% of which accrues and is payable upon the principal
payoff of the Waikiki Investment. On March 16, 1995, the Company agreed to
further extend the maturity of the Waikiki Investment to June 30, 1995.
On April 6, 1994, the Company made a loan in the amount of $1,000,000
(the "Waikiki II Investment") to the Waikiki Borrower. The proceeds of the
Waikiki II Investment, which was funded on April 8, 1994, were used for working
capital for Grand Palais Casino, Inc. ("GPCI"), an affiliate of the Investment
Manager. GPCI is a one-third owner of Harrah's Jazz Company ("HJC"), the entity
that intends to develop and run the single legally permitted land-based casino
in Louisiana (the "New Orleans Casino"). The Waikiki II Investment is secured by
a leasehold mortgage on the Waikiki Property, Mr. Christopher B. Hemmeter's
personal guaranty and a collateral assignment of the Waikiki Borrower's interest
as the sub-lessor of the Waikiki Property. The liens on the Waikiki Property
securing the Waikiki and Waikiki II Investments are of equal priority. The
Waikiki II Investment bears interest at 9 1/2% per annum, payable quarterly in
arrears and was to mature on demand or October 8, 1994. On September 16, 1994
the loan was extended to the earlier of demand or March 31, 1995, in
consideration for which the interest rate was increased to 19.5%, 10% of which
accrues and is payable upon the principal payoff of the Waikiki II Investment.
On March 16, 1995, the Company agreed to further extend the maturity of the
Waikiki II Investment to June 30, 1995. The Company did not receive any fees in
connection with the extension. The Waikiki Borrower is current on its interest
payments to the Company.
On August 27, 1992, the Company made a loan to 228 Poydras Street
Parking Limited Partnership ("228 Poydras L.P.") in the amount of $580,000 to be
used to purchase 228 Poydras Street, New Orleans, Louisiana ("228 Poydras"). 228
Poydras L.P. acquired 228 Poydras with the intention of using it as a parking
facility in connection with the proposed land-based gaming operations to be
conducted by HJC. On November 16, 1994, the Company's 228 Poydras Investment was
repaid by HJC.
As one of its Initial Investments, the Company loaned $12,900,000 (the
"Sint Maarten Loan") to R.C.H. Investments, N.V. (the "Sint Maarten Borrower"),
which was secured by a second mortgage on a 28-acre site on the island of Sint
Maarten in the Netherlands Antilles (the "Sint Maarten Property"). This loan
matured on May 7, 1992. On May 12, 1992, the Company agreed to make a new loan
to the Sint Maarten Borrower in the amount of $12,900,000 (the "New Sint Maarten
Loan") to replace the Sint Maarten Loan. The New Sint Maarten Loan had an
original term of approximately 12 months, and was scheduled to mature on May 7,
1993. The New Sint Maarten loan was extended by the Company for 30 days at which
time it was replaced with a temporary investment (the "Sint Maarten Investment")
which was scheduled to mature on the earlier of demand or June 6, 1994. On June
2, 1994, the Company agreed to extend the maturity of the Sint Maarten
Investment from the earlier of demand or June 6, 1994 to the earlier of demand
or December 31, 1994. In connection with this extension, the Sint Maarten
Borrower agreed to an increased interest rate of 14-1/2% per annum, an increase
of 1/2% over the then current rate. In December 1994, the Sint Maarten Borrower
transferred its interests in the Sint Maarten Property and the attendant
obligation related to the New Sint Maarten Loan to R.C.H. Investments, L.L.C., a
Delaware limited liability company, whose constituent members are the
shareholders of the Sint Maarten Borrower (the "New Sint Maarten Borrower"). On
December 29, 1994, the Board of Directors of the Company agreed to a further
extension of the Sint Maarten Investment to June 30, 1995, however, the demand
feature was withdrawn in consideration for which the interest rate of the Sint
Maarten Investment may be
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increased prior to maturity at the option of the Company. The New Sint Maarten
Borrower continues its efforts to sell this property. The New Sint Maarten
Borrower is current on its interest payments to the Company.
On January 4, 1994, the Company made a loan to Christopher B. Hemmeter
in the amount of $12,900,000 (the "Hemmeter Investment"), the proceeds of which
were used for working capital purposes for Mr. Hemmeter's various gaming
affiliates and to retire certain currently outstanding senior indebtedness
secured by three of Mr. Hemmeter's residences, one in Hawaii and two in
California. This loan was originally secured by junior mortgages on the
aforementioned residences, bore interest at 12% per annum, was payable quarterly
in arrears, and was scheduled to mature on January 3, 1995. On September 14,
1994, the Board of Directors of the Company agreed to modify the loan to provide
for an additional $1,100,000 ("Additional Principal") thereby increasing the
principal amount of the loan to $14,000,000. The Additional Principal originally
bore interest at the rate of 22%, 12% of which was paid under the same terms as
the original loan, and the remaining 10% accrued and will be payable upon the
maturity or earlier prepayment of the loan. In addition, the interest rate on
the original $12,900,000 in principal was increased to 21.7% effective October
1, 1994, 12% of which was paid under the same terms as the original loan, and
the remaining 9.7% accrued and will be payable upon the maturity or earlier
prepayment of the loan. On December 16, 1994, Mr. Hemmeter informed the
Directors that he was selling his residence in Hawaii in late December 1994 and
requested a release of the Company's lien on the Hawaii residence and an
extension of the maturity date of the Hemmeter Investment, including the
Additional Principal. In response to Mr. Hemmeter's request, the Directors
agreed that: (i) the Company should release its lien on the Hawaii residence,
effective January 3, 1995; (ii) the maturity of the Hemmeter Investment,
including the Additional Principal, should be extended to June 30, 1995; and
(iii) the interest rate on the Hemmeter Investment and the Additional Principal
will be increased to 22.7% and 23%. Thirteen percent of both the Hemmeter
Investment and the Additional Principal is now paid under the same terms as
described above, and the remaining 9.7% of the Hemmeter Investment and the
remaining 10% of the Additional Principal accrues and will be payable upon the
maturity or earlier repayment of the Hemmeter Investment and the Additional
Principal. On May 2, 1995, the Board of Directors of the Company agreed to a
further modification of the loan to provide for an additional $1,000,000 (the
"Second Additional Principal") thereby increasing the principal amount of the
loan to $15,000,000. The Second Additional Principal bears interest at the rate
of 23%, 10% of which will be payable upon the maturity or earlier prepayment of
the Second Additional Principal. Mr. Hemmeter is current on his interest
payments to the Company.
On February 13, 1994, the Company made a loan to GPCI in the amount of
$4,000,000, bearing interest at the rate of 14% per annum, payable quarterly in
arrears. The Company increased this loan in April 1994 by $2,250,000 to an
aggregate principal amount of $6,250,000 (the "HJC Investment"). On November 14,
1994, the Company agreed to subordinate the HJC Investment to senior
indebtedness of GPCI in the amount of $34,000,000 and to extend the term of the
HJC Investment to February 3, 1998 in consideration for which the interest rates
were increased to 19.75% effective January 1, 1995. On April 14, 1995, the
Company sold the HJC Investment, on an all cash basis, to an unaffiliated
third-party for the sum of $6,250,000 plus all accrued and unpaid interest
through the date of sale.
On April 21, 1995, the Company made a loan to Hemmeter Enterprises,
Inc. ("HEI"), an affiliate of the Investment Manager, in the amount of
$1,000,000, bearing interest at the rate of 12% per annum, payable quarterly in
arrears, and due on demand (the "HEI Investment"). HEI, either directly or
through affiliated entities, develops, owns and operates gaming and related
entertainment facilities. HEI is a partner in the New Orleans Casino and a 50%
partner in the joint venture which developed and operates one of the nation's
largest riverboat gaming projects, known as River City. In addition, HEI
developed, owns and operates two of the largest casinos in Colorado, known as
Bullwhackers. The proceeds of the HEI Investment will be utilized by HEI for
working capital purposes and is secured by the guarantee of Christopher B.
Hemmeter.
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3. AFFILIATES OF THE COMPANY
On February 16, 1991, a majority of the Independent Directors
authorized the termination of the investment management agreement with RC&H,
Inc. ("RC&H"). Consequently, all rights and responsibilities of RC&H to the
Company as its investment manager terminated on May 4, 1991. On such date, RII
Advisors, an entity controlled by affiliates of Mr. Christopher B. Hemmeter, the
Company's Chairman and President, became the Company's new investment manager.
RII Advisors is subject to the same terms and conditions, as investment manager
to the Company, as RC&H was previously. In this regard, RII Advisors entered
into a substantially identical investment management agreement to that which
terminated with RC&H. The Company has paid the Investment Manager a Loan
Acquisition Fee aggregating $517,500, all of which was paid as of December 31,
1993.
HEI, and certain of its affiliates, have and will continue to provide
certain architectural, development, design-related, financing, leasing, asset
management and brokerage services to the Borrowers or their affiliates in
connection with the properties which HEI develops, refurbishes or manages. In
consideration of such services, HEI and its affiliates have been and will
continue to be paid their usual and customary fees, which may be substantial in
amount.
STOCKHOLDER PROPOSALS
Stockholder proposals for the 1995 Annual Meeting of Stockholders will
not be included in the Company's Proxy Statement for that meeting unless
received by the Company at its executive offices in Denver, Colorado, on or
prior to January 10, 1996. Such proposals must also meet the other requirements
of the rules of the Securities and Exchange Commission relating to shareholder
proposals.
OTHER MATTERS
As of the date of this Proxy Statement, the above is the only business
known to management to be acted upon at the Meeting. However, if other matters
not known to management should properly come before the Meeting, the persons
appointed by the signed proxy intend to vote it in accordance with their best
judgment.
By the order of the Board of Directors,
/s/ Mark Hemmeter
----------------------------------------
Mark Hemmeter
Executive Vice President,
Secretary and Treasurer
Denver, Colorado
May 23, 1995
A COPY OF THE RESORT INCOME INVESTORS, INC. 1994 ANNUAL REPORT ON FORM
10-K WILL BE SUPPLIED TO ANY STOCKHOLDER WITHOUT CHARGE. REQUESTS FOR THE REPORT
SHOULD BE DIRECTED TO:
RESORT INCOME INVESTORS, INC.
ONE NORWEST CENTER
1700 LINCOLN
49TH FLOOR
DENVER, COLORADO 80203-4549
YOUR VOTE IS IMPORTANT. THE PROMPT RETURN OF PROXIES WILL SAVE THE
COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
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<PAGE> 15
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RESORT INCOME INVESTORS, INC.
ONE NORWEST CENTER
1700 LINCOLN
49TH FLOOR
DENVER, COLORADO 80203-4549
The undersigned hereby appoints Mark Hemmeter, Alan L. Mayer and Don S. Hershman
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Resort Income Investors, Inc. held of record by the undersigned on May
8, 1995, at the annual meeting of stockholders to be held on June 29, 1995 or
any adjournment thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as marked to the contrary to vote for all nominees listed below
below)
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
Christopher B. Hemmeter Mark Hemmeter
Daniel D. Lane John R. Young
2. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP as the
independent public accountants of the Company
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted for Proposals 1 and 2.
Please sign exactly as name appears below.
-------------------------------------
(Affix Mailing Label Here)
Date: , 1995
-----------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by the president
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
