UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Maxus Realty Trust, Inc.
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / 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:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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Maxus Realty Trust, Inc.
104 Armour Road
North Kansas City, Missouri 64116
May __, 2005
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders
of Maxus Realty Trust, Inc. (the "Trust") to be held at 10:00 a.m. local time on
June __, 2005, in the 24th Floor Conference Room at 2345 Grand Boulevard, Suite
2400, Kansas City, Missouri. Information regarding business to be conducted at
the meeting is set forth in the accompanying Notice of Special Meeting and Proxy
Statement.
Each of the disinterested Board of Trustees of the Trust has approved a
transaction that would result in the Trust acquiring the Bicycle Club Apartments
in Kansas City, Missouri, the sole asset of Secured Investment Resources Fund,
L.P. III ("SIR III") pursuant to a merger between SIR III and Bicycle Club,
L.L.C., a wholly owned subsidiary of Maxus Operating Limited Partnership
("MOLP"), which is our operating limited partnership. This transaction is
consistent with the Trust's investment objectives, which include providing for
capital growth through appreciation in property values and property
acquisitions.
Under the terms of the merger, the Trust will pay approximately $4.3
million to the limited partners of SIR III, either in the form of cash or MOLP
limited partnership units ("MOLP Units"), which, after a required holding
period, are redeemable for cash or shares of our common stock at the Trust's
option. Only limited partners of SIR III who are "accredited investors" as
defined under the securities laws will have the option of receiving MOLP Units.
In accordance with the requirements of the NASDAQ National Market, the Trust is
seeking your approval of the issuance of the MOLP Units (and the underlying
shares of common stock) in the transaction.
This special meeting of shareholders is being called to consider and vote
upon the proposal(s).
The enclosed proxy statement provides you with detailed information about
SIR III and the Bicycle Club Apartments and the conditions and other terms of
the transaction. We encourage you to read this entire document (including the
appendices) carefully.
The disinterested Board of Trustees has carefully considered the terms and
conditions of the transaction and recommends that you vote for the proposal.
Your vote is very important. Whether or not you plan to attend the special
meeting, I urge you to complete, date, sign and promptly return the enclosed
proxy card to ensure that your shares will be voted at the meeting. If you
attend the special meeting, you may vote in person, even though you have
previously returned your proxy card.
If you have any questions regarding the transaction or the proposals,
please call Michele Berry at (816) 877-0892.
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Sincerely,
------------------------
David L. Johnson
Chairman of the Board, President
and Chief Executive Officer
The Securities and Exchange Commission (the "Commission") has not approved or
disapproved the issuance of the MOLP Units in the transaction nor has the
Commission passed upon the fairness or merits of such issuance or upon the
accuracy or adequacy of the information contained in this document. Any
representation to the contrary is unlawful.
This proxy statement is dated May __, 2005 and is first being mailed to
shareholders of the Trust on or about May 31, 2005.
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MAXUS REALTY TRUST, INC.
104 ARMOUR ROAD
NORTH KANSAS CITY, MISSOURI 64116
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE __, 2005
To the Shareholders of
Maxus Realty Trust, Inc.:
A special meeting of the shareholders of Maxus Realty Trust, Inc. (the
"Trust," "we," "us" or "our") will be held at 10:00 a.m. local time on June __,
2005, in the 24th Floor Conference Room at 2345 Grand Boulevard, Suite 2400,
Kansas City, Missouri, for the following purposes:
1. To consider and vote on a proposal to approve the issuance by our
operating limited partnership, Maxus Operating Limited Partnership
("MOLP") of up to approximately 305,751 limited partnership units
("MOLP Units") (and the underlying shares of our common stock).
2. To consider and vote on a proposal to adjourn the special meeting of
shareholders to allow for additional solicitation of shareholder
proxies or votes in the event that the number of proxies or votes
sufficient to obtain a quorum or to approve Proposal 1 has not been
received by the date of the special meeting of shareholders.
3. To transact such other business as may be properly brought before the
special meeting or at any and all adjournments and postponements of
the meeting.
Your Board of Trustees has set the close of business on May 25, 2005 as the
record date to determine the shareholders entitled to notice of and to vote at
the special meeting or any meeting resulting from an adjournment or postponement
of the special meeting. A list of the shareholders entitled to vote at the
special meeting will be available for examination at our principal offices for a
period of ten days prior to the meeting.
Each of the disinterested Board of Trustees of the Trust recommends that
you vote "FOR" approval of the above proposed transaction.
You may vote in person or by proxy. We have included with this notice a
proxy statement to explain the proposals above and the transaction in detail,
and a proxy card for your use. Even if you expect to attend the special meeting,
please complete, date, sign and return the proxy card to ensure that your shares
will be voted at the meeting. If you attend the special meeting, you may vote
your shares in person, even if you have previously submitted a proxy in writing.
By Order of the Board of Trustees,
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-----------------------------------
Christine A. Robinson
Secretary
May __, 2005
North Kansas City, Missouri
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PROXY STATEMENT
TABLE OF CONTENTS
Summary Term Sheet....................................................8
Certain Questions and Answers About the Transaction..................11
Cautionary Statement Concerning Forward-Looking Statements...........14
Information Concerning the Special Meeting...........................15
Proposal 1: Approval of the Issuance of MOLP Units...................17
Terms of the MOLP Units..............................................24
Unaudited Pro forma consolidated Financial Data......................25
Information About Sir III............................................30
Proposal 2: Approval of Any Adjournment of the Special Meeting.......35
Security Ownership of Certain Beneficial Owners and Management.......35
Independent Auditors.................................................38
Where You can Find More Information..................................38
Index to Consolidated Financial Statements...........................40
Appendix A - Mainland Valuation Services Appraisal...................
Appendix B - Preliminary Copy Form of Proxy..........................
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MAXUS REALTY TRUST, INC.
PROXY STATEMENT
SUMMARY TERM SHEET
This Summary Term Sheet highlights selected information contained in this
proxy statement and may not contain all of the information that is important to
you. You are urged to read this entire proxy statement carefully, including the
appendices. In addition, we incorporate by reference important business and
financial information about us into this proxy statement. You may obtain the
information incorporated by reference into this proxy statement without charge
by following the instructions in the section entitled "Where You Can Find More
Information." In this proxy statement, the terms "we," "us," "our," and the
"Trust" refer to Maxus Realty Trust, Inc. We refer to our subsidiary operating
limited partnership Maxus Operating Limited Partnership as "MOLP."
The Transaction We have agreed to merge a wholly owned subsidiary of MOLP
with Secured Investment Resources Fund, L.P. III ("SIR III")
pursuant to which we will acquire the Bicycle Club
Apartments in Kansas City, Missouri for consideration of
approximately $4.3 million, which will be paid in cash,
except for those limited partners of SIR III that qualify as
accredited investors and elect to receive MOLP Units. The
MOLP Units, after a required holding period, may be
exchanged for shares of our common stock on a one-for-one
basis or cash, at our election. See "Proposal 1 - Background
of the Merger" and "The Transaction" beginning on page 19.
Timing of Closing The closing is currently scheduled to occur on or about June
__, 2005. See "Timing of Closing" beginning on page 19.
Consideration Allocations and Adjustments Limited partners of SIR III
qualifying as accredited investors have the right to elect
to receive this consideration in the form of MOLP Units at a
rate of one MOLP Unit for $14.00 of merger consideration,
which was based on recent prices of our common stock at the
time the merger agreement was executed. See "Consideration
Allocations and Adjustments" beginning on page 19.
Interests of
Certain Persons David L. Johnson, a significant shareholder, President,
Chief Executive Officer and Trustee of the Trust, is the
principal beneficial owner and President of Nichols
Resources, Ltd., the general partner of SIR III. Mr.
Johnson, together with his wife, jointly own approximately
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85% of Bond Purchase, L.L.C., a 7.81% limited partner in SIR
III. Mr. Johnson is also an affiliate of Paco Development,
L.L.C. that is a 2.43% limited partner in SIR III. Bond
Purchase, L.L.C. and Paco Development, L.L.C. have each
indicated it will vote "FOR" the merger and elect to receive
MOLP Units.
Monte McDowell, Bob Kohorst, Chris Garlich, and David L.
Johnson are trustees of the Trust and are the beneficial
owners of 20.3%, 8.0%, 6.5%, and 10.2% respectively of SIR
III. John W. Alvey, Vice President and Chief Financial and
Accounting Officer of the Trust is a minority owner of the
general partner of SIR III and is an executive officer of
Nichols Resources, Ltd. Mr. Garlich and Mr. McDowell have
each indicated that they intend to elect to receive at least
a portion of their merger consideration in the form of MOLP
Units. See "Interests of Certain Persons" beginning on page
19.
Tax Protection We have agreed not to dispose of the Bicycle Club Apartments
in a transaction that would require SIR III to recognize or
be allocated gain for federal income tax purposes before the
third anniversary of the closing. We have also agreed not to
reduce the principal balance of the current first mortgage
on the Bicycle Club Apartments until such anniversary. See
"Tax Protection" beginning on page 19.
Conditions The consummation of the transaction is subject to (i) the
approval of limited partners of SIR III holding a majority
of limited partner units and (ii) our obtaining shareholder
approval of the issuance of the MOLP Units in the
transaction. We have been advised by SIR III that it has
obtained the requisite approval of its limited partners.
Approval Of The
Transaction At the special meeting, we will ask you to approve the
issuance by MOLP of up to approximately 305,751 MOLP Units
(and the underlying shares of our common stock). These MOLP
Units may be exchanged on a one-for-one basis (subject to
adjustments) for shares of the Trust's common stock or cash,
at the Trust's election, after a one-year holding period.
The rules of the NASDAQ National Market provide that
shareholder approval is required in connection with the
acquisition of the stock or assets of
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another company if (i) any director, officer or substantial
shareholder of the issuer has a 5% or greater interest (or
such persons collectively have a 10% or greater interest),
in the company or assets to be acquired and (ii) the
issuance of securities convertible into or exercisable for
common stock, could result in an increase in outstanding
common shares or voting power of 5% or more. This approval
is required for the transaction to proceed. See "Information
Concerning the Special Meeting" beginning on page 15.
Voting Information The minimum vote which will constitute shareholder approval
is a majority of the total votes cast on the proposal to
issue MOLP Units (and the underlying shares of our common
stock) in the transaction. These votes may be cast in person
or by proxy. "Information Concerning the Special Meeting"
beginning on page 15.
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CERTAIN QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
Q: What is the proposed transaction?
A: We have agreed to merge a wholly owned subsidiary of MOLP with SIR III
pursuant to which we will acquire the Bicycle Club Apartments in Kansas
City, Missouri for consideration of approximately $4.3 million, which will
be paid in cash, except for those limited partners of SIR III that qualify
as accredited investors and elect to receive MOLP Units. The MOLP Units,
after a required holding period, may be exchanged for shares of our common
stock on a one-for-one basis (subject to adjustments) or cash, at our
election.
Q: Why is the special meeting being called?
A: The rules of the NASDAQ National Market, on which our common stock is
listed, require our shareholders to approve the issuance of the MOLP Units
(and the underlying shares of our common stock) as contemplated in the
proposed transaction.
Q: Who is SIR III?
A: SIR III is a limited partnership organized in 1988 to hold real property.
The sole asset of SIR III is the Bicycle Club Apartments in Kansas City,
which consists of 312 units of multi-family rental real estate located near
I-29 and Barry Road in Kansas City, Missouri.
Q: Why are we proposing to acquire the Bicycle Club Apartments?
A: We believe that the transaction will benefit our shareholders for the
following reasons:
- it is consistent with the Trust's investment objectives, which include
providing for capital growth through appreciation in property values
and property acquisitions;
- we believe that the transaction will generate both short and long-term
growth in our funds from operations ("FFO") per share; and
- we believe the transaction will result in various operational
synergies.
Q: Are there any possible risks to the transaction?
A: Although we believe that the transaction will benefit our shareholders, we
have considered the following possible risks:
- as a result of the transaction, our total indebtedness will initially
increase. Approximately $8.4 million of the indebtedness on the
Bicycle Club Apartments being acquired will mature in 2008;
- if the expected benefits of the transaction are not realized, or are
not realized in a timely manner, our FFO could be adversely affected;
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- under the terms of the transaction, there will be significant
restrictions on our ability to dispose of or refinance the Bicycle
Club Apartments, which may limit our asset management and financing
flexibility;
- the Bicycle Club Apartments will have a lower tax basis than its book
basis. Of our seven existing properties, three have a lower tax basis
than their book basis. The three properties with the lower tax basis
have a lower tax basis due to deferral of tax gains. The total
deferred gain is $2,899,650. Because the tax basis of these properties
is lower than the book basis, it may potentially reduce or eliminate
the return of capital component of our dividend. This may force us to
increase our distributions of cash to our shareholders, thereby
potentially limiting the amount of cash we might otherwise have been
able to retain for use in growing our business;
- several executive officers and members of the Board of Trustees have a
significant ownership interest or management responsibility in SIR
III; and
- the merger and terms of the transaction were established without any
arms-length negotiations. The terms of the transaction could differ if
they were subject to independent third party negotiations.
We do not, however, believe that these risks outweigh the expected benefits
of the transaction.
Q: What approvals does the transaction require?
A: Your approval of the issuance of the MOLP Units in the transaction is
required. However, since approval of the issuance is a condition to the
transaction, it is effectively a vote on the approval of the transaction.
Additionally, SIR III must obtain the consent of a majority of the holders
of limited partnership units in SIR III for the transaction to close, which
approval SIR III has advised us has been obtained.
Q: What is the expected timing of the transaction?
A: Assuming our shareholders approve the issuance of the MOLP Units in the
transaction and the SIR III limited partners approve the transaction, which
approval SIR III has advised us has been obtained, we expect the
transaction to close on or about June __, 2005.
Q: How will the Trust finance the cash portion of the transaction?
A: We expect to use up to approximately $3.3 million of MOLP's cash and
approximately $1.0 million of SIR III's cash and other deposits. To the
extent limited partners of SIR III elect to acquire MOLP Units, we will use
less than $3.3 million of MOLP's cash.
Q: What are the terms of the securities being issued in the transaction?
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A: The MOLP Units are limited partnership interests in our operating limited
partnership. Following the first anniversary of their issuance, the MOLP
Units will be redeemable by the holders for shares of our common stock on a
one-for-one basis or cash, at our election, subject to adjustments to
reflect stock splits, reverse splits or similar arrangements.
Q: How will I be affected by the transaction?
A: You will continue to own the same number of shares of our common stock that
you owned prior to the acquisition. Your pro rata ownership of MOLP assets,
however, will be diluted to the extent MOLP Units are issued in the
transaction.
Q: What approvals are required of the Trust's shareholders?
A: A majority of the shares voted at the meeting (assuming that a quorum of at
least 50% of our outstanding shares is present) must approve the issuance
of the MOLP Units (and the underlying shares of our common stock) in the
transaction.
Q: What do I need to do now?
A: After carefully considering the information contained in this proxy
statement, please complete, date and sign your proxy card. Then mail your
proxy card in the postage paid envelope as soon as possible, so that your
shares may be voted in accordance with your instructions at the special
meeting. Our Board of Trustees recommends that you vote FOR approval of the
proposals.
Q: What do I do if I want to change my vote?
A: You may change your vote:
- by sending a written notice stating that you would like to revoke your
proxy, which must be received by our transfer agent prior to the vote
at the special meeting;
- by signing a later dated proxy card and mailing it promptly so that it
is received by our transfer agent prior to the vote at the special
meeting; or
- by attending the special meeting and voting your shares in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how
to vote them. Please tell your broker how you would like him or her to vote
your shares. If you do not tell your broker how to vote, your shares will
not be voted.
Q: Where can I find more information about the Trust?
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A: We file reports and other information with the Securities and Exchange
Commission (the "Commission"). You may read and copy this information at
the Commission's public reference facilities. You may call 1-800-SEC-0330
for information about these facilities. This information is also available
at the Internet site the Commission maintains at http://www.sec.gov. You
may also request copies of these documents from us. For more information,
see the section below entitled "Where You Can Find More Information."
Q: Who can help answer my questions?
A: If you have any questions about the transaction or any of the specific
proposals or would like additional copies of this proxy statement, please
call Michele Berry at (816) 877-0892.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements in this Proxy Statement constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this Proxy Statement, the words "estimate," "project,"
"anticipate," "expect," "intend," "believe" and similar expressions are intended
to identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance and achievements of the Trust, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following factors, as well as those factors discussed
elsewhere in the Trust's filings with the Commission: competition, inflation,
the ability to retain tenants, general economic, business, market and social
conditions, trends in the real estate investment market, projected leasing and
sales, future prospects for the Trust and other factors referred to in this
proxy statement.
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INFORMATION CONCERNING THE SPECIAL MEETING
Time, Date, Place and Purpose of the Special Meeting
We are sending you this proxy statement in connection with the solicitation
of proxies by our Board of Trustees for use at our special meeting of
shareholders that has been called to vote on the proposals described below,
including any meeting resulting from adjournments or postponements of the
special meeting. We are seeking your approval of the proposals in connection
with the merger of our subsidiary with SIR III and the resulting acquisition of
the Bicycle Club Apartments.
- The rules of the NASDAQ National Market provide that shareholder
approval is required in connection with the acquisition of the stock
or assets of another company if (i) any director, officer or
substantial shareholder of the issuer has a 5% or greater interest (or
such persons collectively have a 10% or greater interest), in the
company or assets to be acquired and (ii) the issuance of securities
convertible into or exercisable for common stock, could result in an
increase in outstanding common shares or voting power of 5% or more.
Therefore, we are seeking your approval for the issuance by MOLP of up
to approximately 305,751 MOLP Units (and the underlying shares of our
common stock). These MOLP Units may be exchanged on a one-for-one
basis (subject to adjustments) for shares of the Trust's common stock
or cash, at the Trust's election, after a one-year holding period.
This shareholder approval is required for the transaction to proceed.
- To consider and vote on a proposal to adjourn the special meeting of
shareholders to allow for additional solicitation of shareholder
proxies or votes in the event that the number of proxies or votes
sufficient to obtain a quorum or to approve Proposal 1 has not been
received by the date of the special meeting of shareholders.
We will hold the special meeting on June __, 2005 at 10:00 a.m. local time
in the 24th Floor Conference Room at 2345 Grand Boulevard, Suite 2400, Kansas
City, Missouri.
Record Date; Outstanding Common Stock Entitled to Vote; Quorum
The record date for the special meeting has been fixed as the close of
business on May __, 2005. Only holders of record of our common stock on the
record date are entitled to notice of and to vote at the special meeting. You
will have one vote on the proposals you are being asked to consider and vote on
at the special meeting for each share of common stock that you own on that date.
On the record date, 1,296,375 shares of our common stock were outstanding
and were held by ___ record holders on behalf of approximately _______
beneficial holders. The presence in person or by proxy of the holders of a
majority of our shares of outstanding common stock will constitute a quorum for
the transaction of business at the special meeting. If a quorum is not
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present at the special meeting, or a quorum is present but additional time is
desired to solicit proxies, we expect that the meeting will be adjourned or
postponed.
Votes Required
A majority of the shares voted at the meeting (assuming that a quorum of at
least 50% of our outstanding shares is present) must approve the issuance of the
MOLP Units in the transaction.
Voting of Proxies
You may vote your shares by attending the special meeting and voting your
shares in person or by completing, dating, signing and mailing the enclosed
proxy card in the enclosed, postage prepaid envelope. All proxy cards that are
properly executed and returned prior to the special meeting, and not properly
revoked, will be voted at the special meeting (or at any meeting resulting from
an adjournment or postponement of the special meeting) in accordance with the
instructions contained on the proxy card. If you sign a proxy card and return it
without instructions, the shares represented by the proxy will be voted "FOR"
approval of the proposals.
If your shares are held in the name of a broker, bank or other record
holder, you must either direct the record holder of your shares as to how to
vote your shares or obtain a proxy from the record holder to vote at the special
meeting.
Under applicable rules of the NASDAQ National Market, brokers who hold
shares in street name for customers are prohibited from voting, or submitting a
proxy to vote, those customers' shares in the absence of specific instructions
from the customer. A broker's failure to vote because of the absence of customer
instructions is commonly referred to as a "broker non-vote".
We will generally not count abstentions and broker non-votes for any
purpose. Unless you indicate contrary instructions on the accompanying proxy
card, the shares represented by your proxy will be voted in accordance with the
recommendations of our Board of Trustees.
Revoking Proxies
You may revoke your proxy at any time before it is voted by (i) delivering
to the Secretary of the Trust written notice of revocation bearing a later date
than the proxy, (ii) submitting a later dated proxy, or (iii) revoking the proxy
and voting in person at the Special Meeting. Attendance at the Special Meeting
will not in and of itself constitute a revocation of a proxy. Any written notice
revoking a proxy should be sent to Christine A. Robinson, Secretary, Maxus
Realty Trust, Inc., 104 Armour, North Kansas City, Missouri 64116.
Proxy Solicitation
The Board of Trustees is soliciting the enclosed proxy. We will bear the
expense of preparing, printing and mailing this proxy statement and proxy card.
In addition to the use of the mails, our Board of Trustees, officers and regular
employees may solicit proxies, without additional compensation, by personal
interviews, written communications, telephone, telegraph
16
or facsimile transmission or via the Internet or other means of communication.
We also will request brokerage firms, nominees, custodians and fiduciaries to
forward proxy materials to beneficial owners and will, upon request, reimburse
those record holders for their costs of forwarding the materials at customary
rates.
PROPOSAL 1
APPROVAL OF THE ISSUANCE OF MOLP UNITS (AND THE UNDERLYING
SHARES OF COMMON STOCK) IN THE SIR III TRANSACTION
All information contained in this proxy statement relating to SIR III and
its affiliates, its respective actions, purposes, beliefs, intentions or plans,
and all information relating to the Bicycle Club Apartments, has been supplied
by SIR III for inclusion in this proxy statement.
The Parties
The Trust and MOLP. We are a real estate company. Our primary investment
objectives are to preserve and protect shareholders' capital, provide the
maximum possible cash distributions to shareholders and provide for capital
growth through appreciation in property values and property acquisitions. Since
1985, we have qualified as a real estate investment trust ("REIT") under the
Internal Revenue Code. It was management's original objective to sell or
refinance our properties approximately eight to twelve years after their
acquisition. However, because of the depression of real estate values
experienced nationwide from 1988 to 1993, this time frame was extended in order
to achieve the goal of capital appreciation. In May 2000, our shareholders
adopted amendments to our articles of incorporation and bylaws that changed our
investment policies and our "self-liquidating" policy was eliminated.
We currently own seven apartment complexes, which are located in Kansas
City, Missouri; Olathe, Kansas; Topeka, Kansas; Little Rock, Arkansas; Picayune,
Mississippi; and Bay Saint Louis, Mississippi. Each of the properties is owned
by limited liability companies wholly owned by MOLP. Our apartment complexes are
located in or near major urban areas and are subject to competition from other
similar types of properties in such areas.
We conduct substantially all of our business through MOLP. We currently own
an indirect 99.1% interest in MOLP, and one of our wholly owned subsidiaries is
its sole general partner.
In order to maintain our qualification as a REIT for federal income tax
purposes, we must distribute each year at least 90% of our taxable income,
computed without regard to net capital gains or the dividends-paid deduction.
We were formed under The General and Business Corporation Law of Missouri
on June 14, 1984. Our principal executive offices are located at 104 Armour
Road, North Kansas City, Missouri 64116, and our telephone number is (816)
303-4500.
SIR III. Secured Investment Resources Fund, L.P. III is a Missouri limited
partnership formed pursuant to the Missouri Revised Uniform Limited Partnership
Act on April 20, 1988. Nichols Resources Ltd., a Missouri corporation is the
General Partner. SIR III was formed to
17
engage in the business of acquiring, improving, developing, operating and
holding for investment income producing real properties with the objectives of
(i) preserving and protecting SIR III's capital; (ii) providing cash
distributions from operations; (iii) providing capital growth through property
appreciation of Partnership properties; and (iv) increasing equity in property
ownership by the reduction of mortgage loans on Partnership properties. SIR
III's sole property, the Bicycle Club Apartments located in Kansas City,
Missouri, consists of 312 units of multi-family rental real estate. The Bicycle
Club Apartments is owned by a wholly owned subsidiary of Sir III.
SIR III's principal executive offices are located at 104 Armour Road, North
Kansas City, Missouri 64116, and its telephone number is (816) 303-4500.
Background of the Merger
Beginning in July, 2004 through October, 2004, David L. Johnson, Robert W.
Kohorst and Kevan D. Acord had several discussions about a proposed transaction
between the Trust and SIR III. Mr. Johnson and Mr. Kohorst each have a
significant ownership in SIR III and are also members of the Trust's Board of
Trustees. Mr. Acord is a member of the Trust's Board of Trustees. After they
explored a possible transaction, they learned that the prepayment penalty on SIR
III's mortgage was approximately $940,000. Although initial drafts of
transaction documents were prepared and terms of the transaction were discussed,
due to the amount of the prepayment penalty, the discussions were tabled.
In late February and early March, 2005, Messrs. Johnson, Kohorst and Acord
revisited exploring a possible transaction between the Trust and SIR III. After
recalculating the prepayment penalty, they determined that the prepayment
penalty would be approximately $610,000 on May 1, 2005. They discussed a
potential transaction that might be acceptable to both the Trust's shareholders
and SIR III's limited partners. Mr. Johnson then developed a proposal as to the
terms of the transaction, similar to the terms described in this proxy
statement, that he discussed with Mr. Kohorst and Mr. Acord, which included a
reduction in the valuation of SIR III for the prepayment penalty on SIR III's
mortgage loan and estimated disposition fees and brokerage fees if SIR III was
liquidated. He then asked legal counsel for SIR III to prepare a merger
agreement and the necessary documentation to send to SIR III's limited partners
to obtain their consent to the transaction. A merger agreement was executed by
the Bicycle Club, L.L.C., a wholly-owned subsidiary of MOLP, and SIR III on
March 18, 2005. On March 21, 2005 SIR III sent consent materials to its limited
partners. Pursuant to the merger agreement, the merger was conditioned upon the
approval of the Trust's Board of Trustees, SIR III's general partner and a
majority of the holders of the outstanding limited partners of SIR III.
Our management discussed the proposed transaction with our Board of
Trustees at a special Board meeting on April 8, 2005. Prior to the meeting,
management sent a memorandum to the Board of Trustees describing the material
terms of the proposed merger and the conflicts of interest of the Trust's
executive officers and certain Trustees. At the special meeting, management
discussed the transaction and gave a detailed description of the terms of the
proposed transaction, as well as a discussion of the conflicts of interest.
After discussion, management and the interested Trustees recused themselves from
the meeting and the three disinterested Trustees (Messrs. Acord, Evans and
Sheldon) discussed the positives and negatives
18
of the proposed transaction, and then each voted to approve the transaction,
including the issuance of the MOLP Units and the proposed merger, subject to
obtaining shareholder approval.
An audit committee meeting was also held on April 8, 2005. Mr. Acord and
Mr. Evans attended the audit committee meeting. After discussion of the material
terms of the proposed merger and the conflicts of interest of the Trust's
executive officers and certain Trustees, the audit committee also approved the
transaction, subject to obtaining shareholder approval.
The Transaction
We have agreed to merge Bicycle Club, L.L.C., a wholly owned subsidiary of
MOLP, with SIR III pursuant to which we will acquire the Bicycle Club Apartments
in Kansas City, Missouri for consideration of approximately $4.3 million, which
will be paid in cash, except for those limited partners of SIR III that qualify
as accredited investors and elect to receive MOLP Units. The MOLP Units, after a
required holding period, may be exchanged for shares of our common stock on a
one-for-one basis (subject to adjustments) or cash, at our election. Upon
consummation of the merger, Bicycle Club, L.L.C. will be the surviving entity of
the merger and Sir III will lose its separate existence.
Timing of Closing
The closing is currently scheduled to occur on or about June __, 2005
(assuming approval of the (i) issuance of the MOLP Units in the transaction by
our shareholders and (ii) transaction by the SIR III limited partners). We have
been advised by SIR III that it has obtained the requisite approval.
Consideration Allocations and Adjustments
Limited partners of SIR III qualifying as accredited investors have the
right to elect to receive their merger consideration in the form of MOLP Units
at a rate of one MOLP Unit for $14.00 of merger consideration, which was based
on recent prices of our common stock at the time the merger agreement was
executed.
Tax Protection
We have agreed not to dispose of the Bicycle Club Apartments in a
transaction that would require SIR III to recognize or be allocated gain for
federal income tax purposes before the third anniversary of the closing. We have
also agreed not to reduce the principal balance of the current first mortgage on
the Bicycle Club Apartments until such anniversary.
Interests of Certain Persons
David L. Johnson, a significant shareholder, President, Chief Executive
Officer and Trustee of the Trust, is the principal beneficial owner and
President of Nichols Resources, Ltd., the general partner of SIR III. Mr.
Johnson, together with his wife, jointly own approximately 85% of Bond Purchase,
L.L.C., a 7.81% limited partner in SIR III. Mr. Johnson is also an affiliate of
Paco Development, L.L.C. that is a 2.43% limited partner in SIR III. Bond
Purchase,
19
L.L.C. and Paco Development, L.L.C. have each indicated it will vote "FOR" the
merger and elect to receive MOLP Units.
Monte McDowell, Bob Kohorst, Chris Garlich, and David L. Johnson are
trustees of the Trust and are the beneficial owners of 20.3%, 8.0%, 6.5%, and
10.2% respectively of SIR III. John W. Alvey, Vice President and Chief Financial
and Accounting Officer of the Trust is a minority owner of the general partner
of SIR III and is an executive officer of Nichols Resources, Ltd. Mr. Garlich
and Mr. McDowell have each indicated that they intend to elect to receive at
least a portion of their merger consideration in the form of MOLP Units.
Valuation of SIR III
SIR III received an appraisal from Mainland Valuation Services dated March
26, 2004, providing a current value of $12,750,000 for SIR III's assets
comprised of the Bicycle Club Apartments and certain personal property used in
its operation. A copy of the Executive Summary of the appraisal is attached as
Appendix A to this proxy statement. SIR III has 7,412 limited partner units
currently issued and outstanding (the "SIR III Units"). There is no active
trading market for the SIR III Units and therefore there is no market price to
consider in determining the valuation of SIR III. Several isolated trades of the
SIR III Units have been reported with the most recent trades being at $420,
$440, $451 and $510 per Unit. Management determined its valuation of SIR III as
follows:
Gross valuation of the Bicycle Club Apartments $12,750,000
Plus: Cash and cash equivalents 928,158
Plus: Other partnership assets 179,049
Less: Mortgage debt (8,350,000)
Less: Accounts payable and accrued expenses (140,785)
Less: Security deposits (48,998)
Less: Prepayment penalty at May 1, 2005 (609,408)
Less: Real Estate Brokerage fees to affiliates (None are currently owed) 0
Less: Estimated disposition fees and third party brokerage fees (3%) (382,500)
----------
Partnership valuation before taxes and certain costs $ 4,325,516
Less: Estimated closing costs/Transfer fees/Appraisal cost (45,000)
----------
Net valuation of SIR III $ 4,280,516
Percentage of net valuation allocated to holders of SIR III Units 100.00%
----------
Net valuation of SIR III Units $ 4,280,516
Total number of SIR III Units 7,412
-----------
Approximate valuation per unit $ 577.51
===========
Approximate cash consideration per unit $ 577.51
===========
Appraisal of the Bicycle Club Apartments
Selection and Qualifications of Independent Appraiser
SIR III retained the services of Mainland Valuation Services (the
"Appraiser"), an independent third party, to appraise the fair market value of
the Bicycle Club Apartments (the "Property"). The Appraiser is an independent
valuation consulting firm with offices in Shawnee, Kansas, Lawrence, Kansas, and
Joplin, Missouri. Members of the Appraiser maintain appraisal licenses in
Kansas, Missouri, Nebraska, Arkansas and Texas. A majority of the appraisals
prepared by the Appraiser are on multifamily residential projects, and most of
these appraisals are prepared for Freddie Mac and Fannie Mae loans. SIR III
selected the Appraiser based on its qualifications, expertise and reputation in
providing appraisals on multifamily residential projects.
Although the Appraiser appraised the market value of the Property, the
Trust determined the consideration to be offered in the transaction. The
Appraiser did not recommend an amount of consideration to be offered in the
transaction. See "Mainland Valuation Services Appraisal" attached as Appendix A
for an executive summary of the appraisal.
Scope of Engagement
SIR III instructed the Appraiser to appraise the fair market value of the
fee simple estate of the Property. SIR III did not place any limitations on the
scope of the Appraiser's investigation. According to the appraisal, it is
intended to comply with the appraisal related directives within Title XI of the
Federal Financial Institution's Reform, Recovery and Enforcement Act of 1989
(FIRREA 12 C.F.R. 323) and the Appraisal Standards for Federally Related
Transactions with one exception (the appraisers were not engaged by a federally
insured institution).
Compensation of Appraiser
The Appraiser was paid a fee of $3,700.00 for the appraisal. During the
past two years, the Trust and its affiliates have engaged the services of the
Appraiser for the purposes of appraising certain properties. In connection with
the performance of these services, the Trust and its affiliates have paid
aggregate fees to the Appraiser of approximately $[_______]. Other than these
services, no material relationship has existed in the past two years or is
mutually contemplated.
Appraisal Report
A shareholder or its representative who has been so designated in writing
may obtain a copy of the appraisal report from the Trust upon request at the
expense of the requesting shareholder. The appraisal report is also available
for inspection and copying at the Trust's principal executive offices during its
regular business hours by any shareholder or its representative who has been so
designated in writing.
Financing of the Transaction
We expect to use approximately up to $3.3 million of MOLP's cash and
approximately $1.0 million of SIR III's cash and other deposits to pay the SIR
III limited partners the merger consideration. To the extent limited partners of
SIR III elect to acquire MOLP Units, we will use less than $3.3 million of
MOLP's cash.
20
Factors Considered by the Board of Trustees
Our Board of Trustees considered the following factors, among others,
before deciding to approve the transaction:
- The operating projections for the Bicycle Club Apartments, including
opportunities for revenue growth and operating efficiencies, which
lead us to believe that the transaction will increase our FFO over the
short term and will accelerate our FFO growth over the next few years;
- The projected additional operating cash flow the Bicycle Club
Apartments will provide to allow the Trust to increase the percentage
of future dividends funded solely with FFO;
- The geographic location of the Bicycle Club Apartments is near a
recent growth area in Kansas City, Missouri and in a metropolitan area
in which we have two other apartment complexes;
- The low capitalization rate (7.41%) used to value the Bicycle Club
Apartments;
- The transaction is consistent with the Trust's investment objectives,
which include providing for capital growth through appreciation in
property values and property acquisitions;
- The recent significant capital expenditures used to update the Bicycle
Club Apartments;
- Due to the amount of our cash and other current assets, the
transaction will likely result in a better return than we are
currently receiving on the cash;
- Management believes the price of the transaction is favorable due to
improving market conditions; and
- The transaction will likely result in various operational synergies.
Our Board of Trustees also considered several potential risks associated
with the transaction, including the following:
- The merger and terms of the transaction were established without any
arms-length negotiations. The terms of the transaction could differ if
they were subject to independent third party negotiations;
- If the expected benefits of the transaction are not realized, or are
not realized in a timely manner, our FFO could be adversely affected;
- The appraisal performed by Mainland Valuation Services was dated March
26, 2004, over a year ago. The appraisal was based on a higher net
operating income
21
than SIR III actually achieved in 2004, and as a result of the
transaction, our total indebtedness and debt-to-market-capitalization
would initially increase;
- As a result of the transaction, our total indebtedness will initially
increase. Approximately $8.4 million of the mortgage indebtedness on
the Bicycle Club Apartments will mature in 2008, which will expose us
to increased risk of interest rate fluctuations;
- Several executive officers and members of the Board of Trustees have a
significant ownership interest in SIR III;
- The Bicycle Club Apartments will have a lower tax basis than its book
basis. Of our seven existing properties, three have a lower tax basis
than their book basis. The three properties with the lower tax basis
have a lower tax basis due to deferral of tax gains. The total
deferred gain is $2,899,650. Because the tax basis of these properties
is lower than the book basis, it may potentially reduce or eliminate
the return of capital component of our dividend. This may force us to
increase our distributions of cash to our shareholders, thereby
potentially limiting the amount of cash we might otherwise have been
able to retain for use in growing our business; and
- Under the terms of the transaction, there will be significant
restrictions on our ability to dispose of or refinance the Bicycle
Club Apartments, which may limit our asset management and financing
flexibility.
In view of the numerous factors, both positive and negative, considered by
our Board of Trustees, the Board did not find it practical to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered. In addition, individual members of our Board of Trustees may have
given different weights to the various factors considered.
Following its deliberations concerning these factors and its review of the
presentation, the disinterested members of the Board of Trustees concluded that
the transaction and the issuance of the MOLP Units are in the best interests of
the Trust.
Recommendation of the Board of Trustees
Each of the disinterested Trustees approved the transaction, including the
issuance of the MOLP Units (and the underlying shares of our common stock) and
terms of the proposed merger and recommends that the holders of our common stock
vote "FOR" the proposal to be submitted to a vote at the special meeting.
Certain Federal Income Tax Consequences
For U.S. federal income tax purposes, no income, gain or loss will be
recognized by our shareholders in connection with the acquisition. However,
after the acquisition of the Bicycle Club Apartments, we will need to continue
to comply with the requirements of the Internal Revenue Code to maintain our
qualification as a real estate investment trust. We expect to
22
continue to operate after the acquisition in a manner that will allow us to
continue to qualify as a REIT, but we cannot assure you that we will be able to
do so.
In general, we will assume the tax basis and depreciation schedules for the
Bicycle Club Apartments currently used by SIR III. The tax basis of the Bicycle
Club Apartments as of December 31, 2004 is $7.4 million. The book basis will
reflect the consideration paid of $11.7 million, resulting in a difference
between book basis and tax basis of approximately $4.3 million. Accordingly, we
will be entitled to significantly lower depreciation deductions than we would
have been entitled to had we acquired the properties for cash. As a result, our
taxable income relative to our cash flow will be greater than it would have been
had we acquired the properties for cash. Since the REIT rules under the Internal
Revenue Code require that we distribute to our shareholders at least 90% of our
taxable income, the low tax basis of the Bicycle Club Apartments may have the
effect of increasing the cash amounts we are required to distribute as
dividends, thereby potentially limiting the amount of cash we might otherwise
have been able to retain for use in growing our business. This low tax basis may
also have the effect of reducing or eliminating the portion of distributions
made by us that are treated as a non-taxable return of capital.
Trust Policies After the Merger
We expect to continue operating in a similar manner as we have operated
prior to the merger.
Regulatory Matters
We do not believe that any filing with or approval of any governmental
authority is necessary in connection with the consummation of the transaction.
Accounting Treatment
The transaction will be accounted for using the purchase method of
accounting in accordance with generally accepted accounting principles. Under
this method of accounting, the consideration will be allocated to the net assets
acquired based upon their relative fair values.
Expenses
Each party must pay its own expenses in connection with the transaction.
Absence of Dissenters' Rights
We are incorporated in the State of Missouri and, accordingly, are governed
by the provisions of The General and Business Corporation Law of Missouri. Our
shareholders are not entitled to appraisal rights under The General and Business
Corporation Law of Missouri with respect to the transaction.
23
TERMS OF THE MOLP UNITS
The following is a brief summary of the material terms of the MOLP Units.
Such summary is qualified in its entirety by reference to the limited
partnership agreement of MOLP, a copy of which may be obtained from the Trust by
contacting Michele Berry at (816) 877-0892.
In the transaction, MOLP could issue up to approximately 305,751 MOLP Units
to limited partners of SIR III qualifying as accredited investors.
Distributions
Holders of MOLP Units will be entitled to receive distributions from MOLP
on a pro rata basis in accordance with their respective MOLP interests.
Liquidation Rights
If we liquidate MOLP, holders of MOLP Units will be entitled to be paid any
liquidation proceeds on a pro rata basis in accordance with their respective
capital account balances.
Exchange and Conversion Rights
At any time on or after the first anniversary of the closing date, the
holder of MOLP Units may exchange all or any portion of that holder's MOLP Units
for cash, shares of our common stock or any combination of cash and common
stock, at our election. The MOLP Units are currently exchangeable on a
one-for-one basis into shares of our common stock, subject to adjustment for
stock splits, dividends, combinations and similar events.
A MOLP Unit holder's exchange rights will be subject to the beneficial and
constructive share ownership limits in our articles of incorporation.
Restrictions on Transfer
The limited partnership agreement of MOLP generally restricts the transfer
of the MOLP Units without our consent. MOLP Units may, however, be transferred
without our consent (i) by operation of law, testamentary disposition, gift or
by sale, in each case to or for the benefit of any immediate family member, (ii)
pursuant to a pledge to a lender, subject to certain restrictions, or (iii)
pursuant to a distribution to such holder's direct or indirect constituent
partners or owners.
Consent Rights
The consent of the holders of 51% of the outstanding MOLP partnership
interests is required to amend the MOLP limited partnership agreement; provided,
however, the written consent of the general partner and any limited partner
adversely affected is generally required for an amendment to change the
obligation of any limited partner to make capital contributions or to modify the
allocation of profits or losses or distributions among the limited partners.
24
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements are
based on the historical consolidated financial statements of the Trust and SIR
III, consolidated and adjusted to give effect to (i) the acquisition and the
transactions contemplated thereby and (ii) certain acquisitions and dispositions
of real property during the Trust's 2004 fiscal year ("2004 Transactions"), as
described in the notes thereto. Certain amounts in the financial statements of
the properties have been reclassified to conform to the Trust's presentation.
These statements should be read in conjunction with the historical financial
statements and notes thereto of the Trust and the properties which are included
or incorporated by reference in this proxy statement.
The unaudited pro forma consolidated statements of operations and for the
year ended December 31, 2004, present the results for the Trust and SIR III as
if the acquisition and the 2004 Transactions had occurred at the beginning of
the earliest period presented. The accompanying unaudited pro forma consolidated
balance sheet as of December 31, 2004 gives effect to the acquisition as of that
date.
The pro forma adjustments are based upon preliminary estimates, information
currently available and certain assumptions that management believes are
reasonable under the circumstances, including among other things, an adjustment
for a cash flow fee due to SIR III's general partner that the Trust will not
incur in the future.
The Trust's actual consolidated financial statements will reflect the
effects of the acquisition on and after the applicable closing date rather than
the dates indicated above. The unaudited pro forma consolidated financial
statements neither purport to represent what the consolidated results of
operations or financial condition actually would have been had the acquisition
and related transactions in fact occurred on the assumed date, nor do they
purport to project the consolidated results of operations and financial position
for any future period.
The acquisition will be accounted for by the purchase method and,
therefore, assets and liabilities of the properties will be recorded based on
their fair values. Allocations included in the pro forma statements are based on
analysis which is not yet completed. Accordingly, the final value of the
aggregate consideration and its allocation may differ, perhaps significantly,
from the amounts included in these pro forma statements.
25
MAXUS REALTY TRUST, INC.
CONSOLIDATED PRO FORMA BALANCE SHEETS
AS OF DECEMBER 31, 2004
(UNAUDITED)
Assets
PRO FORMA
-------------------------------
HISTORICAL PRO FORMA
---------- FOR 2004
TRANSACTIONS
MRTI AND SIR III
ACTUAL SIR III TRANSACTION
------ ------- -----------
Investment property
Land 1,355,000 $ 312,000 1,667,000
Buildings and improvements 35,641,000 10,841,000 46,482,000
Personal property 2,606,000 587,000 3,193,000
------------ ------------ ------------
39,602,000 11,740,000 51,342,000
Less accumulated depreciation (4,083,000) --- (4,083,000)
------------ ------------ ------------
Total investment property, net 35,519,000 11,740,000 47,259,000
Cash (note 6a) 3,860,000 (3,352,000) 508,000
Escrows and reserves 1,125,000 130,000 1,255,000
Note receivable 4,133,000 --- 4,133,000
Accounts receivable 3,000 --- 3,000
Prepaid expenses and other assets 242,000 55,000 297,000
Intangible assets (net) 94,000 --- 94,000
Deferred expenses, less accumulated amortization 423,000 45,000 468,000
------------ ------------ ------------
Total assets of continuing operations 45,399,000 8,618,000 54,017,000
Assets of discontinued operations - property held for sale 4,000 --- 4,000
------------ ------------ ------------
Total assets $ 45,403,000 8,618,000 54,021,000
============ ============ ============
Liabilities and Shareholders' Equity
Liabilities:
Mortgage notes payable $ 27,824,000 8,350,000 36,174,000
Note payable 4,133,000 --- 4,133,000
Accounts payable, prepaid rent and
accrued expenses 623,000 219,000 842,000
Real estate taxes payable 394,000 --- 394,000
Refundable tenant deposits 177,000 49,000 226,000
Other accrued liabilities 1,047,000 --- 1,047,000
------------ ------------ ------------
Total liabilities 34,198,000 8,618,000 42,816,000
------------ ------------ ------------
Minority interest (note 6a) 152,000 --- 152,000
Shareholders' equity:
Common stock, $1 par value; Authorized 5,000,000 shares,
issued and outstanding 1,294,000 shares
at December 31, 2004 1,294,000 --- 1,294,000
Additional paid-in capital 17,899,000 --- 17,899,000
Distributions in excess of accumulated earnings (8,140,000) --- (8,140,000)
------------ ------------ ------------
Total shareholders' equity 11,053,000 --- 11,053,000
------------ ------------ ------------
Total liabilities & partner capital 45,403,000 8,618,000 54,021,000
============ ============ ============
See accompanying notes to pro forma financial statements.
26
MAXUS REALTY TRUST, INC.
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
PRO FORMA PRO FORMA
--------------------------- --------------------------
HISTORICAL PRO FORMA
---------- FOR 2004
ADJUSTMENTS PRO FORMA ACTUAL TRANSACTIONS
MRTI FOR 2004 FOR 2004 SIR III SIR III AND SIR III
ACTUAL TRANSACTIONS TRANSACTIONS HISTORICAL ADJUSTMENTS TRANSACTION
------ ------------ ------------ ---------- ----------- -----------
Income
Revenues:
Rental 5,220 1,075 6,295 1,789 --- 8,084
Other 761 49 810 136 --- 946
------- ------- ------- ------- ------- -------
Total revenues 5,981 1,124 7,105 1,925 --- 9,030
Expenses:
Depreciation and amortization 1,675 326 2,001 430 65 2,496
Repairs and maintenance 823 114 937 221 --- 1,158
Turn costs and leasing 321 50 371 94 --- 465
Utilities 410 96 506 110 --- 616
Real estate taxes 453 104 557 159 --- 716
Insurance 276 93 369 82 --- 451
Property management fees -
related parties 293 56 349 96 --- 445
Other operating expenses 857 117 974 281 (18) 1,237
General and administrative 376 --- 376 --- --- 376
------- ------- ------- ------- ------- -------
Total operating expenses 5,484 956 6,440 1,473 47 7,960
------- ------- ------- ------- ------- -------
Net operating income 497 168 665 452 (47) 1,070
------- ------- ------- ------- ------- -------
Interest income (note 6b and 6d) (198) (409) (607) (21) 60 568
Interest expense (note 6b) 1,490 546 2,036 577 --- 2,613
------- ------- ------- ------- ------- -------
Loss before minority interest and
discontinued operations (795) 31 (764) (104) (107) (975)
Income from discontinued operations
before minority interest 2,302 (131) 2,171 --- --- 2,171
Less: Minority interest (note 6c) 14 (1) 13 --- 1 14
------- ------- ------- ------- ------- -------
Net income (loss) $ 1,493 (99) 1,394 (104) (108) 1,182
======= ======= ======= ======= ======= =======
Per share data (basic and diluted):
Net income (loss) $ 1.18 (.08) 1.10 (.08) (.09) .93
======= ======= ======= ======= ======= =======
Weighted average shares outstanding 1,269 1,269 1,269 1,269 1,269 1,269
======= ======= ======= ======= ======= =======
See accompanying notes to pro forma financial statements.
27
MAXUS REALTY TRUST, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
1. SECURED INVESTMENT RESOURCES, L.P., III (BICYCLE CLUB APARTMENTS):
The Bicycle Club Apartments ("Bicycle Club") is a 312-unit apartment complex
located at 7909 Granby, Kansas City, Missouri. The Bicycle Club is owned by
Secured Investment Resources Fund, L.P., III ("SIR III"). On March 18, 2005, SIR
III entered into an Agreement and Plan of Merger with Bicycle Club, L.L.C. (the
"Company"), wholly owned by Maxus Operating Limited Partnership, a Delaware
limited partnership ("MOLP"). The purchase price is approximately $12,750,000.
In connection with the acquisition and as part of the purchase price, the Trust
plans to assume a mortgage loan of approximately $8,350,000, other liabilities
of approximately $268,000 and acquire other assets of approximately $1,158,000.
2. PARTNERSHIP MANAGEMENT FEE:
Under the terms of SIR III's Limited Partnership Agreement, the general partner
of SIR III is entitled to a partnership management fee equal to 5% of total
operating cash flow, as defined in the Partnership Agreement. Upon completion of
the proposed merger transaction, this fee will no longer be applicable.
3. DEPRECIATION:
Buildings and improvements are depreciated over their estimated useful lives
(consistent with the policies of Maxus Realty Trust, Inc.) of 27.5 to 40 years
on a straight-line basis. Personal property is depreciated over its estimated
useful life ranging from 7 to 15 years using the straight-line method.
4. TAXES:
The Trust has elected to be taxed as a real estate investment trust ("REIT")
under the Internal Revenue Code. The Trust intends to continue to qualify as a
REIT and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no provision for income taxes is reflected in the pro
forma statements.
5. RELATED PARTY TRANSACTIONS:
Maxus Properties, Inc. ("Maxus"), an affiliate of the Trust will provide
property management services for Bicycle Club. Management fees are calculated at
5% of the total revenue collected by Bicycle Club.
David L. Johnson, Chairman, Chief Executive Officer and President of Maxus
Realty Trust, Inc. (the "Trust"), is also the beneficial owner of more than 10%
of the Trust's issued and outstanding common stock, and the principal owner and
President of Nichols Resources, Ltd., the general partner of SIR III. Mr.
Johnson, together with his wife, jointly own approximately 85% of Bond Purchase,
L.L.C. ("Bond Purchase"), a 7.81% limited partner in SIR III and the sole owner
of SIR III's general partner. Mr. Johnson is also an affiliate of Paco
Development, L.L.C. ("Paco"), which is a 2.43% limited partner in SIR III. Monte
McDowell, Bob Kohorst and Chris Garlich, each of whom are trustees of the
Registrant, are the beneficial owners of 20.3%, 8.0% and 6.5%, respectively, of
SIR III's Partnership Units. Bond Purchase and Paco have indicated that they
will elect to receive approximately 31,000 MOLP Units if the merger transaction
is consummated. Monte McDowell and Chris Garlich have each indicated that they
intend to elect to receive at least a portion of their merger consideration in
the form of MOLP Units.
6. 2004 TRANSACTIONS
In 2004, wholly owned subsidiaries of the Trust acquired three apartment
complexes, Terrace Apartments ("Terrace") in May 2004, Waverly Apartments
("Waverly") and Arbor Gate Apartments ("Arbor Gate") in September 2004. In
addition, in September 2004, the Trust sold the ACI Building. The adjustments
for the 2004 transactions reflect the pro forma adjustments as if each of the
transactions had occurred on January 1, 2004.
28
a. Cash reflected in the pro forma balance sheet for SIR III assumes net
merger consideration of approximately $4,280,000 is all cash. The
balance of $3,352,000 reflects merger consideration less cash held by
SIR III. Affiliates of SIR III have indicated that they will elect to
receive approximately $438,000 consideration in MOLP units instead of
cash, which if consummated would have the effect of decreasing cash,
increasing minority interest and additionally, increasing minority
interest in operations.
b. Interest income and expenses reflected on the Pro Forma Statements of
Operations for the year ended December 31, 2004 includes a net
increase of $349,000 related to the wrap note on the ACI building sale
and interest income includes $60,000 of income on increased cash.
c. Reflects adjustment for minority interest assuming no MOLP units
issued.
d. Reflects $60,000 of forgone interest income.
7. BASIS OF PRESENTATION
The Pro Forma Statement of Operations has been prepared on the accrual basis of
accounting. The Pro Forma Statement of Operations has been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a proxy statement of the Trust.
The Pro Forma Statements of Operations excludes items not comparable to the
projected future operations of the Bicycle Club. Excluded expenses include a 5%
partnership management fee, depreciation and amortization which will be
calculated based on the acquisition basis of the Bicycle Club fixed assets and
interest income forgone. The Pro Forma Statement of Operations was prepared
assuming that all considerations will be paid to the SIR III limited partners in
cash. Affiliates of SIR III have indicated that they will elect to receive MOLP
Units instead of cash, which would increase the minority interest.
8. USE OF ESTIMATES
Management of the Trust has made a number of estimates and assumptions relating
to the reporting of pro forma operations and to prepare these financial
statements in conformity with accounting principles generally accepted in the
United States of America. Actual results could differ from those estimates.
29
INFORMATION ABOUT SIR III
Management's Discussion and Analysis of Financial Condition and Results of
Operations of SIR III
The following discussion should be read together with the financial
statements of SIR III included in this proxy statement. We have included certain
"forward-looking statements" in this proxy statement (including the documents
incorporated herein by reference). We intend these to qualify for the safe
harbor from liability established by the Private Securities Litigation Reform
Act of 1995. See "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS."
Overview
Secured Investment Resources Fund, L.P., III ("SIR III" or "the
Partnership") is a Missouri limited partnership formed pursuant to the Missouri
Revised Uniform Limited Partnership Act on April 20, 1988. Nichols Resources
Ltd., a Missouri corporation ("Nichols") is the General Partner.
The Partnership was formed to engage in the business of acquiring,
improving, developing, operating and holding for investment, income producing
real properties with the objectives of (i) preserving and protecting the
Partnership's capital; (ii) providing cash distributions from operations, (iii)
providing capital growth through property appreciation of Partnership
properties; and (iv) increasing equity in property ownership by the reduction of
mortgage loans on Partnership properties. The term of the Partnership is 60
years from the date of the Partnership Agreement (December 6, 1988), or the date
on which all of the assets acquired by the Partnership are sold and converted to
cash.
On January 1, 1999, the Partnership entered into a property management
agreement with Maxus Properties, Inc. ("Maxus"), a Missouri corporation that is
an affiliate of Nichols Resources, Ltd., the Partnership's general partner
("Nichols"). The sole shareholder of Nichols is Bond Purchase, L.L.C. ("Bond
Purchase"). Mr. Johnson, together with his wife, jointly own approximately 85%
of Bond Purchase. David L. Johnson is also the majority shareholder and an
executive officer and director of Maxus.
Cash is primarily generated by renting apartment units to tenants or
securing loans with the Partnership's assets. Cash is used primarily to pay
operating expenses (repairs and maintenance, payroll, utilities, taxes, and
insurance), make capital expenditures for property improvements, and to repay
principal and interest on outstanding loans. The key performance indicators for
revenues are occupancy rates and rental rates. Revenues are also impacted by
concessions (discounts) offered as rental incentives. The key performance
indicator for operating expenses is total operating expense per apartment unit.
A significant change in the turnover rate of rental units can also cause a
significant change in operating expenses. Management also evaluates total taxes,
utilities and insurance rates for the property.
General economic trends that management evaluates include construction of
apartment units (supply), unemployment rates, job growth, and interest rates
(demand). The apartment industry is sensitive to extremely low interest rates,
which tend to increase home ownership and
30
decrease apartment occupancy rates. The apartment industry is also sensitive to
increased unemployment rates, which tend to cause possible renters to double up
in a unit or share a non-rental dwelling with relatives or acquaintances. New
construction in an area with low occupancy rates can cause a further decline in
occupancy or rental rates.
Economic trends appear to indicate that interest rates are increasing. It
also appears that unemployment rates are declining, with job growth rising. If
these trends are correct and if the trends continue, the Trust believes it
should be able to begin reducing concessions, raising rental rates and
increasing occupancy, which should improve revenues. In such case, the Trust
also believes variable operating expenses will also tend to increase, but fixed
expense coverage would improve.
Liquidity and Capital Resources
Cash and certificates of deposit of SIR III as of December 31, 2004 was
$928,000, a decrease of $177,000 from the balance of $1,105,000 at December 31,
2003. Mortgage escrows and restricted deposits held by various lenders were
$130,000 and $129,000 at December 31, 2004 and December 31, 2003, respectively,
and are not readily available for current disbursement.
Net cash provided by operating activities of SIR III increased $75,000 to
$328,000 for the year ended December 31, 2004 primarily attributable to an
increase of $50,000 due to a reduction in net loss in 2004 compared to 2003.
Net cash used in investing activities of continuing operations of SIR III
was $215,000 comprised primarily of capital expenditures. Net cash used in
investing activities in 2003 of $434,000 was primarily comprised of capital
expenditures.
Net cash used by financing activities of SIR III for the year ended
December 31, 2004 was $290,000, an increase of $216,000 from the same period in
2003. The cash used by financing activities was due to the repurchase of limited
partnership units in the periods presented.
Management believes SIR III's current cash position and the Bicycle Club's
ability to generate operating cash flows should enable SIR III to fund
anticipated operating and capital expenditures in 2005. Projected capital
expenditures of approximately $200,000 are currently planned in 2005, primarily
for painting and land improvement projects. Capital replacements of
approximately $60,000 are expected to be reimbursed from reserves held by
lenders. Except for the items mentioned, management does not anticipate any
material capital expenditures at the Bicycle Club in 2005.
At this time, management does not believe the risk of changes in operations
adversely impacting cash flow from operating activities in the foreseeable
future is a material risk to SIR III's operations. As leases expire, they are
expected to be replaced or renewed in the normal course of business over a
reasonable period of time.
Contractual Obligations and Commercial Commitments
31
The following table sets forth information regarding SIR III's contractual
obligations. Management believes SIR III's current cash position and the Bicycle
Club's ability to provide operating cash flows should enable SIR III to fund
anticipated payments on these obligations in 2005.
As of December 31, 2004
Payments Due by Period
Less
Contractual than 1 1-3 4-5 After 5
Obligations year years years years Total
Long-Term Debt $ - - 8,350,000 - $8,350,000
Reference is also made to Note 2 of Notes to Financial Statements included
in SIR III's audited financial statements included in this proxy statement for a
description of mortgage indebtedness secured by SIR III's real property.
Off-Balance Sheet Arrangements
SIR III does not have any "off-balance sheet arrangements" as defined in
Item 303(c) of Regulations S-B promulgated under the Securities Exchange Act of
1934, as amended.
Related Party Transactions
David L. Johnson, the Trust's Chairman, Chief Executive Officer and
President and beneficial owner of more than 10% of the Trust's issued and
outstanding common stock, is the principal owner of Bond Purchase, which is the
owner of Nichols, the general partner of SIR III and is the primary equity owner
of a limited partner in Secured Investment Resources Fund, L.P. III that owns
approximately 7.81% of Secured Investment Resources Fund, L.P. III. Mr. Johnson
is also an affiliate of Paco Development, L.L.C. ("Paco"), which is a 2.43%
limited partner in SIR III.
Maxus manages the Bicycle Club's investment property. SIR III paid Maxus
management fees of $96,000 and $94,000 for the years ended December 31, 2004 and
2003 respectively. Management fees are determined pursuant to a management
agreement that provides for fees calculated as 5% of monthly gross receipts from
the property's operations. SIR III believes the management fee is similar to
fees that would be paid to an unrelated party for management of the properties.
Certain Maxus employees are located at the Bicycle Club Apartments and
perform leasing, maintenance, office management, and other related services for
the property. SIR II recognized $206,000 and $210,000 of payroll costs for the
years ended December 31, 2004 and 2003, respectively that have been or will be
reimbursed to Maxus. Such amounts are included in manager and office payroll and
maintenance and repairs payroll in the accompanying statements of income,
expense and partners' deficit.
32
Nichols, as the General Partner of SIR III is entitled to receive a
partnership management fee equal to 5% of total operating cash flows (as defined
in the partnership agreement) for managing the normal operations of SIR III. SIR
III management fees were $18,000 for 2004 and 2003, respectively. The amount
included in 2003 includes $18,100 that should have been included in 2002.
Results of Operations
The results of operations for the Bicycle Club for the years ended December
31, 2004 and 2003 are detailed below.
Occupancy
AVERAGE OCCUPANCY LEVELS
FOR THE YEARS ENDED DECEMBER 31,
2004 2003 2002
Bicycle Club 90% 89% 89%
The Northern Kansas City, Missouri market conditions continue to show
concessions of one-month free rent and average occupancy in the mid 80% to mid
90% range. There are no new competitors in the market.
Comparison of Consolidated Results
For the year ended December 31, 2004, SIR III's consolidated total revenues
from continuing operations were $1,925,000 compared to $1,945,000 for the year
ended December 31, 2003, representing a decrease of $20,000 (1.0%). The decrease
in consolidated revenues is primarily due to an increase in bad debt of $45,000,
partially offset by increased rental rates.
For the year ended December 31, 2004, Secured Investment Resources Fund,
L.P. III's consolidated operating expenses were $1,045,000 compared to
$1,119,000 for the year ended December 31, 2003. The decrease in expense of
$74,000 (6.6%) is due primarily to a decrease in other operating and maintenance
expenses of $56,000 along with an $18,000 decrease in leasing expenses.
Competition
The real estate business is highly competitive, and SIR III competes with
numerous entities engaged in real estate activities, some of which may have
greater financial resources than those of SIR III. SIR III's management believes
that success against such competition is dependent upon the geographic location
of the property, the performance of property managers, the amount of new
construction in the area and the maintenance and appearance of the property.
With respect to residential property, competition is also based upon the design
and mix of the units and the ability to provide a community atmosphere for the
tenants. SIR III's direct competitors, located within five miles of SIR III's
only property (the Bicycle Club Apartments), are Quail Run Apartments, 690 units
built in 1985; Falcon Point, 192 units built in 1988; The Ethans, 606 units
built in 1988; Camden Passage, 598 units built in 1989-1998; The Lakes, 400
units
33
built in 1987, Kelly Crossing, 624 units built in 1998 and Barclay Club, 400
units built in 2000-2001. The Bicycle Club Apartments is competitive in terms of
square footage per unit and rents for unit types. SIR III's management believes
that general economic circumstances and trends and new properties in the
vicinity of SIR III's property will also be competitive factors.
Market Risk
SIR III has considered the provisions of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments". SIR III had
no holdings of derivative financial or commodity instruments at December 31,
2004.
SIR III does not believe that it has any material exposure to interest rate
risk. The debt on the Bicycle Club Apartments is at a fixed rated of 6.91% and
matures in 2008.
Inflation
The effects of inflation did not have a material impact on SIR III's
operations in fiscal 2004 or 2003.
Critical Accounting Policies
SIR III is the sole Limited Partner of a single asset partnership, Bicycle
Club Joint Venture, L.P. The consolidated financial statements include the
accounts of SIR III and Bicycle Club Joint Venture, L.P. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates. Certain amounts in 2003 have been
reclassified to conform with the 2004 presentation.
The significant accounting policies followed by SIR III are summarized
below.
Depreciation of Fixed Assets. Depreciation is computed using the
straight-line method over the following economic useful lives:
Buildings and improvements 27 - 30 Years
Other fixed assets 5 - 15 Years
Loan Fees. Loan fees include mortgage loan costs in the original amount of
$97,791 which are being amortized by the straight-line method over a 7 year
period which represents the time from origination of the mortgage loan through
the maturity date of March 1, 2008.
34
The Bicycle Club Apartments
The Bicycle Club Apartments in Kansas City consists of 312 units of
multi-family rental real estate located near I-29 and Barry Road in Kansas City,
Missouri on a tract of land containing 20 acres. The Bicycle Club Apartments
were constructed in 1986 and includes one and two bedroom units.
PROPOSAL 2
PROPOSAL TO APPROVE ANY ADJOURNMENT OF THE SPECIAL MEETING
A vote (i) in person by a shareholder for adjournment of the special
meeting of shareholders or (ii) for Proposal 2 on the proxy card authorizing the
named proxies on the proxy card to vote the shares covered by such proxy to
adjourn the special meeting of shareholders, would allow for additional
solicitation of shareholder proxies or votes in order to obtain a quorum or in
order to obtain more proxies or votes in favor of Proposal 1. Consequently, it
is not likely to be in the interest of shareholders who intend to vote against
Proposal 1 to vote in person to adjourn the special meeting of shareholders or
to vote for Proposal 2 on the proxy card.
The Board of Trustees Recommends a Vote For Any Proposal to Adjourn The
Special Meeting to Allow For Additional Solicitation of Shareholder Proxies or
Votes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May ___, 2005, regarding
the number of shares of the Trust beneficially owned by each of the Trustees and
executive officers of the Trust, by any other person, if any, known to own 5% or
more of the Trust's outstanding shares and by all current Trustees, nominees for
Trustees and executive officers as a group:
Name of Number of Shares Percent
Beneficial Owner (1) Beneficially Owned (2) of Class (3)
-------------------- ---------------------- ------------
David L. Johnson 160,632 (4) 12.4
John W. Alvey 55,881 (5) 4.3
Christopher J. Garlich 77,882 (6) 6.0
Monte McDowell 19,884 (7) 1.6
Danley K. Sheldon 20,000 (8) 1.6
W. Robert Kohorst 37,907 (9) 2.9
Kevan D. Acord 2,130 (10) *
Jose L. Evans 27,852 2.1
Mercury Real Estate 97,998 (11) 7.6
Advisors LLC
100 Field Point Road
Greenwich, CT 06830
35
Mercury Special Situations 80,656 (11) 6.2
Fund LP
100 Field Point Road
Greenwich, CT 06830
Malcolm F. MacLean IV 97,998 (11) 7.6
100 Field Point Road
Greenwich, CT 06830
David R. Jarvis 97,998 (11) 7.6
100 Field Point Road
Greenwich, CT 06830
Trustees and Executive 402,168 31.1
Officers as a Group
(1) Each of the named beneficial owners other than Mercury Real Estate Advisors
LLC may be reached at the Trust's executive offices: c/o Maxus Realty
Trust, 104 Armour Boulevard, North Kansas City, Missouri 64116.
(2) Under the rules of the Securities and Exchange Commission, persons who have
power to vote or dispose of securities, either alone or jointly with
others, are deemed to be the beneficial owners of such securities. Except
as described in the footnotes below, the Trustee has both sole voting power
and sole investment power with respect to the shares set forth in the
table.
(3) An asterisk indicates that the number of shares beneficially owned do not
exceed one percent of the number of shares of common stock issued and
outstanding.
(4) Includes: (i) 150,561 shares held by Mr. Johnson and his wife as joint
tenants with right of survivorship, (ii) 150 shares held in an individual
retirement account for Mr. Johnson's benefit, (iii) 300 shares held by his
minor son and daughter and (iv) 9,621 units of MOLP, which are currently
convertible into 9,621 shares of the Trust's common stock. Does not include
(i) 49,946 shares pledged as collateral to Sunset Plaza Realty Partners,
L.P. ("Sunset"), a limited partnership in which Mr. Johnson and his wife
indirectly are the principal equity interest holders, to secure loans made
by Sunset and (ii) 37,881 shares pledged as collateral to Bond Purchase,
L.L.C. ("Bond Purchase"), a limited liability company in which Mr. Johnson
and his wife are the majority equity interest holders, to secure a loan to
NKC Associates, L.L.C. (as described in note (5) below).
(5) Includes shared voting and dispositive power of the 37,881 shares held by
NKC Associates, L.L.C., a Missouri limited liability company ("NKC"), in
which Mr. Alvey holds a 22.5% equity interest. NKC acquired these shares
with funds from a demand loan made by Bond Purchase, L.L.C., a Missouri
limited liability company and affiliate of David L. Johnson. The demand
loan is secured by the 37,881 shares of the Trust acquired by NKC, with
interest accruing on the unpaid balance at a rate of eight percent
36
per annum. Substantially all of the shares purchased by Mr. Alvey other
than the shares acquired by NKC Associates, L.L.C. were purchased with
funds loaned to Mr. Alvey by David L. Johnson and his wife and his
affiliates. These loans are unsecured.
(6) Includes 51,382 shares held by a trust in which Mr. Garlich is the grantor
and trustee and 26,500 shares held by Mr. Garlich's wife.
(7) Includes: (i) 11,000 shares held by a revocable trust for the benefit of
Mr. McDowell's minor son, (ii) 4,875 shares held by McDowell Investments,
L.P., a Missouri limited partnership in which Mr. McDowell is the 100%
equity holder ("McDowell Investments") and (iii) 4,009 shares held by his
minor son in a custodial account in which Mr. McDowell is the custodian.
(8) These shares have been pledged as collateral to Sunset to secure loans made
by Sunset to Mr. Sheldon.
(9) Includes (i) 35,207 shares held by Everest Management, LLC, of which Mr.
Kohorst is a 50% beneficial owner through his pension plan, (ii) 700 shares
held in Mr. Kohorst's individual retirement account and (iii) 2,000 shares
held in Mr. Kohorst's wife's individual retirement account.
(10) Held by Mr. Acord's wife.
(11) Pursuant to Amendment No. 1 to the Schedule 13D jointly filed by Mercury
Real Estate Advisors LLC, Mercury Special Situations Fund LP, Malcolm F.
MacLean IV and David R. Jarvis on December 22, 2004. Each of these
reporting persons reported beneficial ownership of all or a certain portion
of the 97,998 shares acquired by the reporting persons.
Independent Auditors
The Audit Committee selected KPMG LLP to serve as the Trust's independent
auditor for the current year. KPMG LLP also served as the Trust's independent
auditor for the fiscal year ended December 31, 2004. Representatives of KPMG LLP
will be present at the special meeting, will have an opportunity to make a
statement if they desire to do so, and will be available to answer questions for
the shareholders.
Other Business
Other than those items set forth in this proxy statement, the Board of
Trustees knows of no other business to be presented for consideration at the
special meeting. Should any other matters properly come before the special
meeting or any adjournment thereof, it is the intention of the persons named in
the proxies to vote such proxies in accordance with their best judgment on such
matters.
37
Shareholder Proposals for the 2006 Annual Meeting of Shareholders
Shareholders who wish to present proposals for action at the annual meeting
of shareholders to be held in 2006 should submit their proposals to the Trust at
the address of the Trust set forth on the first page of this proxy statement.
Proposals must be received by the Trust no later than November 25, 2005, for
consideration for inclusion in the next year's proxy statement and proxy. In
addition, proxies solicited by management may confer discretionary authority to
vote on matters which are not included in the proxy statement but which are
raised at the annual meeting by shareholders, unless the Trust receives written
notice at such address of such matters on or before February 8, 2006.
Householding
Only one copy of the Trust's annual report for the year ended December 31,
2004, and this proxy statement is being delivered to multiple security holders
sharing an address unless the Trust has received contrary instructions from one
or more of the shareholders. This procedure is referred to as "householding." In
addition, the Trust has been notified that certain intermediaries, i.e., brokers
or banks, will household proxy materials. The Trust will promptly deliver upon
written or oral request a separate copy of the annual report and/or this proxy
statement to a shareholder at a shared address to which a single copy of the
document was delivered if a separate copy of the annual report and/or proxy
statement is desired. A shareholder should notify the Trust (i) if a shareholder
wishes to receive a separate annual report and/or proxy statement in the future
or (ii) if a shareholder is receiving multiple copies of the annual report
and/or the proxy statement, but wishes to receive a single copy of the annual
report and/or the proxy statement in the future. Requests should be made to
Maxus Realty Trust, Inc., Attention: Michele Berry, 104 Armour Road, North
Kansas City, Missouri 64116, (816) 877-0892. A shareholder can contact his
broker or bank to make a similar request, provided the broker or bank has
determined to household proxy materials.
INDEPENDENT AUDITORS
The consolidated financial statements of the Trust incorporated in this
proxy statement by reference from its Annual Report on Form 10-KSB for the year
ended December 31, 2004 have been audited by KPMG LLP, independent public
accountants, as indicated in their report with respect thereto.
The financial statements of SIR III for the year ended December 31, 2004
included in this proxy statement have been audited by Koch & Koch, independent
auditors, as stated in their report appearing herein.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other information
with the Commission. The Commission allows us to "incorporate by reference"
information into this proxy statement. This means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is considered to be
part of this proxy statement, and later information filed with the Commission
will update and supersede the information in this proxy statement.
38
We incorporate by reference into this proxy statement the following
documents filed by us with the Commission (File No. 000-13754) pursuant to the
Exchange Act:
- Our Annual Report on Form 10-KSB for the year ended December 31, 2004;
and
- Our Current Reports on Form 8-K filed with the Commission on January
18, 2005 (reporting under Item 1.01), and April 14, 2005 (reporting
under Item 7.01).
The information relating to the Trust contained in this proxy statement
should be read together with the information in the documents which we have
incorporated by reference in this proxy statement. You should rely only on the
information contained in (or incorporated by reference into) this proxy
statement. A copy of our annual report for the year ended December 31, 2004
accompanies this proxy statement.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this proxy statement and prior to the date of
the special meeting on June __, 2005, and any and all adjournments of that
meeting, shall be deemed to be incorporated by reference in and to be a part of
this proxy statement from the date we file such documents.
Any statement contained in a document which we incorporate by reference in
this proxy statement shall be deemed to be automatically modified or superseded
for purposes of this proxy statement once we file another document which also is
or is deemed to be incorporated by reference in this proxy statement which
modifies or supersedes such statement.
We have not authorized anyone to give any information different from the
information contained in (or incorporated by reference into) this proxy
statement. This proxy statement is dated May __, 2005. You should not assume
that the information contained in this proxy statement is accurate as of any
later date, and the mailing of this proxy statement to shareholders shall not
create any implication to the contrary.
Documents incorporated by reference are available from us without charge,
excluding all exhibits (unless we have specifically incorporated by reference an
exhibit into this proxy statement). To receive a free copy of any of the
documents incorporated by reference in this proxy call or write Maxus Realty
Trust, Inc., 104 Armour Road, North Kansas City, Missouri 64116, Attention:
Michele Berry, Telephone (816) 877-0892.
By Order of the Board of Trustees,
Christine A. Robinson
Secretary
May __, 2005
North Kansas City, Missouri
39
[Koch & Koch logo omitted]
SECURED INVESTMENT RESOURCES FUND L.P. III AUDITED FINANCIAL STATEMENTS
----------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGES
-----
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets 2-3
Statements of Income, Expense and Partners' Deficit 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-10
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Partners of
Secured Investment Resources Fund, L.P. III
We have audited the consolidated balance sheets of Secured Investment Resources
Fund, L.P. III, a limited partnership as of December 31, 2004 and 2003 and the
related consolidated statements of income, expense, and partners' deficit, and
cash flows for the years then ended. These financial statements are the
responsibility of the Project's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Secured Investment
Resources Fund, L.P. III, a limited partnership as of December 31, 2004 and 2003
and the results of its operations and the changes in partners' deficit and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
February 7, 2005 Koch & Koch
Certified Public Accountants
Kansas City, Missouri
1
SECURED INVESTMENT RESOURCES FUND, L.P. III
BALANCE SHEETS
-------------------------------------------
December 31, 2004 and 2003
ASSETS
------
2004 2003
---- ----
CURRENT ASSETS
Cash and certificates of deposit $ 928,158 $1,104,744
Prepaid insurance 48,693 49,098
Restricted deposits 83,762 83,594
Mortgage escrows 46,594 45,144
---------- ----------
TOTAL CURRENT ASSETS 1,107,207 1,282,580
---------- ----------
FIXED ASSETS (Note 1)
Land and buildings 10,855,697 10,728,917
Personal property 1,610,281 1,523,541
---------- ----------
Total fixed assets 12,465,978 12,252,458
Less accumulated depreciation 6,367,352 5,951,637
---------- ----------
NET FIXED ASSETS 6,098,626 6,300,821
---------- ----------
OTHER ASSETS
Unamortized loan fees (Note 1) 45,403 59,373
Utility deposits 6,000 6,000
---------- ----------
TOTAL OTHER ASSETS 51,403 65,373
---------- ----------
TOTAL ASSETS $7,257,236 $7,648,774
========== ==========
See Notes to Financial Statements.
2
SECURED INVESTMENT RESOURCES FUND, L.P. III
BALANCE SHEETS
-------------------------------------------
December 31, 2004 and 2003
LIABILITIES
-----------
2004 2003
---- ----
CURRENT LIABILITIES
Accounts payable - trade (Note 3) $ 37,681 $ 41,802
Accrued payroll 10,022 10,998
Accrued interest payable -mortgage 48,082 48,082
Accrued property management fee (Note 3) 8,013 8,353
Accrued partnership management fee (Note 3) 18,000 24,000
Tenant security deposits 48,998 51,044
Accounts payable - repurchase partnership units 78,030 -
Prepaid rent 18,987 2,296
---------- ----------
TOTAL CURRENT LIABILITIES 267,813 186,575
LONG TERM LIABILITIES
Mortgage payable (Note 2) 8,350,000 8,350,000
---------- ----------
TOTAL LIABILITIES 8,617,813 8,536,575
---------- ----------
PARTNERS' DEFICIT
-----------------
General partner (4 units authorized and outstanding)
Capital contributions 2,000 2,000
Partner deficit (45,386) (44,337)
---------- ----------
(43,386) (42,337)
---------- ----------
Limited partners (60,000 units authorized; outstanding
2004 - 7,595 units; 2003 - 8,445 units)
Capital contributions 3,177,524 3,545,394
Partner deficit (4,494,715) (4,390,858)
---------- ----------
(1,317,191) (845,464)
---------- ----------
TOTAL PARTNERS' DEFICIT (1,360,577) (887,801)
---------- ----------
TOTAL LIABILITIES AND PARTNERS' DEFICIT $7,257,236 $7,648,774
========== ==========
See Notes to Financial Statements
3
SECURED INVESTMENT RESOURCES FUND, L.P. III
STATEMENTS OF INCOME, EXPENSE, AND PARTNERS' DEFICIT
---------------------------------------------
For the Years Ended December 31, 2004 and 2003
2004 2003
---- ----
INCOME
Rent $1,789,373 $1,820,160
Other 135,786 124,429
---------- ----------
TOTAL INCOME 1,925,159 1,944,589
---------- ----------
OPERATING EXPENSES
Property management fee (Note 3) 96,208 94,084
Partnership management fee (Note 3) 18,000 34,800
Manager and office payroll 99,024 101,752
Leasing costs 40,723 59,024
Other administrative expenses 97,302 85,810
Utilities 109,537 122,019
Maintenance and repairs payroll 107,270 109,154
Other operating and maintenance expenses 185,940 242,378
Real estate taxes 153,556 158,687
Payroll taxes 18,149 17,941
Property insurance 82,138 60,373
Other insurance and taxes 36,739 33,329
---------- ----------
TOTAL OPERATING EXPENSES 1,044,586 1,119,351
---------- ----------
NET OPERATING INCOME 880,573 825,238
---------- ----------
OTHER INCOME (EXPENSES)
Interest income 21,191 34,231
Interest expense - mortgage (576,985) (576,985)
Depreciation (415,715) (422,522)
Amortization (13,970) (13,970)
---------- ----------
TOTAL OTHER INCOME (EXPENSES) (985,479) (979,246)
---------- ----------
NET INCOME (LOSS) (104,906) (154,008)
BEGINNING PARTNERS' DEFICIT (887,801) (659,693)
REPURCHASE OF PARTNERSHIP UNITS (367,870) (74,100)
---------- ----------
ENDING PARTNERS' DEFICIT $(1,360,577) $ (887,801)
========== ==========
Allocation of Income
General Partner $ (1,049) $ (1,540)
Limited Partners (103,857) (152,468)
---------- ----------
Total Income (Loss) $ (104,906) $ (154,008)
========== ==========
Partnership Loss Per Limited Partnership Unit $ (13.10) $ (17.79)
========== ==========
See Notes to Financial Statements.
4
SECURED INVESTMENT RESOURCES FUND, L.P. III
STATEMENTS OF CASH FLOWS
-----------------------------------------
For the Years Ended December 31, 2004 and 2003
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (104,906) $ (154,008)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 415,715 422,522
Amortization 13,970 13,970
Decrease (increase) in prepaid expenses 405 (22,042)
Decrease in accounts payable - trade (4,121) (11,620)
Increase (decrease) in accrued payroll (976) 4,094
Increase (decrease) in accrued management fee (6,340) 9,653
Decrease in tenant security deposits (2,046) (8,581)
Increase (decrease) in prepaid rent 16,691 (1,445)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 328,392 252,543
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted deposits (168) (346)
Decrease (increase) in mortgage escrows (1,450) 11,837
Cash payments for fixed asset purchases (213,520) (445,921)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (215,138) (434,430)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of partnership units (289,840) (74,100)
---------- ----------
NET CASH USED BY FINANCING ACTIVITIES (289,840) (74,100)
---------- ----------
NET INCREASE (DECREASE) IN CASH (176,586) (255,987)
CASH BEGINNING OF YEAR 1,104,744 1,360,731
---------- ----------
CASH END OF YEAR $ 928,158 $1,104,744
========== ==========
See Notes to Financial Statements.
5
SECURED INVESTMENT RESOURCES FUND, L.P. III
STATEMENTS OF CASH FLOWS
-----------------------------------------
For the Years Ended December 31, 2004 and 2003
SUPPLEMENTAL DISCLOSURES OF CASH FLOW 2004 2003
INFORMATION ---- ----
Interest paid during the year $ 576,985 $ 576,985
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
As of December 31, 2004 repurchase of treasury units in the amount of $78,030
was accrued.
DISCLOSURES OF ACCOUNTING POLICY:
For purposes of the statement of cash flows, management considers cash from
operations and certificates of deposit to be cash.
See Notes to Financial Statements.
6
SECURED INVESTMENT RESOURCES FUND, L.P. III
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------
For the Years Ended December 31, 2004 and 2003
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership was organized as a Missouri limited partnership April 20,
1988 to acquire an interest in real property located in Kansas City,
Missouri and to operate thereon an apartment complex of 312 units.
The General Partner's and Limited Partners' interest in Partnership
earnings or loss initially amounts to 1% and 99%, respectively. At such
point in time cash distributions to the Limited Partners equal their
original invested capital plus interest at a rate of the greater of 12%
(14% for those investors who subscribed for units on or before 90 days
after December 7, 1988) or the increase in the Consumer Price Index per
annum, cumulative non-compounded on their adjusted invested capital, net
income or loss will be allocated 15% to the General Partner and 85% to the
Limited Partners. Upon dissolution of the Partnership, the General Partner
must have a capital account greater than or equal to 1.01% of the original
invested capital. If a deficiency exists, the General Partner will be
required to fund the necessary amounts.
Partnership income (loss) per limited partnership unit is computed by
dividing the income (loss) allocated to the Limited Partners by the
weighted average number of limited partnership units outstanding. The per
unit information has been computed based on 7,930 and 8,569 weighted
average limited Partnership units outstanding for the years ended December
31, 2004 and 2003, respectively.
The Partnership is the sole Limited Partner of a single asset partnership,
Bicycle Club Joint Venture, L.P. The consolidated financial statements
include the accounts of the Partnership and Bicycle Club Joint Venture,
L.P. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Certain amounts in 2003 have been reclassified to conform with the 2004
presentation.
7
SECURED INVESTMENT RESOURCES FUND, L.P. III
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------
For the Years Ended December 31, 2004 and 2003
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The significant accounting policies followed by the Partnership are
summarized below.
Depreciation of Fixed Assets - Depreciation is computed using the
straight-line method over the following economic useful lives:
Buildings and improvements 27 - 30 Years
Other fixed assets 5 - 15 Years
Loan Fees - Loan fees include mortgage loan costs in the original amount of
$97,791 which are being amortized by the straight-line method over a 7 year
period which represents the time from origination of the mortgage loan
through the maturity date of March 1, 2008.
Restricted Deposits - Restricted deposits consist of cash accounts held for
debt service payments and repair and replacement costs
Basis of Accounting - The financial statements of the Partnership are
prepared on the accrual basis of accounting in accordance with U.S.
generally accepted accounting principles. Due to collectibility problems
industry-wide, the allowance for doubtful tenant receivable accounts
represents 100% of tenant receivables. All such leases with tenants of the
property are operating leases.
Provision for Income Taxes - A business operated as a partnership is not
taxed as a separate entity; rather, the net income or loss is included in
the income tax returns of the partners. Therefore, no provision is made for
income taxes in these statements.
(2) MORTGAGE PAYABLE
Mortgage payable consists of a 6.91% per annum note due in monthly interest
only installments of $48,082 through March 1, 2008 at which time all unpaid
interest and principal amounts are due. The loan is secured by a deed of
trust covering all real and personal property.
8
SECURED INVESTMENT RESOURCES FUND, L.P. III
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------
For the Years Ended December 31, 2004 and 2003
(2) MORTGAGE PAYABLE (CONTINUED)
2004 2003
---- ----
Current portion $ - $ -
Non -current portion 8,350,000 8,350,000
----------- -----------
TOTAL $8,350,000 $8,350,000
=========== ==========
Maturities of the mortgage note are as follows:
2005 $ -
2006 -
2007 -
2008 8,350,000
-----------
TOTAL $8,350,000
===========
(3) RELATED PARTY TRANSACTIONS
Property Management Fee - The project's management company is an affiliate
of the general partner of the partnership. The partnership incurred $96,208
and $94,084 in management fees for 2004 and 2003 respectively. As of
December 31, 2004 and 2003, management fees of $8,013 and $8,353,
respectively, remain unpaid.
Partnership Management Fee - The general partner is entitled to receive a
Partnership management fee equal to 5% of total operating cash flows (as
defined in the Partnership Agreement) for managing the normal operations of
the Partnership. Partnership management fees amounted to $18,000 and
$34,800 for 2004 and 2003, respectively. The amount included in 2003
includes $18,100 that should have been included in 2002.
9
SECURED INVESTMENT RESOURCES FUND, L.P. III
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------
For the Years Ended December 31, 2004 and 2003
(3) RELATED PARTY TRANSACTIONS (CONTINUED)
Accounts Payable - Trade - The management company is due $135 and $8,798 at
December 31, 2004 and 2003, respectively, representing reimbursements for
expenses incurred on behalf of the project.
(4) CASH DISTRIBUTIONS
No distributions have been made to the general or limited partners since
July 1990. Future distributions, if any, will be made from excess cash flow
not needed for capital improvements or working capital purposes.
10
APPENDIX A
MAINLAND VALUATION SERVICES APPRAISAL
March 26, 2004
Mr. Dave Johnson
Secured Investment Resource Fund, L.P. III
104 Armour Road
North Kansas City, Missouri 64116
SUBJECT: MARKET VALUE APPRAISAL
Complete Self-Contained Report
Bicycle Club Apartments
7909 North Grandby Avenue
Kansas City, Platte County, Missouri 64151
MVS File No.: 24-1930
Dear Mr. Dave Johnson:
At your request, the property commonly referred to as the Bicycle Club
Apartments located at 7909 North Granby Avenue in Kansas City, Missouri has been
inspected and appraised. A legal description of the property has been included
in Addendum E for your reference.
The purpose of this letter is to set forth the appraisers' opinion of the market
value for the subject property in "as is" condition in fee simple estate. This
appraisal report has been prepared in conformity with the Uniform Standards of
Professional Appraisal Practice (USPAP). No departure provision of USPAP was
relied upon. The appraisal is intended to comply with the appraisal related
directives within Title XI of the Federal Financial Institution's Reform,
Recovery and Enforcement Act of 1989 (FIRREA 12 C.F.R. 323) and the Appraisal
Standards for Federally Related Transactions with one exception. The appraisers
were not engaged by a federally insured institution. The market value is
premised upon the Assumptions and Limiting Conditions included within the
appraisal report. The term "market value" is defined in the body of the attached
report.
The subject property represents a 312 unit apartment complex located on a tract
of land containing 20.03 acres, more or less, or approximately 872,507 square
feet. The complex was constructed in 1986 and was in average condition on the
date of the inspection. The improvements include 312 units with an average unit
size of 897 square feet. The complex offers a selection of one and two bedroom
unit types. There are approximately 282,336 square feet of gross building area
and 279,776 square feet of net rentable area. As of the effective appraisal date
the complex was 91% occupied.
In conclusion, based upon the following narrative appraisal report to which your
attention is now directed, the appraisers opinion of the "as is" market value of
the subject property, considering a
1
marketing period of twelve months and an effective appraisal date of March 16,
2004, is as follows:
TWELVE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($12,750,000).
This value estimate includes approximately $230,000 attributable to the
depreciated value of the personal property. The value in use would exceed any
anticipated salvage value.
It is important to note that this value estimate does not consider the
detrimental effect of the above market financing currently in place on the
subject property nor does the above value reflect sales commissions associated
with the sale of the subject property. According to the yield maintenance
calculation provided to the appraisers, the calculated prepayment premium is
equal to $1,302,906.26.
It is the undersigneds' opinion that the subject property does not include any
enhancement in value as a result of any natural, cultural, recreational or
scientific influences.
Thank you for the opportunity to be of service.
Sincerely,
MAINLAND VALUATION SERVICES
/s/ Gerald R. Maier /s/ Thomas M. Scaletty
- -------------------------------- -------------------------------
Gerald R. Maier, MAI Thomas M. Scaletty
Missouri License No. RA-1974 Missouri License No. 2003012169
GRM/TMS
2
APPENDIX B
PRELIMINARY COPY
FORM OF PROXY
PROXY
MAXUS REALTY TRUST, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned does hereby appoint David L. Johnson and Christine A.
Robinson and each of them, the true and lawful attorneys-in-fact and proxies of
the undersigned (acting by a majority hereunder), each with full power of
substitution, to vote all common shares of the undersigned in Maxus Realty
Trust, Inc. at the special meeting of shareholders to be held on June ___, 2005,
commencing at 10:00 A.M. in the 24th Floor Conference Room at 2345 Grand
Boulevard, Suite 2400, Kansas City, Missouri, and at any adjournment thereof,
upon all matters described in the proxy statement furnished herewith, subject to
any directions indicated on the reverse side of this proxy. This proxy revokes
all prior proxies given by the undersigned.
SPECIAL MEETING OF SHAREHOLDERS OF
MAXUS REALTY TRUST, INC.
June ____, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible
~/ Please detach along perforated line and mail in the envelope provided ~/
- ----------------------------------------------------------------------------------------------------------------------
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
- --------------------------------------------------------------------- ------------------------------------------------
1. Approve the issuance of MOLP Units in the SIR III FOR AGAINST ABSTAIN
transaction. [ ] [ ] [ ]
- --------------------------------------------------------------------- ------------------------------------------------
2. Adjournment of the meeting to allow for additional FOR AGAINST ABSTAIN
solicitation of proxies if necessary to establish a quorum
or to obtain more proxies or votes in favor of Proposal 1. [ ] [ ] [ ]
- --------------------------------------------------------------------- ------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon FOR AGAINST ABSTAIN
such other matters as may be properly come before the
meeting. [ ] [ ] [ ]
- --------------------------------------------------------------------- ------------------------------------------------
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH
PROPOSAL.
IT IS IMPORTANT THAT YOU VOTE, SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE. BY DOING SO, YOU MAY
SAVE THE TRUST THE EXPENSE OF ADDITIONAL SOLICITATION.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
To change the address on your account, please check the box at the right and
indicate your new address in the space above. Please note that changes to the
registered name(s) on the account may not be submitted via this method. [ ]
- ----------------------------------------------------------------------------------------------------------------------
Signature of Shareholder: Date:
- ----------------------------------------------------------------------------------------------------------------------
Signature of Shareholder: Date:
- ----------------------------------------------------------------------------------------------------------------------
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full
title as such. If signer is a partnership, please sign in partnership name by authorized person.
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