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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 [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
TRANSCONTINENTAL REALTY INVESTORS, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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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
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TRANSCONTINENTAL REALTY INVESTORS, INC.
DALLAS, TEXAS 75234
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 10, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Transcontinental Realty Investors, Inc. which will be held on Tuesday, July
10, 2001 at 11:00 a.m., at 1800 Valley View Lane, Suite 300, Dallas, Texas.
The purposes of the Annual Meeting are:
(1) to elect four Directors; and
(2) to transact any other business that may properly come before the
meeting.
You must be a stockholder of record at the close of business on May 24,
2001, to vote at the Annual Meeting.
Whether you plan to attend or not, please sign, date, and return the
enclosed proxy card in the envelope provided. You may also attend and vote at
the Annual Meeting.
The Annual Report for the year ended December 31, 2000, has been mailed to
all Stockholders under separate cover.
Dated: May 28, 2001
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT A. WALDMAN
Robert A. Waldman
Senior Vice President, General
Counsel and
Corporate Secretary
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TRANSCONTINENTAL REALTY INVESTORS, INC.
DALLAS, TEXAS
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 2001
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Transcontinental Realty Investors, Inc. (the
"Company") of proxies to be used at the Annual Meeting of Stockholders for
consideration of and voting upon (1) the election of four Directors, and (2) the
transaction of such other business as may properly come before the meeting or
any adjournments thereof.
The Annual Meeting will be held at 11:00 a.m., Central time, on Tuesday,
July 10, 2001, at 1800 Valley View Lane, Suite 300, Dallas, Texas. The Company's
financial statements for the year ended December 31, 2000, were audited by BDO
Seidman, LLP. A representative from BDO Seidman is expected to be present at the
Annual Meeting to respond to appropriate questions, and such representative will
have an opportunity to make a statement if such representative desires to do so.
This Proxy Statement and the accompanying proxy are first being mailed to
Stockholders on or about May 28, 2001.
The Annual Report for the year ended December 31, 2000, has preceded this
Proxy Statement and was previously mailed to all stockholders under separate
cover.
STOCKHOLDERS ENTITLED TO VOTE
Only holders of record of issued and outstanding shares of common stock of
the Company (the "Shares") at the close of business on May 24, 2001 (the "Record
Date"), are entitled to vote at the Annual Meeting and at any adjournments
thereof. At the close of business on May 24, 2001, there were 8,636,185 Shares
outstanding. Each holder is entitled to one vote for each Share held on the
Record Date.
VOTING OF PROXIES
When the enclosed proxy is properly executed and returned, the Shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions noted thereon. As to the election of the four nominees as Directors
(Proposal One), Stockholders may choose to vote for all of the nominees or
withhold authority for voting for any one or all of the nominees.
In the absence of other instructions, the Shares represented by a properly
executed and submitted proxy will be voted in favor of the four nominees for
election to the Board of Directors. The Board of Directors does not know of any
other business to be brought before the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting, it is the intention of the
persons named in the enclosed proxy to vote such proxy in accordance with their
judgment on such matters.
VOTE REQUIRED FOR ELECTION OR APPROVAL
Section 2.07 of the By-laws of the Company provides that the election of
any Director requires the affirmative vote of a majority of the votes cast at a
meeting of stockholders by holders of shares entitled to vote thereon. Section
2.06 of the By-laws of the Company provides that a majority of the outstanding
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at any such meeting.
Abstentions will be included in vote totals and, as such, will have the
same effect on each proposal as a negative vote. Broker non-votes, if any, will
not be included in vote totals and, as such, will have no effect on any
proposal.
As of May 24, 2001, management and affiliates held 5,184,451 shares
representing approximately 60.6% of the Shares outstanding. Such parties intend
to vote all of such shares for the election of the Directors.
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REVOCATION OF PROXIES
A proxy is enclosed herewith. Any stockholder who executes and delivers the
proxy may revoke the authority granted thereunder at any time prior to its use
by giving written notice of such revocation to American Stock Transfer and Trust
Company, 6201 15th Avenue, Brooklyn, New York 11219, or by executing and
delivering a proxy bearing a later date by mail or through Internet voting. A
stockholder may also revoke a proxy by attending and voting at the Annual
Meeting. Mere attendance at the meeting is not sufficient to revoke a proxy.
FUTURE PROPOSALS OF STOCKHOLDERS
Any proposal intended to be presented by a stockholder at the 2002 Annual
Meeting of Stockholders of the Company must be received at the principal office
of the Company not later than April 1, 2002, in order to be considered for
inclusion in the Company's proxy statement and form of proxy (as the case may
be) for that meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Board of Directors currently consists of four members and all Directors
are elected annually. The following persons have been nominated to serve as
Directors of the Company: Ted P. Stokely, R. Douglas Leonhard, Martin L. White
and Edward G. Zampa.
Each of the four nominees is currently a Director of the Company. Each of
the nominees have been nominated by the Board of Directors to serve for an
additional term until the next Annual Meeting of Stockholders or until his
successor shall have been duly elected and qualified. Each nominee has consented
to being named in this Proxy Statement as a nominee and has agreed to serve as a
Director if elected. When a proxy is properly executed and returned, the shares
represented thereby will be voted in favor of the election of each of the
nominees, unless authority to vote for any such nominee is specifically
withheld. Cumulative voting for the election of Directors is not permitted. If
any nominee is unable to serve or will not serve (an event which is not
anticipated), then the person acting pursuant to the authority granted under the
proxy will cast votes for such other person(s) as he or she may select in place
of such nominee(s).
The four nominees for Directors are listed below, together with their age,
terms of service, all positions and offices with the Company or the Company's
advisor, Basic Capital Management, Inc. ("BCM"), other principal occupations,
business experience and directorships with other companies during the last five
years or more. The designation "Affiliated," when used below with respect to a
Director, means that the Director is an officer, director or employee of the
Advisor or an officer of the Company. The designation "Independent," when used
below with respect to a Director, means the Director is neither an officer of
the Company nor a director, officer or employee of the Advisor, although the
Company may have certain business or professional relationships with such
Director as discussed below under "Certain Business Relationships and Related
Transactions".
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NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS
AGE
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TED P. STOKELY: Director (Independent) (since April 1990) and 67
Chairman of the Board (since January 1995)
General Manager (since January 1995) of ECF Senior Housing Corporation, a nonprofit corporation;
General Manager (since January 1993) of Housing Assistance Foundation, Inc., a nonprofit
corporation; Part-time unpaid consultant (since January 1993) of Eldercare Housing Foundation,
a nonprofit corporation; and Director (since April 1990) and Chairman of the Board (since
January 1995) of Income Opportunity Realty Investors, Inc. ("IORI")
R. DOUGLAS LEONHARD: Director (Independent) (since January 1998) 65
Director (since November 1998) and Chairman (since October 1999) of OpTel, Inc.; Senior Vice
President (1986 to 1997) of LaCantera Development Company, a wholly-owned subsidiary of USAA;
and Director (since January 1998) of IORI
MARTIN L. WHITE: Director (Independent) (since January 1995) 61
Chief Executive Officer (since 1995) of Builders Emporium, Inc.; Chairman and Chief Executive
Officer (since 1993) of North American Trading Company, Ltd.; President and Chief Operating
Officer (since 1992) of Community Based Developers, Inc.; and Director (since January 1995) of
IORI
EDWARD G. ZAMPA: Director (Independent) (since January 1995) 65
General Partner (since 1976) of Edward G. Zampa and Company; and Director (since January 1995) of
IORI
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE NOMINEES NAMED ABOVE.
BOARD COMMITTEES
The Company's Board of Directors held 17 meetings during 2000. For such
year, no incumbent Director attended fewer than 75% of the aggregate of (i) the
total number of meetings held by the Board during the period for which he had
been a Director and (ii) the total number of meetings held by all committees of
the Board on which he served during the periods that he served.
The Board of Directors has an Audit Committee, the function of which is to
review the Company's operating and accounting procedures. The Board of Directors
does not have Nominating or Compensation Committees.
Audit Committee
The Audit Committee meets periodically with the independent auditors;
reviews annual financial statements and the independent auditors' work and
report thereon; reviews the independent auditors' report on internal controls
and related matters; selects and recommends to the Board of Directors the
appointment of the independent auditors; reviews the letter of engagement and
statement of fees which pertain to the scope of the annual audit and certain
special audit and non-audit work which may be required or suggested by the
independent auditors; receives and reviews information pertaining to internal
audits; directs and supervises special investigations; and performs any other
functions deemed appropriate by the Board of Directors. Members of the Audit
Committee are Messrs. Stokely, Leonhard and White, each of whom is independent
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(as defined in Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange
Listed Company Manual.) The Board of Directors has adopted a written charter for
the Audit Committee, a copy of which is attached to this Proxy Statement as
Attachment A. The Audit Committee met four times during 2000.
Audit Committee Report
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000, for filing with the Securities and Exchange
Commission. The Committee has also recommended, subject to Board approval, the
selection of the Company's independent auditors.
AUDIT COMMITTEE
Ted P. Stokely
R. Douglas Leonhard
Martin L. White
Dated: March 23, 2001
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OLIVE LITIGATION
In February 1990, the Company, together with Continental Mortgage and
Equity Trust ("CMET"), IORI and National Income Realty Trust ("NIRT"), three
real estate entities with, at the time, the same officers, directors or trustees
and advisor as the Company, entered into a settlement (the "Settlement") of a
class and derivative action entitled Olive et al. v. National Income Realty
Trust et al. relating to the operation and management of each of the entities.
On April 23, 1990, the Court granted final approval of the terms of the
Settlement. The Settlement was modified in 1994 (the "Modification").
On January 27, 1997, the parties entered into an Amendment to the
Modification, effective January 9, 1997 (the "Olive Amendment"). The Olive
Amendment provided for the settlement of additional matters raised by
plaintiffs' counsel in 1996. The Court issued an order approving the Olive
Amendment on July 3, 1997.
The Olive Amendment provided that the Company's Board retain a
management/compensation consultant or consultants to evaluate the fairness of
the BCM advisory contract and any contract of its affiliates with the Company,
CMET and IORI, including, but not limited to, the fairness to the Company, CMET
and IORI of such contracts relative to other means of administration. In 1998,
the Board engaged a management/compensation consultant to perform the evaluation
which was completed in September 1998.
In 1999, plaintiffs' counsel asserted that the Board did not comply with
the provision requiring such engagement and requested that the Court exercise
its retained jurisdiction to determine whether there was a breach of this
provision of the Olive Amendment. In January 2000, after the merger of CMET with
the Company, the Board engaged another management/compensation consultant to
perform the required evaluation again. This evaluation was completed in April
2000 and was provided to plaintiffs' counsel. The Board believes that any
alleged breach of the Olive Amendment has been fully remedied by the Board's
engagement of the second consultant. Although several status conferences have
been held on this matter, there has been no Court order resolving whether there
was any breach of the Olive Amendment.
In June 2000, plaintiffs' counsel asserted that the loans made by the
Company to BCM and American Realty Trust, Inc. breached the provisions of the
Modification. The Board believes that all provisions of the Settlement, the
Modification and the Olive Amendment terminated on April 28, 1999. However, in
September 2000, the Court ruled that certain provisions of the modification
continue to be effective after the termination date. This ruling has been
appealed to the United States Court of Appeals for the Ninth Circuit by the
Company and IORI.
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EXECUTIVE OFFICERS
The following persons currently serve as executive officers of the Company:
Karl L. Blaha, President; Bruce A. Endendyk, Executive Vice President; Mark W.
Branigan, Executive Vice President and Chief Financial Officer; and David W.
Starowicz, Executive Vice President -- Acquisitions, Sales and Construction.
Their positions with the Company are not subject to a vote of stockholders. The
age, terms of service, all positions and offices with the Company or BCM, other
principal occupations, business experience and directorships with other
companies during the last five years or more of each executive officer are set
forth below.
AGE
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KARL L. BLAHA: President (since September 1999), Executive 53
Vice President -- Commercial Asset Management
(July 1997 to September 1999) and Executive
Vice President and Director of Commercial
Management (April 1992 to August 1995)
President (since September 1999), Executive Vice President -- Commercial Asset Management (July
1997 to September 1999) and Executive Vice President and Director of Commercial Management April
1992 to August 1995) of BCM and IORI; Director and President (since August 2000) of American
Realty Investors, Inc. ("ARI"); Director (since June 1996), President (since October 1993) and
Executive Vice President and Director of Commercial Management (April 1992 to October 1993) of
American Realty Trust, Inc, ("ART"); and President and Director (since 1996) of First Equity
Properties, Inc., which is 50% owned by BCM
BRUCE A. ENDENDYK: Executive Vice President (since January 1995) 52
Executive Vice President (since January 1995) of BCM, ART and IORI; and Executive Vice President
(since August 2000) of ARI.
MARK W. BRANIGAN: Executive Vice President and Chief Financial 46
Officer (since August 2000), Vice
President -- Director of Construction (August
1999 to August 2000) and Executive Vice
President-Residential Asset Management
(January 1992 to October 1997)
Executive Vice President and Chief Financial Officer (since August 2000), Vice
President -- Director of Construction (August 1999 to August 2000) and Executive Vice
President -- Residential Asset Management (January 1992 to October 1997) of BCM, ART and IORI;
Executive Vice President and Chief Financial Officer (since August 2000) and Director (since
September 2000) of ARI; and real estate consultant (November 1997 to July 1999)
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AGE
---
DAVID W. STAROWICZ: Executive Vice President -- Acquisitions, 45
Sales and Construction (since March 2001),
Executive Vice President -- Commercial Asset
Management (September 1999 to March 2001) and
Vice President (May 1992 to September 1999)
Executive Vice President -- Acquisitions, Sales and Construction (since March 2001), Executive
Vice President -- Commercial Asset Management (September 1999 to March 2001), Vice President (May
1992 to September 1999) and Asset Manager (November 1990 to May 1992) of BCM, ART and IORI;
Executive Vice President -- Acquisitions, Sales and Construction (since March 2001) and Executive
Vice President -- Commercial Asset Management (August 2000 to March 2001) of ARI
OFFICERS
Although not an executive officer of the Company, Robert A. Waldman
currently serves as Senior Vice President, Secretary and General Counsel. His
position with the Company is not subject to a vote of stockholders. His age,
term of service, all positions and offices with the Company or BCM, other
principal occupations, business experience and directorships with other
companies during the last five years or more is set forth below.
AGE
---
ROBERT A. WALDMAN: Senior Vice President and General Counsel 48
(since January 1995), Vice President
(December 1990 to January 1995) and Secretary
(December 1993 to February 1997 and since
June 1999)
Senior Vice President and General Counsel (since January 1995), Vice President (December 1990 to
January 1995) and Secretary (December 1993 to February 1997 and since June 1999) of IORI; Senior
Vice President and General Counsel (since January 1995), Vice President (January 1993 to January
1995) and Secretary (since December 1989) of ART; Senior Vice President and General Counsel
(since November 1994), Vice President and Corporate Counsel (November 1989 to November 1994) and
Secretary (since November 1989) of BCM; and Senior Vice President, Secretary and General Counsel
(since August 2000) of ARI.
In addition to the foregoing officers, the Company has several vice
presidents and assistant secretaries who are not listed herein.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's Directors,
executive officers, and any persons holding more than ten percent of the
Company's shares of common stock are required to report their ownership of the
Company's shares and any changes in that ownership to the Securities and
Exchange Commission (the "Commission"). Specific due dates for these reports
have been established and the Company is required to report any failure to file
by these dates during 2000. All of these filing requirements were satisfied by
its Directors and executive officers and ten percent holders. In making these
statements, the Company has relied on the written representations of its
incumbent Directors and executive officers and its ten percent holders and
copies of the reports that they have filed with the Commission.
THE ADVISOR
Although the Board of Directors is directly responsible for managing the
affairs of the Company and for setting the policies which guide it, the
day-to-day operations are performed by BCM under the supervision of
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the Board. The duties of BCM include, among other things, locating,
investigating, evaluating and recommending real estate and mortgage note
investment and sales opportunities and financing and refinancing sources. BCM
also serves as a consultant to the Board in connection with the business plan
and investment decisions made by the Board.
BCM has served as the Company's advisor since March 1989. BCM is a company
of which Messrs. Blaha, Endendyk, Branigan and Starowicz serve as executive
officers. BCM is owned by a trust for the benefit of the children of Gene E.
Phillips. Mr. Phillips serves as a representative of his children's trust which
owns BCM and, in such capacity, had, until June 2000, substantial contact with
the management of BCM and input with respect to its performance of advisory
services to the Company.
BCM has served as advisor to the Company since March 28, 1989. The current
Advisory Agreement was entered into effective October 15, 1998.
Under the Advisory Agreement, BCM is required to formulate and submit
annually for Board approval a budget and business plan containing a twelve month
forecast of operations and cash flow, a general plan for asset sales or
purchases, lending, foreclosure and borrowing activity, and other investments,
and BCM is required to report quarterly to the Board on the Company's
performance against the business plan. In addition, all transactions require
prior Board approval unless they are explicitly provided for in the approved
business plan or are made pursuant to authority expressly delegated to BCM by
the Board.
The Advisory Agreement also requires prior Board approval for the retention
of all consultants and third party professionals, other than legal counsel. The
Advisory Agreement provides that BCM shall be deemed to be in a fiduciary
relationship to the stockholders; contains a broad standard governing BCM's
liability for losses by the Company; and contains guidelines for BCM's
allocation of investment opportunities as among itself, the Company and other
entities it advises.
The Advisory Agreement provides for BCM to be responsible for the
day-to-day operations of the Company and to receive an advisory fee comprised of
a gross asset fee of .0625% per month (.75% per annum) of the average of the
gross asset value (total assets less allowance for amortization, depreciation or
depletion and valuation reserves) and an annual net income fee equal to 7.5% per
annum of the Company's net income.
The Advisory Agreement also provides for BCM to receive an annual incentive
sales fee equal to 10% of the amount, if any, by which the aggregate sales
consideration for all real estate sold by the Company during such fiscal year
exceeds the sum of: (1) the cost of each such property as originally recorded in
the Company's books for tax purposes (without deduction for depreciation,
amortization or reserve for losses), (2) capital improvements made to such
assets during the period owned by the Company and (3) all closing costs,
(including real estate commissions) incurred in the sale of such real estate
provided, however, no incentive fee shall be paid unless (a) such real estate
sold in such fiscal year, in the aggregate, has produced an 8% simple annual
return on the net investment including capital improvements, calculated over the
holding period before depreciation and inclusive of operating income and sales
consideration and (b) the aggregate net operating income from all real estate
owned for each of the prior and current fiscal years shall be at least 5% higher
in the current fiscal year than in the prior fiscal year.
Additionally, pursuant to the Advisory Agreement, BCM or an affiliate of
BCM is to receive an acquisition commission for supervising the acquisition,
purchase or long-term lease of real estate equal to the lesser of (1) up to 1%
of the cost of acquisition, inclusive of commissions, if any, paid to
nonaffiliated brokers or (2) the compensation customarily charged in
arm's-length transactions by others rendering similar property acquisition
services as an ongoing public activity in the same geographical location and for
comparable property; provided that the aggregate purchase price of each property
(including acquisition commissions and all real estate brokerage fees) may not
exceed such property's appraised value at acquisition.
The Advisory Agreement requires BCM or any affiliate of BCM to pay the
Company one-half of any compensation received from third parties with respect to
the origination, placement or brokerage of any loan made by the Company;
provided, however, that the compensation retained by BCM or any affiliate of BCM
shall not exceed the lesser of (1) 2% of the amount of the loan committed or (2)
a loan brokerage and commitment fee which is reasonable and fair under the
circumstances.
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The Advisory Agreement also provides that BCM or an affiliate of BCM is to
receive a mortgage or loan acquisition fee with respect to the acquisition or
purchase of any existing mortgage loan by the Company equal to the lesser of (1)
1% of the amount of the loan purchased or (2) a loan brokerage or commitment fee
which is reasonable and fair under the circumstances. Such fee will not be paid
in connection with the origination or funding of any mortgage loan by the
Company.
Under the Advisory Agreement, BCM or an affiliate of BCM is also to receive
a mortgage brokerage and equity refinancing fee for obtaining loans or
refinancing on properties equal to the lesser of (1) 1% of the amount of the
loan or the amount refinanced or (2) a brokerage or refinancing fee which is
reasonable and fair under the circumstances; provided, however, that no such fee
shall be paid on loans from BCM or an affiliate of BCM without the approval of
the Company's Board of Directors. No fee shall be paid on loan extensions.
Under the Advisory Agreement, BCM receives reimbursement of certain
expenses incurred by it in the performance of advisory services.
Under the Advisory Agreement, all or a portion of the annual advisory fee
must be refunded by the Advisor if the Operating Expenses of the Company (as
defined in the Advisory Agreement) exceed certain limits specified in the
Advisory Agreement based on the book value, net asset value and net income of
the Company during the fiscal year. No refund of the annual advisory fee was
required for 2000.
Additionally, if management were to request that BCM render services to the
Company other than those required by the Advisory Agreement, BCM or an affiliate
of BCM is separately compensated for such additional services on terms to be
agreed upon from time to time. The Company has hired Triad Realty Services, Ltd.
("Triad"), an affiliate of BCM, to perform property management for the Company's
properties. Also, the Company has engaged, on a non-exclusive basis, Regis
Realty, Inc. ("Regis"), a related party, to perform brokerage services for the
Company. BCM may only assign the Advisory Agreement with the prior consent of
the Company.
The directors and principal officers of BCM are set forth below.
MICKEY N. PHILLIPS....................... Director
RYAN T. PHILLIPS......................... Director
KARL L. BLAHA............................ President
MARK W. BRANIGAN......................... Executive Vice President and Chief
Financial Officer
RICK D. CONLEY........................... Executive Vice President -- Marketing and
Promotion
BRUCE A. ENDENDYK........................ Executive Vice President
DAVID W. STAROWICZ....................... Executive Vice President -- Acquisitions,
Sales and Construction
DAN S. ALLRED............................ Senior Vice President -- Land Development
MICHAEL A. BOGEL......................... Senior Vice President -- Project Manager
LOUIS J. CORNA........................... Senior Vice President -- Director of Tax
ROBERT A. WALDMAN........................ Senior Vice President, Secretary and
General Counsel
Mickey N. Phillips is Gene E. Phillips' brother, and Ryan T. Phillips is
Gene E. Phillips' son. Gene E. Phillips serves as a representative of the trust
established for the benefit of his children which owns BCM and, in such
capacity, had, until June 2000, substantial contact with the management of BCM
and input with respect to its performance of advisory services for the Company.
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On August 18, 2000, the Board of Directors approved the renewal of the
Advisory Agreement with BCM through the next annual meeting of stockholders.
Subsequent renewals of the Advisory Agreement with BCM do not require the
approval of the stockholders but do require Board approval.
PROPERTY MANAGEMENT
Since February 1, 1990, affiliates of BCM have provided property management
services. Currently, Triad provides such property management services for a fee
of 5% or less of the monthly gross rents collected on the residential properties
under its management and 3% or less of the monthly gross rents collected on the
commercial properties under its management. Triad subcontracts with other
entities for the provision of the property-level management services to the
Company at various rates. The general partner of Triad is BCM. The limited
partners of Triad are Gene E. Phillips and GS Realty Services, Inc. ("GS
Realty"), a related party, which is a company not affiliated with either Mr.
Phillips or BCM. Triad subcontracts the property-level management and leasing of
52 of the Company's commercial properties, its four hotels and the commercial
property owned by a real estate partnership in which the Company and IORI are
partners to Regis, a related party, which is a company owned by GS Realty. Regis
is entitled to receive property and construction management fees and leasing
commissions in accordance with the terms of its property-level management
agreement with Triad.
REAL ESTATE BROKERAGE
Regis also provides services to the Company on a non-exclusive basis. Regis
is entitled to receive a real estate commission for property purchases and sales
in accordance with the following sliding scale of total fees to be paid: (1)
maximum fee of 4.5% on the first $2.0 million of any purchase or sale
transaction of which no more than 3.5% would be paid to Regis or affiliates; (2)
maximum fee of 3.5% on transaction amounts between $2.0 million to $5.0 million
of which no more than 3% would be paid to Regis or affiliates; (3) maximum fee
of 2.5% on transaction amounts between $5.0 million to $10.0 million of which no
more than 2% would be paid to Regis or affiliates; and (4) maximum fee of 2% on
transaction amounts in excess of $10.0 million of which no more than 1.5% would
be paid to Regis or affiliates.
EXECUTIVE COMPENSATION
The Company has no employees, payroll or benefit plans and pays no
compensation to its executive officers. The executive officers of the Company,
who are also officers or employees of BCM, the Company's advisor, are
compensated by BCM. Such executive officers perform a variety of services for
BCM and the amount of their compensation is determined solely by BCM. BCM does
not allocate the cash compensation of its officers among the various entities
for which it serves as advisor.
The only remuneration paid by the Company is to the Directors who are not
officers or directors of BCM or its affiliated companies. The Independent
Directors (1) review the business Plan of the Company to determine that it is in
the best interest of stockholders, (2) review the advisory contract, (3)
supervise the performance of the advisor and review the reasonableness of the
compensation to the advisor in terms of the nature and quality of services
performed, (4) review the reasonableness of the total fees and expenses of the
Company and (5) select, when necessary, a qualified independent real estate
appraiser to appraise properties acquired.
Each Independent Director receives compensation in the amount of $30,000
per year, plus reimbursement for expenses. The Chairman of the Board receives an
additional fee of $3,000 per year. In addition, each Independent Director
receives an additional fee of $1,000 per day for any special services rendered
by him to the Company outside of his ordinary duties as Director, plus
reimbursement of expenses. Effective June 2000, each Independent Director that
serves as a member of the Audit Committee receives $250 for each Audit Committee
meeting attended.
During 2000, $199,000 was paid to the Independent Directors in total
Directors' fees for all services, including the annual fee for service, during
the period January 1, 2000, through December 31, 2000, and 2000 special service
fees as follows: Richard W. Douglas (a Director until June 2000), $15,000; Larry
E. Harley (a
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Director until June 2000), $15,000; R. Douglas Leonhard, $34,000; Murray Shaw (a
Director until March 2001), $34,000; Ted P. Stokely, $36,000; Martin L. White,
$34,000; and Edward G. Zampa, $33,000.
DIRECTOR'S STOCK OPTION PLAN
The Company has established a Director's Stock Option Plan ("Director's
Plan") for the purpose of attracting and retaining Directors who are not
officers or employees of the Company or BCM. The Director's Plan provides for
the grant of options that are exercisable at fair market value of the Company's
Common Stock on the date of grant. The Director's Plan was approved by
stockholders at their annual meeting on October 10, 2000, following which each
then-serving Independent Director was granted options to purchase 5,000 shares
of Common Stock of the Company. On January 1 of each year, each Independent
Director will receive options to purchase 5,000 shares of Common Stock. The
options are immediately exercisable and expire on the earlier of the first
anniversary of the date on which a Director ceases to be a Director or 10 years
from the date of grant.
As of March 1, 2001, the Company had 140,000 shares of Common Stock
reserved for issuance under the Director's Stock Option Plan of which options
for 50,000 shares were outstanding.
2000 STOCK OPTION PLAN
The Company has established the 2000 Stock Option Plan ("2000 Plan") as an
incentive for and as a means of encouraging ownership of the Company's Common
Stock by officers of the Company and employees of BCM or its affiliates. The
2000 Plan is administered by the Stock Option Committee, which currently
consists of three Independent Directors of the Company. The exercise price per
share of an option will not be less than 100% of the fair market value per share
on the date of grant thereof. The Company receives no consideration for the
grant of an option.
As of March 1, 2001, the Company had 300,000 shares of Common Stock
reserved for issuance under the 2000 Plan. However, no options had been granted
at that time.
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PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Company's shares of Common Stock with the Dow Jones Equity Market
Index ("DJ Equity Index") and the Dow Jones Real Estate Investment Index ("DJ
Real Estate Index"). The comparison assumes that $100 was invested on December
31, 1995 in the Company's shares of Common Stock and in each of the indices and
further assumes the reinvestment of all distributions. Past performance is not
necessarily an indicator of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
Company.............................. 100.00 113.04 168.76 148.61 153.85 112.58
DJ Equity Index...................... 100.00 122.02 160.84 200.88 246.53 223.68
DJ Real Estate Index................. 100.00 134.61 158.95 125.39 118.72 151.39
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. The following table sets
forth the ownership of the Company's Shares of common stock, both beneficially
and of record, both individually and in the aggregate, for those persons or
entities known by the Company to be beneficial owners of more than 5% of the
outstanding shares of common stock as of the close of business on May 24, 2001.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------ -------------------- ----------
American Realty Trust, Inc. ............................ 2,135,400(2) 24.7%
1800 Valley View Lane
Suite 300
Dallas, Texas 75234
EQK Holdings, Inc. ..................................... 1,838,900(2) 21.3%
1800 Valley View Lane
Suite 300
Dallas, Texas 75234
Basic Capital Management, Inc. ......................... 1,163,676 13.5%
1800 Valley View Lane
Suite 300
Dallas, Texas 75234
Maurice A. Halperin..................................... 432,000(3) 5.0%
17890 Deauville Lane
Boca Raton, Florida 33496
- ---------------
(1) Percentage is based upon 8,636,185 shares of common stock outstanding at May
24, 2001.
(2) American Realty Trust, Inc. ("ART") is a wholly-owned subsidiary of American
Realty Investors, Inc. ("ARI"). EQK Holdings, Inc. ("EHI") is a wholly-owned
subsidiary of EQK Realty Investors, I, which is 80% owned by ARI and 20%
owned by ART.
(3) Based on information set forth in Amendment No. 5 to a Schedule 13D dated
March 13, 2001.
Security Ownership of Management. The following table sets forth the
ownership of the Company's shares of common stock, both beneficially and of
record, both individually and in the aggregate for the Directors and executive
officers of the Company as of the close of business on May 24, 2001.
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
- ------------------------ ---------- ----------
Karl L. Blaha............................................... 5,184,451(2) 60.6%
Mark W. Branigan............................................ 5,184,451(2) 60.6%
Bruce A. Endendyk........................................... 5,184,451(2) 60.6%
R. Douglas Leonhard......................................... 10,000(3) *
David W. Starowicz.......................................... 5,184,451(2) 60.6%
Ted P. Stokely.............................................. 10,000(3) *
Martin L. White............................................. 10,000(3) *
Edward G. Zampa............................................. 10,000(3) *
All Directors and Executive Officers as a group (8
individuals).............................................. 5,234,451(2) 60.6%
- ---------------
* Less than 1%
(1) Percentage is based upon 8,636,185 shares of common stock outstanding at May
24, 2001.
(2) Includes 26,475 shares owned by Syntek Asset Management, L.P., 1,163,676
shares owned by BCM, 2,135,400 shares owned by ART and 1,858,900 shares
owned by EHI, of which the executive officers of
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the Company may be deemed to be beneficial owners by virtue of their
positions as executive officers or directors of BCM, ART, EHI and the
general partner of SAMLP. The executive officers of the Company disclaim
beneficial ownership of such shares.
(3) Each of Messrs. Leonhard, Stokely, White and Zampa have options to purchase
10,000 shares which are exercisable as of May 24, 2001, or within 60 days
thereafter.
(4) Includes 40,000 shares that are subject to options exercisable as of May 24,
2001, or within 60 days thereafter.
The Board of Directors has approved the repurchase of a total of 1.4
million shares of the Company's common stock. Through December 31, 2000, a total
of 409,765 shares had been repurchased at a cost of $3.3 million. No shares were
repurchased in 2000.
CERTAIN BUSINESS RELATIONSHIPS
In February 1989, the Board of Directors voted to retain BCM as the
Company's advisor. BCM is a corporation of which Messrs. Blaha, Endendyk,
Branigan and Starowicz serve as executive officers. BCM is owned by a trust for
the benefit of the children of Gene E. Phillips. Mr. Phillips serves as a
representative of his children's trust which owns BCM and, in such capacity,
had, until June 2000, substantial contact with the management of BCM and input
with respect to BCM's performance of advisory services to the Company.
Since February 1, 1990, affiliates of BCM have provided property management
services to the Company. Currently, Triad provides such property management
services. The general partner of Triad is BCM. The limited partners of Triad are
Gene E. Phillips and GS Realty, a related party, which is not affiliated with
either Mr. Phillips or BCM. Triad subcontracts the property-level management and
leasing of 52 of the Company's commercial properties, its four hotels and the
commercial properties owned by a real estate partnership in which the Company
and IORI are partners to Regis, a related party, which is a company owned by GS
Realty.
Regis also provides real estate brokerage services for the Company, on a
non-exclusive basis, and receives brokerage commissions in accordance with the
brokerage agreement.
The Directors and officers of the Company also serve as directors and
officers of IORI. The Directors owe fiduciary duties to IORI, as well as to the
Company under applicable law. IORI has the same relationship with BCM as the
Company. As of May 24, 2001, the Company owned approximately 22.8% of the
outstanding shares of common stock of IORI. BCM serves as advisor to ARI. In
addition, Messrs. Blaha, Endendyk, Branigan and Starowicz are executive officers
of ARI.
RELATED PARTY TRANSACTIONS
Historically, the Company has engaged in and may continue to engage in
business transactions, including real estate partnerships, with related parties.
Management believes that all of the related party transactions represented the
best investments available at the time and were at least as advantageous to the
Company as could have been obtained from unrelated third parties.
The Company is a partner with IORI in the Tri-City Limited Partnership,
Nakash Income Associates and TCI Eton Square, L.P. The Company owns 345,728
shares of common stock of IORI, an approximate 22.8% interest.
At December 31, 2000, the Company owned 746,972 shares of ARI common stock
which were primarily purchased in open market transactions in 1990 and 1991 at a
total cost of $1.6 million. The officers of TCI also serve as officers of ARI.
BCM also serves as advisor to ARI and at March 2, 2001, ARI owned approximately
24.7% of TCI's outstanding Common Stock. At December 31, 2000, the market value
of the ARI common shares was $10.1 million.
In 2000, the Company paid BCM, its affiliates and related parties $10.5
million in advisory fees and net income fees, $464,000 in mortgage brokerage and
equity refinancing fees, $2.7 million in property acquisition fees, $3.2 million
in real estate brokerage commissions and $4.3 million in property and
construction
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management fees and leasing commissions, net of property management fees paid to
subcontractors, other than affiliates of BCM. In addition, as provided in the
Advisory Agreement, BCM received cost reimbursements from the Company of $2.1
million in 2000.
Restrictions on Related Party Transactions. Article FOURTEENTH of the
Company's Articles of Incorporation provides that the Company shall not,
directly or indirectly, contract or engage in any transaction with (1) any
director, officer or employee of the Company, (2) any director, officer or
employee of the advisor, (3) the advisor or (4) any affiliate or associate (as
such terms are defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended) of any of the aforementioned persons, unless (a) the material facts
as to the relationship among or financial interest of the relevant individuals
or persons and as to the contract or transaction are disclosed to or are known
by the Board of Directors or the appropriate committee thereof and (b) the Board
of Directors or committee thereof determines that such contract or transaction
is fair to the Company and simultaneously authorizes or ratifies such contract
or transaction by the affirmative vote of a majority of independent directors of
the Company entitled to vote thereon.
Article FOURTEENTH defines an "independent director" as one who is neither
an officer or employee of the Company nor a director, officer or employee of the
Company's advisor.
SELECTION OF AUDITORS FOR 2001
The Board of Directors has selected BDO Seidman, LLP as the auditors for
the Company for the 2001 fiscal year. The Company's auditors for the 2000 fiscal
year were BDO Seidman, LLP. A representative of BDO Seidman is expected to
attend the annual meeting. They will have an opportunity to made a statement if
they desire to do so and will be available to respond to appropriate questions.
ASSURANCE FEES
The aggregate fees billed by BDO Seidman, LLP, the Company's independent
auditors, for all assurance professional services rendered for the year ended
December 31, 2000 were $243,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed to the Company by BDO Seidman, LLP for
professional services rendered for information technology services relating to
financial information systems design and implementation for the year ended
December 31, 2000.
ALL OTHER FEES
The aggregate fees billed for services rendered to the Company by BDO
Seidman, LLP, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees," for the year
ended December 31, 2000 were $68,000.
OTHER MATTERS
Management knows of no other matters that may properly be, or that are
likely to be, brought before the meeting. However, if any other matters are
properly brought before the meeting, the persons named in the enclosed proxy or
their substitutes will vote in accordance with their best judgment on such
matters.
FINANCIAL STATEMENTS
The audited financial statements of the Company, in comparative form for
the years ended December 31, 2000, 1999 and 1998, are contained in the 2000
Annual Report to Stockholders. However, such report and the financial statements
contained therein are not to be considered part of this solicitation.
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SOLICITATION OF PROXIES
THIS PROXY STATEMENT IS FURNISHED TO STOCKHOLDERS TO SOLICIT PROXIES ON
BEHALF OF THE DIRECTORS OF THE COMPANY. The cost of soliciting proxies will be
borne by the Company. Directors and officers of the Company may, without
additional compensation, solicit by mail, in person or by telecommunication. In
addition, the Company has retained Georgeson Shareholder Communications, Inc.
("GSC") to assist in the solicitation of proxies. An agreement with GSC provides
that it will distribute materials relating to the solicitation of proxies,
contact stockholders to confirm receipt of materials and answer questions
relating thereto. GSC is to be paid a base fee of $5,000 plus out-of-pocket
expenses and is to be indemnified against certain liability incurred as a result
of the provision of such services.
---------------------
COPIES OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 2000, TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K ARE AVAILABLE
TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO TRANSCONTINENTAL REALTY
INVESTORS, INC., 1800 VALLEY VIEW LANE, SUITE 300, DALLAS, TEXAS 75234,
ATTENTION: DIRECTOR OF INVESTOR RELATIONS.
By Order of the Board of Directors
/s/ KARL L. BLAHA
Karl L. Blaha
President
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE FOUR
NOMINEES ON THE ENCLOSED PROXY. REGARDLESS OF HOW YOU WISH TO VOTE YOUR SHARES,
YOUR BOARD OF DIRECTORS URGES YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED
PROXY.
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ATTACHMENT A
TRANSCONTINENTAL REALTY INVESTORS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee of the Board of Directors is a committee appointed by
the Board:
- To review the adequacy of corporate financial reporting, accounting
systems and controls;
- To assure that the Company generates financial statements that are
complete, accurate, consistently prepared and not materially misleading;
and
- To secure compliance with the Company's internal policies, standards of
business conduct, and external regulatory requirements.
MEMBERSHIP
The Audit Committee shall be comprised of at least three directors all of
whom are independent directors who shall be given full access to and will
encourage full and free interchange among the Company's Board of Directors,
President, Chief Financial Officer, other Company executives and the designated
certified public accountants. Members of the Audit Committee are expected to be
financially literate, informed and vigilant in pursuing their duties.
RESPONSIBILITIES
The Audit Committee's specific responsibilities are to:
- Recommend selection of the firm of independent certified public
accountants to audit the financial statements of the Company for the
fiscal year and review the compensation for their services and the
proposed scope of the annual examination.
- Ensure that the auditors are accountable to the Audit Committee of the
Board of Directors.
- Review with the firm of independent certified public accountants and
Company management:
1. the results of the audit for that year end;
2. the Company's annual financial statements and related footnotes;
3. the effectiveness and adequacy of the Company's financial and
accounting organization and financial reporting system;
4. the effectiveness and adequacy of the Company's internal control
environment; and
5. The adequacy of financial controls and effectiveness of the data
processing system.
- Require a written statement confirming the independence of the certified
public accountants, including assessing the impact and extent of
non-audit services they are also providing.
- Provide oversight responsibility for the audit engagement.
- Inquire of management and the independent accountants about significant
risks or exposures.
- Assess the steps management has taken to minimize such risks to the
Company.
- Review with Company legal counsel and tax executives, the legal and
regulatory matters that may have a material impact on the Company's
financial statements.
A-1
20
- Review with Company management:
1. The annual audit plan and any changes to it; and
2. Significant audit findings during the year and management's
responses thereto.
- Meet with the independent accountants at least once per year in separate
private sessions to discuss any matters that the Audit Committee or these
groups believe should be discussed with the Audit Committee.
In performing these duties the Audit Committee should
- Convene at least four times each fiscal year.
- Report its activities to the Board at least once a year.
- Review earnings results each quarter prior to release.
- Annually review the charter of the Audit Committee of the Board of
Directors.
- Complete Committee Questionnaire on Audit Committee member independence.
A-2
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Please Detach and Mail in the Envelope Provided
A PLEASE MARK YOUR
[X] VOTES AS IN THE
EXAMPLE.
FOR all nominees WITHHOLD
(except as marked AUTHORITY
to the contrary to vote for all nominees PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY
below) listed below
FOR AGAINST ABSTAIN
1. ELECTION 2. OTHER BUSINESS: I AUTHORIZE the [ ] [ ] [ ]
OF [ ] [ ] aforementioned proxies in their
DIRECTORS: discretion to vote upon such other
NOMINEES: Ted P. Stokely business as may properly come
R. Douglas Leonhard before the Annual Meeting and any
Martin L. White adjournments thereof.
Edward G. Zampa
When a proxy card is properly executed and returned, the
Instruction: To withhold authority Shares represented thereby will be voted in favor of the
to vote for any individual election for each of the nominees, unless authority to vote
nominee, write that nominee's for any such nominee is specifically withheld. There will be
name in the space below. no cumulative voting for the election of Directors. If any
nominee is unable to serve or will not serve (an event which
- ----------------------------------- is not anticipated), then the person acting pursuant to the
authority granted under the proxy will cast votes for the
remaining nominees and, unless the Board of Directors takes
action to reduce the number of Directors, for such other
person(s) as he or she may select in place of such nominees.
Signature Signature (if held jointly) Title Dated: , 2001
------------------------ ------------------------- --------------- -----------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. When signing for corporation,
please sign full corporate name by an authorized officer. When signing for a partnership, please sign partnership
name by an authorized person. If shares are held in more than one capacity, this proxy shall be deemed valid for all
shares held in all capacities.
22
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TRANSCONTINENTAL REALTY INVESTORS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 10, 2001
The undersigned hereby appoints MARK W. BRANIGAN and ROBERT A. WALDMAN,
and each of them, Proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to be at the Annual Meeting of
Stockholders of TRANSCONTINENTAL REALTY INVESTORS, INC., to be held on Tuesday,
July 10, 2001 at 11:00 a.m., or at any adjournments thereof, according to the
number of votes that the undersigned would be entitled to vote if personally
present, upon the following matters:
(continued and to be signed and dated on the other side)