UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 2-95449
NATIONAL PROPERTIES INVESTMENT TRUST
Formerly Richard Roberts Real Estate Growth
Trust I (Exact name of registrant as specified in
its charter)
Massachusetts 06-6290322
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
P.O. Box 148 Canton Center, CT 06020
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (860) 693-9624
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:Shares of Beneficial
Interest No Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K . X
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 15, 1999: Shares of Beneficial Interest without
par value $76,313 *
Documents Incorporated by Reference: None
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: Not Applicable
* As no established public trading market exists, a value of $0.121 (the
approximate Net Asset Value as of December 31, 1998) has been ascribed for the
purpose of this calculation.
PART I
ITEM 1. BUSINESS.
NATIONAL PROPERTIES INVESTMENT TRUST (the "Trust") was organized on January 16,
1985, as a Massachusetts Business Trust. On July 23, 1993, the Trust changed its
name from Richard Roberts Real Estate Growth Trust I to its current name. The
Trust has made for 1997 and prior years, and intends to make for 1998, an
election to file as a real estate investment trust "REIT" under the provisions
of the Internal Revenue Code and intends to maintain this status as long as it
will benefit the Trust's shareholders.
Since inception, the Trust has invested directly in equity interests in five
commercial properties in the United States, which have income-producing
capabilities, four of which have been lost to foreclosure and the last property
was sold on December 31, 1997. The Trust has experienced a loss of 222,583,
income of $1,067,259 and a loss of $18,598 for fiscal years ended December 31,
1998, 1997 and 1996, respectively. The Trust considers its business to be
operating in one industry segment, investment in real property.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the common stock of the New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). Soon after the issuance of the New REIT
stock, the stock split 1.706 to 1 and the shares were issued on May 8, 1998. The
New REIT indirectly owns ten shopping center properties in the New England,
Mid-Atlantic and Southeast regions of the United States. New REIT is not
affiliated with the Trust or the Trustees of the Trust and the sale price for
the Property was determined by arm's-length negotiations between the parties.
The Property is an approximately 38,125 square foot shopping center located in
Lake Mary, Florida and, as of the date of sale, was 100% occupied. The
consummation of the transactions contemplated by the Contribution and Exchange
Agreement, including the sale of the Property, was approved by a majority of the
shareholders of the Trust at its special meeting held on December 30, 1997.
499,097 of the 747,553 shares entitled to vote at such meeting approved the
transaction proposal, with 13,219 opposed and 10,624 abstaining.
The Trust exchanged its sole real estate holding for 32,000 shares of the Common
Stock of New REIT plus the assumption of its first mortgage. The total selling
price was $2,161,940, resulting in a gain of $1,106,368. 3,744 shares of the New
REIT Common Stock were distributed to the Trust shareholders on December 31,
1997 and approximately 20,256 of such shares were distributed to the Trust
shareholders on January 7, 1998 (representing in the aggregate not less than 75%
of the Common Stock received by the Trust). The remaining 8,000 shares were
retained by the Trust and any distributions on the shares or net proceeds from
the sale of the shares will be available to the Trust for working capital
purposes. The New REIT stock split 1.706 to 1 and the Trust was issued a total
of 13,348 on May 8, 1998. The Trust is contingently liable on the first
mortgage.
The Trust during 1998, has sold all 13,648 shares that it owned in Philips
International Realty Corp. The Trust received gross proceeds of $221,480 and had
realized losses of $178,520. Substantially all of the Trust's assets were held
as cash as of December 31, 1998. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust are investigating new properties as possible
acquisitions for the Trust. Very preliminary negotiations are currently underway
with a potential merger candidate. Should the Trust be unable to acquire a new
property(ies) by the end of 1999, the Trustees will evaluate their options as to
the best course of action for the Trust and will liquidate the Trust if it were
to lose its REIT status.
ITEM 2. PROPERTIES.
The Shoppes at Lake Mary (Lake Mary, Florida)
On March 31, 1986, the Trust purchased The Shoppes at Lake Mary, a 38,125 square
foot neighborhood strip shopping center located on 4.7 acres of land in Lake
Mary, Florida, from an unaffiliated entity for $3,200,000 in cash. The Shoppes
at Lake Mary is a two-story shopping center and office facility consisting of
three buildings and a parking lot with 191 parking spaces. Lake Mary is located
in Seminole County, Florida, slightly north and to the east of Orlando.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the common stock of the New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). Soon after the issuance of the New REIT
stock, the stock split 1.706 to 1 and the shares were issued on May 8, 1998. The
New REIT indirectly owns ten shopping center properties in the New England,
Mid-Atlantic and Southeast regions of the United States. New REIT is not
affiliated with the Trust or the Trustees of the Trust and the sale price for
the Property was determined by arm's-length negotiations between the parties.
The Property is an approximately 38,125 square foot shopping center located in
Lake Mary, Florida and, as of the date of sale, was 100% occupied.
The Trust during 1998, has sold all 13,648 shares that it owned in philips
international Realty Corp. The Trust received gross proceeds of $221,480 and had
realized losses of $178,520. Substantially all of the Trust's assets were held
as cash as of December 31, 1998. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust are investigating new properties as possible
acquisitions for the Trust. Very preliminary negotiations are currently underway
with a potential merger candidate. Should the Trust be unable to acquire a new
property(ies) by the end of 1999, the Trustees will evaluate their options as to
the best course of action for the Trust and will liquidate the Trust if it were
to lose its REIT status.
ITEM 3. LEGAL PROCEEDINGS.
A lawsuit has been brought by a successor of the former Advisor ("Former
Advisor") in the State of Connecticut against the Trust, Peter Stein (the
Managing Trustee of the Trust) individually, and First Investment Properties,
Inc. (a former Advisor of the Trust) for $105,000 plus interest, costs and
attorney's fees. The suit contends that the Trust assumed and ratified the
contract between First Investment Properties, Inc., which succeeded the Former
Advisor as Advisor. The Trust contends it was never party to the contract and
intends to vigorously defend these actions which it considers groundless. The
ultimate resolution of these matters is not ascertainable at this time. No
provision has been made in the financial statements related to these claims. The
suit is currently in the discovery phase and has not been set to go to trial.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF HOLDERS OF BENEFICIAL INTEREST.
A special meeting was held on December 30, 1997. At this meeting, the
shareholders of the Trust voted to approve the acceptance of the "Contribution
and Exchange Agreement" between National Properties Investment Trust and the New
REIT, which agreement had been approved by the Trustees of the Trust in August,
1997 for the sale of the Lake Mary property and approve certain amendments to
the Restated Declaration of Trust of National Properties Investment Trust, and
both proposals were approved by a majority of the shareholders of the Trust.
499,097 of the 747,553 shares entitled to vote at such meeting approved the
transaction proposal, with 13,219 opposed and 10,624 abstaining.
An annual meeting of the shareholders was not held during 1997. The Declaration
of Trust of National Properties Investment Trust requires an annual meeting to
be held within six months of the Trust's year end.
The annual meeting of shareholders was held May 29, 1998 and the shareholders of
the Trust reelected the Trustees of the Trust and voted to amend the Declaration
of Trust and ratify the following: In accordance with the Declaration of Trust,
the Trustees have approved amending the Trusts Declaration of Trust, to the
following effect, and recommend that the Shareholders approve and ratify the
same: (i) to confirm self-management of the Trust by the Trustees, and the
Managing Trustee and such officers as the Trustees may appoint acting under
their direction, (ii) to substitute for provisions contemplating a finite life
of the Trust and self-liquidation upon sale of the Trust's last real estate
asset, provision for perpetual life of the Trust until terminated by action of a
majority in interest of the Shareholders, and (iii) to broaden the Trust's
investment guidelines and remove certain investment restrictions in order to
give the Trustees greater flexibility in managing the Trust's remaining assets
for maximum realization of value in the Trust, subject always to the purpose of
the Trust to operate so as to qualify as a real estate investment trust within
the meaning of the Internal Revenue Code.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Trust was engaged in a public offering through April 30, 1987. The Trust has
the authority to issue unlimited number of shares of Beneficial Interest,
without par value. There is no established public trading market for the Trust's
shares. The Trust had 1,691 shareholders of record at March 15, 1999.
The Trusts old CUSIP number was 763-077-104 and its new CUSIP number is
637-255-100.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the common stock of the New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). Soon after the issuance of the New REIT
stock, the stock split 1.706 to 1 and the shares were issued on May 8, 1998. The
New REIT indirectly owns ten shopping center properties in the New England,
Mid-Atlantic and Southeast regions of the United States. New REIT is not
affiliated with the Trust or the Trustees of the Trust and the sale price for
the Property was determined by arm's-length negotiations between the parties.
The Property is an approximately 38,125 square foot shopping center located in
Lake Mary, Florida and, as of the date of sale, was 100% occupied. The
consummation of the transactions contemplated by the Contribution and Exchange
Agreement, including the sale of the Property, was approved by a majority of the
shareholders of the Trust at its special meeting held on December 30, 1997.
499,097 of the 747,553 shares entitled to vote at such meeting approved the
transaction proposal, with 13,219 opposed and 10,624 abstaining.
The Trust exchanged its sole real estate holding for 32,000 shares of the Common
Stock of New REIT plus the assumption of its first mortgage. The total selling
price was $2,161,940, resulting in a gain of $1,106,368. 3,744 shares of the New
REIT Common Stock were distributed to the Trust shareholders on December 31,
1997 and approximately 20,256 of such shares were distributed to the Trust
shareholders on January 7, 1998 (representing in the aggregate not less than 75%
of the Common Stock received by the Trust). The remaining 8,000 shares were
retained by the Trust and any distributions on the shares or net proceeds from
the sale of the shares will be available to the Trust for working capital
purposes. The New REIT stock split 1.706 to 1 and the Trust was issued a total
of 13,348 on May 8, 1998. The Trust is contingently liable on the first
mortgage.
The Trust during 1998, has sold all 13,648 shares that it owned in Philips
International Realty Corp. The Trust received gross proceeds of $221,480 and had
realized losses of $178,520. Substantially all of the Trust's assets were held
as cash as of December 31, 1998. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust are investigating new properties as possible
acquisitions for the Trust. Very preliminary negotiations are currently underway
with a potential merger candidate. Should the Trust be unable to acquire a new
property(ies) by the end of 1999, the Trustees will evaluate their options as to
the best course of action for the Trust and will liquidate the Trust if it were
to lose its REIT status.
The Trust declared and paid cash distributions on a monthly basis from February
1986 through September 1988. On April 11, 1989, the Trustees voted to suspend
the quarterly shareholders' dividend indefinitely, effective with the scheduled
distribution for the first quarter of 1989. This decision was predicated upon
the desire to direct all available funds into property operations. A one-time
dividend was declared in January 1996, paid in February 1996, payable to
shareholders of record as of September 30, 1995, of $0.05 per share. This
dividend was a return of capital to the shareholders. The dividend was declared
by the sole vote of the Managing Trustee (See Item 13 - Certain Relationships
and Related Transactions). The Trust declared and paid a property dividend on
December 31, 1997, payable to the shareholders of record as of December 4, 1997,
of 3,744 shares Philips International Realty Corp. common stock. The dividend
had an approximate value of $0.25 per share. The Trust declared and paid a
property dividend on January 7, 1998, payable to the shareholders of record as
of December 4, 1997, of 20,256 shares Philips International Realty Corp. common
stock. The dividend had an approximate value of $1.35 per share.
The Trust has made for prior years, and intends to make for 1998, an election to
file as a real estate investment trust (REIT) for federal tax purposes, and if
so qualified, will not be taxed on earnings distributed to shareholders.
Dividends to shareholders will be taxable dividends to the extent the Trust has
taxable income. Dividends in excess of taxable income will be a return of
capital to the shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain selected financial data for the Trust for
the years ended December 31, 1998, 1997, 1996, 1995 and 1994, and should be read
in conjunction with the accompanying financial statements.
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Statement of Operations: 1998 1997 1996 1995 1994
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Gross Rental Income $ - $ 350,302 $ 340,768 $ 311,383 $ 293,882
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Net Income (Loss) From
Property Operations (2&3) - (39,765) (20,187) 32,192 (272,220)
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Interest & Dividend Income 3,565 656 1,589 1,260 -
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Gain (Loss) Due to
Disposition of Assets &
Loss Revenue (5) (6) (226,148) 1,106,368 - - -
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Net Income (Loss) (222,583) 1,067,259 (18,598) 33,452 (272,220)
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Per Share Data:
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Net Income (Loss) (1) (0.30) 1.45 (0.03) 0.05 (0.39)
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Distributions Declared 1.35 0.25 0.05 0.00 0.00
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Weighted Average Number
of Shares of Beneficial
Interest Outstanding (1) 747,528 735,288 718,496 718,649 693,436
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Balance Sheet:
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Total Assets (2,3,4&5) 102,818 1,452,115 1,050,867 1,102,288 1,014,331
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Mortgage Loans Payable
(2,3&5) - - - 571,258 598,353 398,606
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
Shareholder's Equity 85,798 1,321,964 405,681 460,618 386,800
- -------------------------------------- ---------------- ---------------- ----------------- ---------------- -----------------
<FN>
(1) Earnings (Loss) per Share of Beneficial Interest are computed based on the
weighted average number of Shares of Beneficial Interest outstanding
during the period.
(2) On November 30, 1993, the Trust borrowed $400,000 to extinguish old
payables, pay delinquent real estate taxes and accumulate working capital.
The Shoppes at Lake Mary were pledged as collateral for this loan.
(3) On May 4, 1994, the Trust borrowed $25,000 to accumulate working capital.
The Shoppes at Lake Mary were pledged as collateral for this loan.
(4) On October 26, 1995, the Trust borrowed $600,000 to extinguish the
mortgage payable, make capital and tenant improvements, pay delinquent
real estate taxes, accumulate working capital and to provide funds to pay
a one-time dividend. The Shoppes at Lake Mary were pledged as collateral
for this loan.
(5) On December 31, 1997, the Trust sold its sole remaining real property in
exchange for 32,000 shares of Philips International Realty Corp. common
stock and the assumption of the 1st mortgage of $546,940.
(6) The loss for 1998 is comprised of a loss from discontinued operations
of $47,628 and a loss from the sale of investments of $178,520.
</FN>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
At December 31, 1998, the Trust has cash of approximately $98,523, which is
comprised almost entirely of proceeds from the sale of investments.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the common stock of the New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the Trust, the
Board of Trustees of the Trust, New REIT and certain affiliated partnerships or
limited liability companies associated with a private real estate firm
controlled by Philip Pilevsky and certain partners and members thereof (the
"Contribution and Exchange Agreement"). Soon after the issuance of the New REIT
stock, the stock split 1.706 to 1 and the shares were issued on May 8, 1998. The
New REIT indirectly owns ten shopping center properties in the New England,
Mid-Atlantic and Southeast regions of the United States. New REIT is not
affiliated with the Trust or the Trustees of the Trust and the sale price for
the Property was determined by arm's-length negotiations between the parties.
The Property is an approximately 38,125 square foot shopping center located in
Lake Mary, Florida and, as of the date of sale, was 100% occupied. The
consummation of the transactions contemplated by the Contribution and Exchange
Agreement, including the sale of the Property, was approved by a majority of the
shareholders of the Trust at its special meeting held on December 30, 1997.
499,097 of the 747,522 shares entitled to vote at such meeting approved the
transaction proposal, with 13,219 opposed and 10,624 abstaining.
The Trust exchanged its sole real estate holding for 32,000 shares of the Common
Stock of New REIT plus the assumption of its first mortgage. The total selling
price was $2,161,940, resulting in a gain of $1,106,368. 3,744 shares of the New
REIT Common Stock were distributed to the Trust shareholders on December 31,
1997 and approximately 20,256 of such shares were distributed to the Trust
shareholders on January 7, 1998 (representing in the aggregate not less than 75%
of the Common Stock received by the Trust). The remaining 8,000 shares were
retained by the Trust and any distributions on the shares or net proceeds from
the sale of the shares will be available to the Trust for working capital
purposes. The New REIT stock split 1.706 to 1 and the Trust was issued a total
of 13,348 on May 8, 1998. The Trust is contingently liable on the first
mortgage.
The Trust during 1998, has sold all 13,648 shares that it owned in philips
international Realty Corp. The Trust received gross proceeds of $221,480 and had
realized losses of $178,520. Substantially all of the Trust's assets were held
as cash as of December 31, 1998. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust are investigating new properties as possible
acquisitions for the Trust. Very preliminary negotiations are currently underway
with a potential merger candidate. Should the Trust be unable to acquire a new
property(ies) by the end of 1999, the Trustees will evaluate their options as to
the best course of action for the Trust and will liquidate the Trust if it were
to lose its REIT status.
The principal assets of the Trust consists of cash.
Results of Operations
Year Ended December 31, 1998 compared to Year Ended December 31, 1997
For the year ended December 31, 1998, the Trust reported no income or loss from
operations. The Trust sold its sole remaining operating asset on December 31,
1997. During 1998, the Trust incurred $47,628 in general and administrative
expenses incurred in administering the Trust and for searching for new merger
candidates. The Trust sold its remaining interest in Philips International
Realty Corp. and had realized losses from the sale of investments of $178,520.
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
For the year ended December 31, 1997, the Trust reported a net loss from
property operations of $39,765, as compared to net loss from property operations
of $20,187 for the year ended December 31, 1996. Significant variances from 1996
are as follows; the increase in gross rental income for the year ended December
31, 1997 is the result of decreases in vacancies resulting in an increase of
gross rental of $5,641 and rent escalations resulting in an increase of gross
rental income of $10,586 and a decrease in gross rental income due to rent
concessions of $6,693. Rental expenses increased by $23,774 for the year ended
December 31, 1997 as a result of the write-off of the remaining balance of
capitalized loan origination costs of $7,478, increase in depreciation of $4,133
as a result of the new sewer construction and improvements, an increase in
property taxes of $7,104 over the prior year, and the write-off of the remaining
balance of capitalized leasing commissions of $5,531. General and administrative
expenses increased by $5,338 for the year ended December 31, 1997 over the year
ended December 31, 1996 due to increases in expenses related to the Trust's
preparation for the proposed sale of $3,831, decreases in travel and
entertainment of $3,571, and increases in health insurance premiums of $6,095.
Also, the Trust had net income of $1,067,259 for the year ended December 31,
1997, compared to a net loss of $18,598 for the year ended December 31, 1996.
The increase is the result of a gain on the sale of real estate of $1,106,368 on
December 31, 1997.
On December 31, 1997, the Trust, sold its sole real estate asset (the
"Property") to a newly formed real estate investment trust company, the Philips
International Realty Corp., a Maryland corporation ("New REIT"), in exchange for
32,000 shares of the Common Stock of New REIT plus the assumption of its first
mortgage. The total selling price was $2,161,940, resulting in a gain of $
1,106,368. 3,744 shares of the New REIT Common Stock were distributed to the
Trust shareholders on December 31, 1997 and approximately 20,256 of such shares
were distributed to the Trust shareholders on January 7, 1998 (representing in
the aggregate not less than 75% of the Common Stock received by the Trust). The
remaining 8,000 shares are to be retained by the Trust and any distributions on
the shares or net proceeds from the sale of the shares will be available to the
Trust for working capital purposes.
The Trust's sole remaining substantial asset is an interest in Philips
International Realty Corp. The Trust does not currently own any operating
assets. The Trust is contractually bound to operate for one year until December
31, 1998. The Trustees of the Trust plan to investigate new properties as
possible acquisitions for the Trust. No potential properties are currently under
investigation. Should the Trust be unable to acquire a new property(ies) by the
end of 1998, the Trustees will evaluate their options as to the best course of
action for the Trust.
Currently, there is no agreement with regards to compensation of the Managing
Trustee (See Item 13 - Certain Relationships and Related Transactions) and
compensation paid to the Managing Trustee was $48,000 for the year ended
December 31, 1997.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
For the year ended December 31, 1996, the Trust reported a net loss from
property operations of $20,187, as compared to net income from property
operations of $32,192 for the year ended December 31, 1995. Significant
variances from 1995 are as follows; repairs and maintenance expenses were higher
due to repairs to the sprinkler system, septic system and air conditioning
systems; interest expense increased due to the refinancing and additional
borrowing on October 25, 1995; property management costs increased due to a
monthly Trustee fee paid to the Managing Trustee as a result of the conversion
of the REIT to a self-managed REIT; Telephone expenses increased due to
increased contact with shareholders, contact with contractors in Florida, and
contacts by the Managing Trustee when he is traveling; and revenues increased
due to increased occupancy and rent escalations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
NATIONAL PROPERTIES INVESTMENT TRUST
INDEX
Independent Auditors' Reports
Comparative Balance Sheet as of December 31, 1998 and 1997
Comparative Statement of Operations for the Years Ended December 31, 1998,
1997 and 1996
Comparative Statement of Changes in Shareholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996
Comparative Statement of Cash Flows for the Years Ended December 31, 1998,
1997 and 1996
Comparative Schedule of Rental Expenses for the Years Ended December 31,
1998, 1997 and 1996
Notes to the Financial Statements
Supplemental Financial Statement Schedules:
None
---------------
Schedules Not Filed:
All schedules except, those indicated above, have been omitted because
either the required information is not applicable or the information is
shown in the financial statements or notes thereto.
[LETTERHEAD OF BERNARDI & COMPANY, LLC]
Trustees
National Properties Investment Trust
P.O. Box 148
Canton Center, Connecticut 06020
We have audited the accompanying balance sheet of National Properties Investment
Trust as of December 31, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity, and cash flows for the years ended
December 31, 1998, 1997 and 1996. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Properties Investment
Trust as of December 31, 1998 and 1997 and the results of its operations and its
cash flows for the years ended December 31, 1998, 1997 and 1996 in conformity
with generally accepted accounting principles. Also in our opinion, the
financial statement schedule, when considered in relation to the basic financial
statements, presents fairly in all material respects the information shown
therein.
The accompanying financial statements have been prepared assuming that the Trust
will continue as a going concern. As described in Note 1 and Note 8 to the
financial statements, the Trust has sold its remaining operating assets, which
raise substantial doubt its ability to continue as a going concern. Management's
plans regarding those matters are also described in Note 8. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
March 12, 1999
Respectfully submitted,
/s/ Bernardi & Company
BERNARDI & COMPANY, LLC
Certified Public Accountants
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE BALANCE SHEET
December 31,
1998 1997
---- ----
ASSETS
Investments in real estate and personal property $ 3,158 $ 4,287
Cash and cash equivalents 98,523 32,171
Receivables -- 1,314
Investments -- 1,412,800
Receivable from employee 1,137 --
Deposits -- 1,543
--------- --------
TOTAL ASSETS $ 102,818 $1,452,115
========== ==========
LIABILITIES:
Accounts payable $ 5,657 $ 16,146
Accrued expenses 2,182 15,609
Due to shareholders 606 --
Prepaid rent and security deposits 8,575 8,575
Note payable -- 89,821
--------- ---------
Total Liabilities 17,020 130,151
--------- ---------
SHAREHOLDERS' EQUITY:
Shares of beneficial interest, no par value, unlimited
authorization, shares issued and outstanding were
747,503 in 1998 and 747,553 in 1997 11,790,407 11,791,190
Accumulated deficit (11,704,609) (10,469,226)
--------- ---------
Total Shareholders' Equity 85,798 1,321,964
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 102,818 $ 1,452,115
=========== ===========
The accompanying notes are an integral part of the financial statements.
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE STATEMENT OF OPERATIONS
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
INCOME (LOSS) FROM OPERATIONS OF DISCONTINUED
LAKE MARY REAL ESTATE:
Gross rental income $ -- $ 350,302 $ 340,768
Rental expenses -- (265,552) (241,778)
General and administrative expenses (47,628) (124,515) (119,177)
----------- ---------- ---------
Net Income (Loss) from Property Operations (47,628) (39,765) (20,187)
----------- ---------- ---------
OTHER INCOME (EXPENSE):
Interest income 18 656 1,589
Dividend income 3,547 -- --
Loss on sale of investments (178,520) -- --
----------- ---------- ---------
Total Other Income (Expense) (174,955) 656 1,589
----------- ---------- ---------
GAIN ON DISPOSAL OF LAKE MARY REAL ESTATE (LESS
APPLICABLE INCOME TAXES OF $15,609) -- 1,106,368 --
----------- ---------- ---------
NET INCOME (LOSS) $ (222,583)$1,067,259 $ (18,598)
=========== ========== =========
INCOME (LOSS) PER SHARE OF BENEFICIAL INTEREST $ (0.30)$ 1.45 $ (0.03)
=========== ========== =========
AVERAGE NUMBER OF SHARES OF BENEFICIAL
INTEREST 747,528 735,288 718,496
=========== ========== =========
The accompanying notes are an integral part of the financial statements.
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
Shares Amount Shares Amount Shares Amount
------- ------------ ------- ------------ -------- ------------
SHARES OF BENEFICIAL INTEREST
Balance - January 1, 747,553 $ 11,791,190 718,416 $ 11,754,966 718,860 $ 11,754,966
Shares issued 12,128 3,478 30,416 36,900 -- --
Redemption of shares (12,178) (4,261) (1,185) (676) -- --
Corrections of errors -- -- (174) -- (364) --
------- ------------ ------- ------------ -------- ------------
Balance - December 31, 747,503 $ 11,790,407 747,553 $ 11,791,190 718,416 $ 11,754,966
======= ============ ======= ============ ======== ============
ACCUMULATED DEFICIT
Balance - January 1, $(10,469,226) $(11,349,285) $(11,294,348)
Net income (loss) (222,583) 1,067,259 (18,598)
Dividends paid (1,012,800) (187,200) (36,339)
------------ ------------ ----------
Balance - December 31, $(11,704,609) $(10,469,226) $(11,349,285)
============ ============ ============
The accompanying notes are an integral part of the financial statements.
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
For the Years Ended December 31,
1998 1997 1996
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (222,583)$ 1,067,259 $ (18,598)
---------- --------- -------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities
Depreciation and amortization 1,129 62,510 50,899
(Gain)loss on sale of assets 178,520 (1,106,368) --
Changes in Assets and Liabilities:
Receivables 177 16,934 (4,337)
Prepaid expenses -- 21,019 1,753
Deposits 1,543 617 (360)
Accounts payable (10,489) (1,161) (1,589)
Accrued expenses (13,427) (35,800) 29,575
Prepaid rent and security deposits -- (12,246) 2,625
Due to shareholders 606 -- --
---------- --------- -------
Total Adjustments 158,059 (1,054,495) 78,566
---------- --------- -------
Net Cash Provided By (Used In)
Operating Activities (64,524) 12,764 59,968
---------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Closing costs paid on the sale of assets -- (10,000) --
Proceeds from the sale of assets 221,480 -- --
Purchase of personal property -- (131,723) (60,212)
---------- --------- -------
Net Cash Flows Provided By (Used In)
Investing Actvities 221,480 (141,723) (60,212)
---------- --------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (89,821) (24,318) (27,095)
Proceeds from the issuance of shares 3,478 36,900 --
Redemption of shares (4,261) (676) --
Dividends paid -- -- (36,339)
Proceeds from note -- 104,821 --
---------- --------- -------
Net Cash Provided by (Used In)
Financing Activities (90,604) 116,727 (63,434)
---------- --------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 66,352 (12,232) (63,678)
CASH AND CASH EQUIVALENTS, BEGINNING
OF THE YEAR 32,171 44,403 108,081
---------- --------- -------
CASH AND CASH EQUIVALENTS, END
OF THE YEAR $ 98,523 $ 32,171 $ 44,403
========== ========= =======
The accompanying notes are an integral part of the financial statements.
NATIONAL PROPERTIES INVESTMENT TRUST
CANTON CENTER, CONNECTICUT
COMPARATIVE SCHEDULE OF RENTAL EXPENSES
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
RENTAL EXPENSES:
Promotion and administration $ -- $ 23,507 $ 21,170
Leasing commissions -- 18,244 12,713
Utilities -- 23,715 21,264
Maintenance and repair -- 22,870 26,234
Insurance -- 12,672 13,309
Property taxes -- 43,000 35,896
Interest expense and late charges -- 59,034 60,293
Amortization -- 16,454 8,976
Depreciation -- 46,056 41,923
-------- ------ ------
Total Rental Expenses $ -- $ 265,552 $ 241,778
========= ========= =========
The accompanying notes are an integral part of the financial statements.
NATIONAL PROPERTIES INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Organization and Summary of Accounting Policies:
A. Organization:
National Properties Investment Trust (formerly Richard Roberts
Real Estate Growth Trust I) (the "Trust") was organized on January
16, 1985 as a Massachusetts Business Trust. The Trust invests
directly in equity interests in commercial, industrial and/or
residential properties in the United States which have
income-producing capabilities and intends to hold its properties
for long-term investment.
On December 31, 1997, the Trust, sold its sole real estate asset
(the "Property") to a newly formed real estate investment trust
company, Philips International Realty Corp., a Maryland
corporation ("New REIT"), in exchange for 32,000 shares of the
common stock of the New REIT pursuant to a Contribution and
Exchange Agreement, dated August 11, 1997, as amended, among the
Trust, the Board of Trustees of the Trust, New REIT and certain
affiliated partnerships or limited liability companies associated
with a private real estate firm controlled by Philip Pilevsky and
certain partners and members thereof (the "Contribution and
Exchange Agreement"). Soon after the issuance of the New REIT
stock, the stock split 1.706 to 1 and the shares were issued on
May 8, 1998. The New REIT indirectly owns ten shopping center
properties in the New England, Mid-Atlantic and Southeast regions
of the United States. New REIT is not affiliated with the Trust or
the Trustees of the Trust and the sale price for the Property was
determined by arm's-length negotiations between the parties. The
Property is an approximately 38,125 square foot shopping center
located in Lake Mary, Florida and, as of the date of sale, was
100% occupied. The consummation of the transactions contemplated
by the Contribution and Exchange Agreement, including the sale of
the Property, was approved by a majority of the shareholders of
the Trust at its special meeting held on December 30, 1997.
499,097 of the 747,522 shares entitled to vote at such meeting
approved the transaction proposal, with 13,219 opposed and 10,624
abstaining.
The Trust exchanged its sole real estate holding for 32,000 shares
of the Common Stock of New REIT plus the assumption of its first
mortgage. The total selling price was $2,161,940, resulting in a
gain of $1,106,368. 3,744 shares of the New REIT Common Stock were
distributed to the Trust shareholders on December 31, 1997 and
approximately 20,256 of such shares were distributed to the Trust
shareholders on January 7, 1998 (representing in the aggregate not
less than 75% of the Common Stock received by the Trust). The
remaining 8,000 shares were retained by the Trust and any
distributions on the shares or net proceeds from the sale of the
shares will be available to the Trust for working capital
purposes. The New REIT stock split 1.706 to 1 and the Trust was
issued a total of 13,348 on May 8, 1998. The Trust is contingently
liable on the first mortgage.
NOTE 1 - Organization and Summary of Accounting Policies: (Continued)
B. Method of Accounting:
The financial statements of the Trust have been prepared on
the accrual basis of accounting.
C. Cash Equivalents:
For financial statement purposes, the Trust considers all
highly liquid investments with original maturities of three months
or less to be cash equivalents.
D. Income Taxes:
The Trust has made for prior years, and intends to make for
1998, an election to file as a real estate investment trust (REIT)
for federal tax purposes, and if so qualified, will not be taxed
on earnings distributed to shareholders. Accordingly, no provision
for federal income taxes has been made for the periods ended
December 31, 1998 and 1997. However, the Trust is subject to state
income taxes, where applicable.
E. Real Estate Assets and Depreciation:
On January 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121"
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." The statement requires
impairment losses to be recognized for long-lived assets, on a
property by property basis, used in operations when indicators of
impairment are present and the undiscounted future cash flows are
not sufficient to recover the assets, carrying value. If such
indicators are present, an impairment loss is recognized based on
the excess of the carrying amount of the impaired asset over its
fair value.
For long-lived assets to be disposed of, impairment losses are
recognized when the fair value of the asset, less the estimated
cost to sell, is less than the carrying value of the asset
measured at the time management commits to a plan to dispose of
the asset. Assets are classified as assets to be disposed of when
management has committed to sell and is actively marketing the
property. Assets to be disposed of are carried at the lower of
carrying value or fair value less cost to dispose, determined on
an asset by asset basis. Depreciation is not recorded during the
period in which assets are held for disposal and gains (losses)
from initial and subsequent adjustments to the carrying value of
the assets, if any, are recorded as a separate component of income
from continuing operations. Adoption of this standard did not have
a material impact on the Company's financial position or results
of operations.
Depreciation was computed using the straight-line method over
an estimated depreciable life of 40 years for real property, 7
years for personal property, and over the life of the related
lease for tenant improvements. The only property owned by the
Trust was written down to its realizable value at December 31,
1991.
NOTE 1 - Organization and Summary of Accounting Policies: (Continued)
F. Accumulated Deficit:
The accumulated deficit, reported as a reduction of
Shareholders' Equity, includes net losses recognized and
distributions made to Shareholders as a return of capital
invested.
G. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
NOTE 2 - Related Party Transactions:
The Trust paid the Managing Trustee $0, $48,000 and $46,000 as
compensation for managing the Trust property for the years ended
December 31, 1998, 1997 and 1996, respectively. In addition,
Effective in November 1995, the Trust offices are located at
premises owned by the Managing Trustee. No rent was charged to the
Trust in 1998, 1997 and 1996, however, the Trust paid utility
bills for the office of $845 in 1998, $2,325 in 1997 and $1,647 in
1996.
In 1998 and 1997, the Trust paid health insurance premiums of
$13,221 and $17,269 on behalf of two Trustees, respectively. The
Trust paid $9,667 and $11,727 to a credit card account of the
Managing Trustee for reimbursement of Trust expenses during 1998
and 1997, respectively. In 1997 the Trust reimbursed two Trustees
$3,391 for travel expenses. In 1998, the Trust overpaid the
Managing Trustee $1,139 for reimbursements of expenses, which will
be repaid to the Trust and is reflected as a receivable from
employee.
On March 3, 1997, the Trust issued 30,416 shares of beneficial
interest to a Profit Sharing Retirement Plan for the benefit of a
Trustee of the Trust. The shares were issued for $1.2132 per
share, totaling $36,900.
As part of their compensation for their involvement in the
sale of the real estate by the Trust to Philips International
Realty Corp., two Trustees received a total of 5,000 shares of
Philips International Realty corp. common stock, valued at
$250,000. In addition the two Trustees received warrants to
purchase an additional 8,000 shares of Philips International
Realty Corp. common stock.
NOTE 3 - Earnings Per Share:
Earnings per Share of Beneficial Interest are computed on the
weighted average number of Shares of Beneficial Interest
outstanding during the period.
NOTE 4 - Investment in Personal Property:
All of the Trust's property are recorded at historical cost.
On December 31, 1997, National Properties Investment Trust,
sold its sole real estate asset to a newly formed real estate
investment trust company, the Philips International Realty Corp.,
a Maryland corporation.
The Trust's property and equipment are as follows:
1998 1997
---- ----
Furnishings and Equipment 6,545 6,545
Less: Accumulated Depreciation ( 3,387) ( 2,258)
----- ------
Net Investment in Personal Property $3,158 $4,287
====== ======
NOTE 5- Receivables:
Receivables consist of the following:
1998 1997
---- ----
Tenant Receivables $ -- $1,314
Allowance for Doubtful Accounts -- --
----- -----
Tenant Receivables net of Allowance $ -- $1,314
====== ======
NOTE 6 - Accrued Expenses:
Accrued Expenses consist of the following:
1998 1997
---- ----
Accrued corporation taxes 2,182 15,609
======= =======
NOTE 7 - Note Payable:
As part of the sale of the Lake Mary property, the Trust
entered into a secured non-recourse note agreement for settlement
adjustments in favor of the purchaser. The note balance as of
December 31, 1998 and 1997 was $0 and $89,821. The note was
secured by 4,000 shares of Phillips International Realty Corp.
stock.
NOTE 8- Going Concern:
The Trust during 1998, has sold all 13,648 shares that it
owned in Philips International Realty Corp. The Trust received
gross proceeds of $221,480 and had realized losses of $178,520.
Substantially all of the Trust's assets were held as cash as of
December 31, 1998. The Trust does not currently own any operating
assets. The Trust was contractually bound to operate for one year
until December 31, 1998. The Trustees of the Trust are
investigating new properties as possible acquisitions for the
Trust. Very preliminary negotiations are currently underway with a
potential merger candidate. Should the Trust be unable to acquire
a new property(ies) by the end of 1999, the Trustees will evaluate
their options as to the best course of action for the Trust and
will liquidate the Trust if it were to lose its REIT status.
NOTE 9- Sale of Lake Mary Property:
On December 31, 1997, the Trust exchanged its sole real estate
holding for 32,000 shares of the Common Stock of New REIT, valued
at $1,600,000 plus the assumption of its first mortgage. The total
selling price was $2,161,940, resulting in a gain of $1,106,368.
The Trust remains contingently liable on the first mortgage.
The value of the Philips International Realty Corp. stock and
the value of the Lake Mary real property were determined based
upon the opinions of the each parties financial advisors. The
relative valuations of the Partnership Properties, and the Trust's
Property, were considered independently by the Philips Group and
the Trust, and negotiated on an arm's-length basis. The Trust and
the Philips Group are not related parties and retained separate
legal counsel and financial advisors. The terms of the
Contribution and Exchange Agreement were the result of lengthy
negotiations. However, no third-party appraisals of the Properties
or any other assets were used to value such property for purposes
of the Transaction.
Accordingly, no assurance can be given that the valuation of
Philips International Realty Corp. implied by the market
capitalization of Philips International Realty Corp. does not
exceed the aggregate value of the Properties that might have been
obtained from an independent appraisal, or that the common stock
received by the Trust in the Transactions reflects the fair value
of the Trust's Property.
NOTE 10- Dividends Paid to Shareholders:
The Trust declared and paid cash dividends on a monthly basis
from February 1986 through September 1988. On April 11, 1989, the
Trustees voted to suspend the quarterly shareholders' dividend
effective with the scheduled distribution for the first quarter of
1989.
A one-time dividend was declared in January 1996, paid in
February 1996, and payable to shareholders of record as of
September 30, 1995, of $0.05 per share. This dividend was a return
of capital to the shareholders. The dividend was declared by the
sole vote of the Managing Trustee.
A specific date of re-establishment of the quarterly
shareholders' dividend has not yet been determined. Distributions
made by the Trust are at the discretion of the Trustees. Future
distributions, if any, will be dependent upon the earnings and
cash flow of the Trust, its financial condition and other relevant
factors.
Dividends declared per share, are based upon the actual number
of shares outstanding on the date of declaration and not upon the
weighted average number of shares outstanding during the period
used in computing earnings per share.
The Trust declared a property dividend of 3,744 shares of the
New REIT common stock distributed to the Trust shareholders on
December 31, 1997 to the shareholders of record on December 4,
1997 and declared a property dividend of 20,256 of such shares
distributed to the Trust shareholders on January 7, 1998 to the
shareholders of record on December 4, 1997 (representing in the
aggregate not less than 75% of the Common Stock received by the
Trust). The remaining 8,000 shares are to be retained by the Trust
and any distributions on the shares or net proceeds from the sale
of the shares will be available to the Trust for working capital
purposes.
NOTE 11- Contingencies:
Salvatore R. Carabetta, an Independent Trustee, resigned on
June 30, 1996. A successor Trustee was not appointed until June
16, 1997, which is greater than the 60 day period required by the
Declaration of Trust for the appointment of a successor Trustee.
The Declaration of the Trust requires a new Trustee to be
appointed within 60 days. On June 16, 1997 Robert Reibstein was
appointed as Trustee of the Trust.
NOTE 11- Contingencies: (Continued)
On January 6, 1996 the Managing Trustee, Peter Stein, declared
a dividend without the express approval of Mr. Carabetta. Mr.
Stein believes that the request for a vote sent to Mr. Carabetta
twice by certified mail and not responded to, constitutes a
presence at a vote and abstention from the vote. Additionally
until June 25, 1996 when Jay Goldman was elected as Trustee of the
Trust, Peter Stein, the Managing Trustee, had been acting on
behalf of the Trust without the express approval of the majority
of the Trustees. Peter Stein and Salvatore Carabetta were the sole
remaining Trustees and since a majority of Trustees need to be
present to have a vote, both Trustees needed to be present to hold
a vote. On June 16, 1997, a Trustee meeting was held and the
Trustees acknowledged that the Trust was operating without the
full complement of Trustees and approved and ratified all actions
carried out by the officers of the Trust.
On June 16, 1997, the Trustees adopted an Amended and Restated
Declaration of Trust, which provides that the Trust may choose to
elect officers, including a President who shall act as Managing
Trustee, and which further defines the powers and limitations of
the officers of the Trust. As of September 30, 1997, no officers
of the Trust have been appointed to oversee the management of the
Trust.
In July 1993, the then trustees of Trust amended the
Declaration of Trust, without seeking or obtaining shareholder
approval, to, among other things, create an open-end trust such
that National would have an infinite life. Since the date of such
amendment, National and its trustees have been acting at all times
in a manner consistent with such infinite life status. Although
the current Trustees believe that such trustees acted within their
discretionary authority under the original Declaration of Trusts
in effecting such amendment without seeking shareholder approval
and that such amendment was properly adopted, there can be no
assurance that one or more shareholders of the Trust will not
challenge the validity of such amendment premised upon the need
for such shareholder approval under the terms of the original
Declaration of Trust or seek damages for breach of the contractual
provisions of the original Declaration of Trust. If such a
challenge was successfully brought, Trust may be required to
obtain shareholder approval of such amendment in order to maintain
its infinite life status (as opposed to liquidating one year after
the completion of the Formation Transactions), and there can be no
assurances that such shareholder approval, if required, would be
obtained.
NOTE 11- Contingencies: (Continued)
A lawsuit has been brought by a successor of the former
Advisor ("Former Advisor") in the State of Connecticut against the
Trust, Peter Stein (the Managing Trustee of the Trust)
individually, and First Investment Properties, Inc. (a former
Advisor of the Trust) for $105,000 plus interest, costs and
attorney's fees. The suit contends that the Trust assumed and
ratified the contract between First Investment Properties, Inc.,
which succeeded the Former Advisor as Advisor. The Trust contends
it was never party to the contract and intends to vigorously
defend these actions which it considers groundless. The ultimate
resolution of these matters is not ascertainable at this time. No
provision has been made in the financial statements related to
these claims. The suit is currently in the discovery phase and has
not been set to go to trial.
Management is unable to determine the effects the above events
will have on the financial condition of the Trust, if any.
NOTE 12- Supplemental Disclosure of Cash Flow Information:
1998 1997 1996
---- ---- ----
Cash paid during the year -
Income taxes $ -- $ -- $ --
Interest $ 4,637 $ 59,034 $ 60,293
Non-cash transactions -
32,000 shares of Philips International
Realty Corp. common stock received
in exchange for real estate $ -- $ 1,600,000 $ --
Assumption of 1st mortgage by
Philips International Realty Corp.
$ -- $ 546,940 $ --
Shares of Philips International
Realty Corp. common stock
distributed as a dividend $ 1,012,800 $ 187,200 $ --
Income taxes to be paid by Philips
International Realty Corp. as a
condition of the sale of the real
estate $ -- $ 15,000 $ --
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Trustees collectively have ultimate control over the management of the Trust
and the conduct of its affairs. Peter Stein, the Managing Trustee, (See Item 13
- - Certain Relationships and Related Transactions) administers the day-to-day
operations of the Trust.
Under the Declaration of Trust, the Trustees or their nominees hold legal title
to the property of the Trust. Independent Trustees will at all times comprise a
majority of the Trustees in office. The Trustees serve for a term of one year or
until their successors are elected and qualified. Trustees were re-elected at
the annual meeting. The Declaration of Trust calls for a minimum of three
Trustees, and a majority of the Trustees must be independent Trustees. Should a
trustee resign and there are less than three trustees, then the Trust may
operate as if it has the required minimum Trustees until a new Trustee is
appointed, which shall be done within sixty days. A Trustee may be removed with
cause by all the remaining Trustees, or with or without cause by the holders of
a majority of the outstanding Shares. The independent Trustees do not serve the
Trust on a full-time basis and will devote only so much of their time to the
Trust as is necessary or required for the conduct of the Trust's business. Each
of the independent Trustees has, and will continue to have, a principal
occupation and/or source of income other than that of the Trust and it is
contemplated that they will not devote a substantial portion of their time to
the discharge of their duties as Trustees.
The Trustees are as follows:
PETER M. STEIN
Mr. Stein, who is 47 years old, has a 25-year involvement in investment real
estate, being involved in over 55 investment programs. Mr. Stein has directed
his own firm since graduating from Lafayette College in 1973. As Managing
Trustee (See Item 13 - Certain Relationships and Related Transactions) of the
Trust, Mr. Stein oversees the administration of the Trust, and as such, is
empowered to implement the intentions of the Trustees.
JAY GOLDMAN
Jay Goldman, a lawyer in Boston, Massachusetts, received a B.A. from Lake
Forrest College, a J.D. from Boston University Law School, and a L.L.M.
(Taxation) from Boston University Law School. He has extensive experience in
various segments of the real estate industry including development, finance, and
tax related syndications.
In addition to his decades of real estate experience, Mr. Goldman has been
involved in a broad range of investment banking and financial advisory services
for principals and joint venture partners, including such services for start up
and emerging companies. Mr. Goldman has also been active in international
merchant banking transactions.
ROBERT H. REIBSTEIN
Robert H. Reibstein graduated from Boston University with a B.A. in Economics in
1978 and a Masters in Business Administration with a concentration in Finance in
1984. He began working in the real estate industry in 1984, acquiring commercial
and multi-family properties for growth and income syndication funds. Since 1988,
Mr. Reibstein has provided consulting and advisory services to private and
institutional real estate companies and pension funds. Currently, he is involved
with analysis and valuation of commercial debt and equity portfolios for
portfolio management purposes. Mr. Reibstein is experienced in structuring
portfolios and managing the due diligence process for commercial mortgage backed
security transactions.
Salvatore R. Carabetta, an Independent Trustee, resigned on June 30, 1996. A
successor Trustee was not appointed until June 16, 1997, which is greater than
the 60 day period required by the Declaration of Trust for the appointment of a
successor Trustee. The Declaration of the Trust requires a new Trustee to be
appointed within 60 days. On June 16, 1997 Robert Reibstein was appointed as
Trustee of the Trust. (See Item 13 - Certain Relationships and Related
Transactions).
ITEM 11. EXECUTIVE COMPENSATION.
Under the Declaration of Trust, the Independent Trustees are entitled to receive
reasonable compensation for their services as Trustees (See Item 13 - Certain
Relationships and Related Transactions). In addition, the Trust will reimburse
the Trustees (including those who are affiliates) for travel and other expenses
incurred in connection with their duties as Trustees.
The Managing Trustee was not paid in 1998 for managing the Trust's property.
However, the Trust paid health insurance premiums of $13,221on behalf of two
Trustees.
Management does not anticipate any management fees or other trustee fees to be
paid to any trustee unless the Trust is able to acquire new real property.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
To the best knowledge of the Trust, on March 15, 1999, two shareholders of
record owned more than five percent of its Shares of Beneficial Interest. The
following Trustees hold shares of beneficial interest of the Trust.
Name of Amount and Nature
Beneficial Of Beneficial Percentage
Owner Ownership Ownership
Gretchen Stein 54,124.77 Shares 7.2%
Peter Stein Indirectly - 54,124.77 Shares 7.2%
(same shares as above)
Jay Goldman Indirectly - 58,693.68 Shares 7.8%
Robert R. Reibstein 4,003.00 Shares 0.5%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Trust paid the Managing Trustee $0, $48,000 and $46,000 as compensation for
managing the Trust property for the years ended December 31, 1998, 1997 and
1996, respectively. In addition, Effective in November 1995, the Trust offices
are located at premises owned by the Managing Trustee. No rent was charged to
the Trust in 1998, 1997 and 1996, however, the Trust paid utility bills for the
office of $845 in 1998, $2,325 in 1997 and $1,647 in 1996.
In 1998 and 1997, the Trust paid health insurance premiums of $13,221 and
$17,269 on behalf of two Trustees, respectively. The Trust paid $9,667 and
$11,727 to a credit card account of the Managing Trustee for reimbursement of
Trust expenses during 1998 and 1997, respectively. In 1997 the Trust reimbursed
two Trustees $3,391 for travel expenses. In 1998, the Trust overpaid the
Managing Trustee $1,139 for reimbursements of expenses, which will be repaid to
the Trust and is reflected as a receivable from employee.
Jay Goldman was elected by the shareholders of the Trust as a Trustee of the
Trust on June 25, 1996 at a Special Meeting of the shareholders.
Salvatore R. Carabetta, an Independent Trustee, resigned on June 30, 1996. A
successor Trustee was not appointed until June 16, 1997, which is greater than
the 60 day period required by the Declaration of Trust for the appointment of a
successor Trustee. The Declaration of the Trust requires a new Trustee to be
appointed within 60 days. On June 16, 1997 Robert Reibstein was appointed as
Trustee of the Trust.
George Knude, a Trustee, resigned on November 13, 1995. A successor Trustee was
appointed June 25, 1996.
On January 6, 1996 the Managing Trustee, Peter Stein, declared a dividend
without the express approval of Mr. Carabetta. Mr. Stein believes that the
request for a vote sent to Mr. Carabetta twice by certified mail and not
responded to, constitutes a presence at a vote and abstention from the vote.
Additionally until June 25, 1996 when Jay Goldman was elected as Trustee of the
Trust, Peter Stein, the Managing Trustee, had been acting on behalf of the Trust
without the express approval of the majority of the Trustees. Peter Stein and
Salvatore Carabetta were the sole remaining Trustees and since a majority of
Trustees need to be present to have a vote, both Trustees needed to be present
to hold a vote. On June 16, 1997, a Trustee meeting was held and the Trustees
acknowledged that the Trust was operating without the full complement of
Trustees and approved and ratified all actions carried out by the officers of
the Trust.
On June 16, 1997, the Trustees adopted an Amended and Restated Declaration of
Trust, which provides that the Trust may choose to elect officers, including a
President who shall act as Managing Trustee, and which further defines the
powers and limitations of the officers of the Trust. As of September 30, 1997,
no officers of the Trust have been appointed to oversee the management of the
Trust.
On March 3, 1997, the Trust issued 30,416 shares of beneficial interest to a
Profit Sharing Retirement Plan for the benefit of a Trustee of the Trust. The
shares were issued for $1.2132 per share, totaling $36,900.
As part of their compensation for their involvement in the sale of the real
estate by the Trust to Philips International Realty Corp., two Trustees received
a total of 5,000 shares of Philips International Realty Corp. common stock,
valued at $250,000. In addition, the two Trustees received warrants to purchase
an additional 8,000 shares of Philips International Realty Corp. common stock.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) The following documents are enclosed:
(1) Financial Statements (See index to financial statements filed
as part of Item 8).
(2) Supplemental Financial Statement Schedules (See index to
financial statements filed as part of Item 8).
(3) Exhibits:
3.1 Amended and Restated Declaration of Trust of the
Registrant (Exhibit 3.1 to Amendment No. 2 Filed on April
10, 1985 to the Registrant's Registration Statement on Form
S-ll, File No. 2-95449, is incorporated herein by
reference).
3.2. Trustee's Regulations of the Registrant (Exhibit 3.2 to
Amendment No. 1 filed on March 14, 1985, to the Registrant's
Registration Statement on Form S-ll, File No. 2-95449, is
incorporated herein by reference).
10.1 Advisory Agreement between the Registrant and First
Investment Properties, Inc. (Exhibit 10.1 to Amendment No. 2
filed on August 3, 1993 to the Registrant's Registration
Statement on Form S-ll, File No. 2-95449, incorporated
herein by reference).
10.2 Dividend Reinvestment Plan (Exhibit 10.2 to Amendment
No. 2 filed on April 10, 1985 to the Registrant's
Registration Statement on Form S-ll, file No. 2-95449, is
incorporated herein by reference).
The Trust filed a Form 10-Q/A, Amendment No. 1 to the
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 for the quarter ended
September 30, 1997.
The Trust filed a Form 10-Q/A, Amendment No. 2 to the
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 for the quarter ended
September 30, 1997.
(b) The following Reports on Form 8-K ("Reports") were filed during
the last quarter of the fiscal period.
None.
Signatures
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NATIONAL PROPERTIES INVESTMENT TRUST
Date: 3/27/99 By: /s/ Peter M. Stein
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Peter M. Stein
Managing Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated:
Signature Title Date
/s/ Peter M. Stein Managing Trustee 3/27/99
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Peter M. Stein
/s/ Jay Goldman Trustee 3/27/99
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Jay Goldman
/s/ Robert Reibstein Trustee 3/27/99
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Robert Reibstein