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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 000-23463
Philips International Realty Corp.
(Exact name of registrant as specified in its charter)
Maryland 13-3963667
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No)
417 Fifth Avenue, New York, NY 10016
(Address of principal executive offices - Zip Code)
(212) 545-1100
(Registrant's telephone number, including area code)
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 such filing
requirements for the past 90 days.
Yes /x/ No / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
7,340,474 shares outstanding as of July 31, 2002.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2002 and December
31, 2001
Condensed Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2002 and 2001
Condensed Consolidated Statements of Shareholders' Equity for the Six
Months Ended June 30, 2002 and 2001
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosure of Market Risk
PHILIPS INTERNATIONAL REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2002 December 31, 2001
(Unaudited) (Note 1)
---------- --------
ASSETS
Rental properties, net - held for sale $15,460,660 $ 18,973,660
Cash and cash equivalents 3,922,758 863,005
Accounts receivable, net 186,563 303,543
Deferred charges and prepaid expenses 375,029 86,269
Other assets 2,249,134 2,158,089
----------- ------------
Total Assets $22,194,144 $ 22,384,566
=========== ============
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and accrued expenses $ 1,003,844 $ 1,071,891
Other liabilities 71,971 70,671
----------- ------------
Total Liabilities 1,075,815 1,142,562
----------- ------------
Minority interests 71,457 71,878
----------- ------------
Shareholders' Equity:
Preferred Stock, $.01 par value; 30,000,000 shares authorized:
no shares issued and outstanding -- --
Common Stock, $.01 par value; 150,000,000 shares authorized;
7,340,474 shares issued and outstanding 73,405 73,405
Additional paid in capital 92,668,007 92,668,007
Cumulative distributions in excess of net income (71,694,540) (71,571,286)
----------- ------------
Total Shareholders' Equity 21,046,872 21,170,126
---------- ------------
Total Liabilities and Shareholders' Equity $22,194,144 $ 22,384,566
=========== ============
See accompanying notes.
PHILIPS INTERNATIONAL REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Discontinued Operations:
Revenues from rental property $ 734,758 $1,233,452 $1,622,992 $2,649,078
--------- ---------- ---------- ----------
Expenses:
Operating expenses 129,768 188,058 236,779 387,962
Real estate taxes 57,069 165,286 147,450 338,471
Management fees to affiliates 19,235 39,067 48,861 82,442
General and administrative expenses 284,731 312,007 515,532 541,665
--------- ---------- ---------- ----------
490,803 704,418 948,622 1,350,540
--------- ---------- ---------- ----------
Operating income from discontinued operations 243,955 529,034 674,370 1,298,538
Minority interests in (income) loss before gain (loss) on
sale of shopping center properties 20 (1,651) (1,440) (4,355)
Other income (expense), net (249,703) (43,198) (250,828) (17,474)
--------- ---------- ---------- ----------
Income (loss) from discontinued operations before gain
(loss) on sale of shopping center properties (5,728) 484,185 422,102 1,276,709
Gain (loss) on sale of shopping center properties, net of
minority share of ($1,861) in 2002 and $1,165 in 2001 (545,356) 341,537 (545,356) 341,537
--------- ---------- ---------- ----------
Net income (loss) from discontinued operations ($551,084) $ 825,722 ($123,254) $1,618,246
========= ========== ========== ==========
Basic and diluted net income (loss) per common share ($ 0.08) $ 0.11 ($ 0.02) $ 0.22
========= ========== ========== ==========
See accompanying notes.
PHILIPS INTERNATIONAL REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF SHARHOLDERS' EQUITY
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
Cumulative
Distributions in Total
Common Stock Additional Excess of Net Shareholders'
Shares Amount Paid-in Capital Income Equity
------ ------ --------------- ------ ------
Balance, December 31, 2001 7,340,474 $73,405 $92,668,007 $ (71,571,286) $21,170,126
Net loss from discontinued
operations
(123,254) (123,254)
--------- ------- ----------- ------------- -----------
Balance, June 30, 2002 7,340,474 $73,405 $92,668,007 $ (71,694,540) $21,046,872
========= ======= =========== ============= ===========
Cumulative
Distributions in Total
Common Stock Additional Excess of Net Shareholders'
Shares Amount Paid-in Capital Income Equity
------ ------ --------------- ------ ------
Balance, December 31, 2000 7,340,474 $73,405 $92,668,007 $(57,797,724) $ 34,943,688
Net income from discontinued
operations 1,618,246 1,618,246
Dividends declared on Common
Stock ($1.00 per share) (7,340,474) (7,340,474)
--------- ------- ----------- ------------- -----------
Balance, June 30, 2001 7,340,474 $73,405 $92,668,007 $ (63,519,952) $ 29,221,460
========= ======= =========== ============= ===========
See accompanying notes.
PHILIPS INTERNATIONAL REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
(Unaudited)
2002 2001
---- ----
Cash flow used in operating activities ($597,270) ($645,461)
---------- ----------
Cash flow from investing activities
Proceeds from sale of shopping center properties 3,657,023 7,549,309
--------- ----------
Cash flow from financing activities -- --
--------- ---------
Net increase in cash and cash equivalents 3,059,753 6,903,848
Cash and cash equivalents, beginning of period 863,005 1,704,425
--------- ----------
Cash and cash equivalents, end of period $3,922,758 $8,608,273
========== ==========
See accompanying notes.
PHILIPS INTERNATIONAL REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements
The accompanying Condensed Consolidated Financial Statements include
the accounts of the Company and its subsidiaries, all of which are wholly-owned.
All significant intercompany accounts and balances have been eliminated in
consolidation. The information furnished is unaudited and reflects all
adjustments which are, in the opinion of management, necessary to reflect a fair
presentation of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature. These Condensed Consolidated
Financial Statements should be read in conjunction with the financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.
The Condensed Consolidated Balance Sheet at December 31, 2001, has been
derived from the audited financial statements at that date but does not include
all of the information and footnote disclosure required by generally accepted
accounting principles for complete financial statements.
2. Income (loss) per Common Share
Basic and diluted net income (loss) per common share in the
accompanying Condensed Consolidated Statements of Operations are based upon
weighted average numbers of 7,340,474 shares of Common Stock outstanding for the
three and six months ended June 30, 2002 and 2001.
3. Segment Information
Management considers the Company's various operating, investing and
financing activities to comprise a single business segment and evaluates real
estate performance and allocates resources based on net income.
As the result of the plan of liquidation, the Company's operations are
presented as discontinued operations pursuant to Accounting Principles Board
Opinion No. 30 ("APB No. 30") for 2001. On January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supersedes APB No. 30 and
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. The adoption did not have a material impact on
the Company's results of operations or financial position.
4. Plan of Liquidation
On October 13, 1999, the Board of Directors of the Company announced
that it had retained a financial advisor to assist the Company in examining
strategic alternatives to maximize shareholder value. The Board believed that
the Company's then current stock price did not reflect the underlying value of
its assets. Given the changing dynamics of the REIT market place and consistent
with its commitment to realize shareholder value for all investors, the Board
believed that it was prudent to explore the strategic alternatives for the
Company.
At a Special Meeting of Stockholders held on October 10, 2000,
approximately 80% of the Company's 7,340,474 common shares outstanding were
voted with 99.7% of these votes cast in favor of the plan of liquidation.
On October 11, 2000, the Company announced that its stockholders had
approved a plan of liquidation for the Company, pursuant to which the Company
planned to (a) transfer its interests in affiliated entities that owned eight
shopping centers to Kimco Income Operating Partnership, L.P. for cash and the
assumption of indebtedness, (b) transfer its interests in entities that owned
four shopping centers and two redevelopment properties, subject to certain
indebtedness, to Philip Pilevsky, the chief executive officer, and certain of
his affiliates and family members (the "Related Limited Partners") in exchange
for cash and the redemption of units in the Company's operating partnership, (c)
sell its remaining assets for cash, (d) pay or provide for its liabilities and
expenses, (e) distribute the net cash proceeds of the liquidation, then
estimated at $18.25 per share of common stock, to the stockholders in two or
more liquidating distributions, and (f) wind up operations and dissolve. On
December 22, 2000, the Company paid the initial liquidating distribution of $13
per share of common stock upon substantial completion of the transactions
referenced in (a) and (b) above. Subsequent liquidating distributions of $1.00,
$.75 and $.50 per share were paid on July 9, 2001, September 24, 2001 and
November 19, 2001, respectively, following sales of the Company's shopping
center properties located in Lake Worth, Florida, Alexandria, Minnesota and Port
Angeles, Washington. See Note 5.
On January 29, 2002, the Company announced that Kmart Corporation's
("Kmart") Chapter 11 bankruptcy filing is likely to delay the sales of the
Company's then five remaining properties pursuant to the Company's plan of
liquidation, and may result in a reduction of the remaining projected
liquidating distributions of $3.00 per common share. Further, the Company
reported that Kmart leases a significant portion of the space in each of the
Company's then five remaining shopping center properties, of which four stores
are currently operating and one Kmart store in Reedley, California is closed.
While operating in bankruptcy, Kmart has announced that it will seek immediate
cancellation of leases at closed locations. As a result of the uncertainty
pertaining to the ultimate status of the Kmart leases, the Company expects a
delay in the completion of its plan of liquidation. Also, the potential impact
on the proceeds from sales of the then remaining five properties cannot
currently be evaluated.
On February 19, 2002, the Company announced that the New York Stock
Exchange (NYSE) has advised the Company that it may be subject to NYSE trading
suspension and delisting if the Company's average market capitalization falls
below $15 million ($2.05 per common share) over a 30 day trading period. The
Company's stock closed at $2.01 per share on the NYSE on August 9, 2002. If the
Company's shares cease to be traded on the NYSE, the Company believes that an
alternative trading venue may be available; however, there can be no assurance
that such an alternative market would develop. The Company does not presently
intend to seek listing of its common shares on any other securities exchange.
On March 13, 2002, the Company announced that its then four properties
with operating Kmart stores (Sacramento, CA, Atwater, CA, McHenry, IL, and
Hopkinsville, KY) are not affected by Kmart's recent announcement of store
closings. Kmart is operating under the protection of Chapter 11 of the
Bankruptcy Code, and the Court approved the cancellation of the Kmart lease at
the Company's fifth remaining property, located in Reedley, California, in
January. Although none of the Company's remaining stores were targeted for
closure, there can be no assurance that K mart will not seek to cancel
additional leases while it is in bankruptcy. Recently the Company objected to
Kmart's request for an extension of the 60 day period in which the debtor must
assume or reject the Company's leases under the Bankruptcy Code. Kmart was
seeking an extension on all remaining leases through July 2003, and the Courts
generally grant such significant extensions. As to the Company's Kmart leases,
the Court approved an agreement with Kmart that all leases which have not been
assumed or rejected on or before September 30, 2002 will be subject to certain
protections from October 1, 2002 through January 15, 2003 which, among other
things, precludes store closings during this period. In addition, the Court set
March 31, 2003 as the deadline for Kmart to assume or reject the Company's
leases without prejudice to Kmart's right to seek further extension.
As a result of the uncertainty pertaining to the ultimate status of the
Kmart leases, the Company expects a continued delay in the completion of its
plan of liquidation. Also, the potential impact on the proceeds from the sales
of the Company's now remaining four properties (see Notes 5 and 6) and the
Company's target of approximately $18.25 of aggregate liquidating distributions
to shareholders cannot currently be evaluated. The uncertainty that continues to
surround Kmart could impede the Company's ability to achieve prompt sales of its
remaining assets at acceptable prices.
5. Property Dispositions
Pursuant to its plan of liquidation, on June 14, 2001, the Company
completed the sale of its redevelopment site located in Lake Worth, Florida (the
"Lake Worth Property") to the Related Limited Partners, for approximately $7.6
million in cash, pursuant to the Amended and Restated Purchase and Sale
Agreement dated as of June 20, 2000 (the "Lake Worth Agreement"). The sale of
this property resulted in a gain of approximately $.3 million.
The purchase price paid by the Related Limited Partners under the Lake
Worth Agreement will be adjusted so that the aggregate value per Unit received
by them in connection with the November 2000 distribution to the Related Limited
Partners of the Company's four (4) shopping center properties located in
Hialeah, Florida and the sale to the Related Limited Partners in December 2000
of the Company's redevelopment property located on Third Avenue in New York, New
York ($18.25 per Unit), and the estimated per share value to be received by our
stockholders in the liquidation ($18.25 per share), will be the same.
On August 31, 2001, the Company completed the sale of its North Star
Shopping Center in Alexandria, Minnesota for approximately $4.5 million in cash,
pursuant to the Sale and Purchase Agreement dated July 16, 2001 by Philips
Shopping Center Fund L.P., a Delaware limited partnership, and Repco LLP, as
successor to Kordel, Inc., a Minnesota corporation. The sale resulted in a gain
of approximately $4 thousand.
On October 31, 2001, the Company completed the sale of its Highway 101
Shopping Center in Port Angeles, Washington for approximately $4.5 million in
cash, pursuant to the Sale and Purchase Agreement dated June 14, 2001 by Philips
Shopping Center Fund L.P, a Delaware limited partnership, and BDG LLC, as
successor to 3 Puyallup Associates, LLC., a Washington limited liability
company. This transaction resulted in a gain of $39 thousand.
On April 16, 2002, the Company completed the sale of its McHenry
Commons shopping center property in McHenry, Illinois for approximately $3.9
million in cash, pursuant to a Sale and Purchase Agreement dated November 29,
2001 by and between Philips Shopping Center Fund L.P., a Delaware limited
partnership, as Seller, and GK Development, Inc., an Illinois corporation, and
Star Realty Investors, LLC, an Illinois limited liability company, jointly and
severally as Purchaser. This transaction resulted in a gain of $102 thousand.
On June 28, 2002, the Company entered into a settlement agreement with
the New York City Department of Finance (the "DOF") pursuant to which the
Company paid $903,943, including principal of $650,000 and interest of $253,943,
in full satisfaction of all real property transfer taxes, interest and penalties
assessed by the DOF in May 2002 in connection with the Company's 1997 Formation
Transactions and 1998 initial public stock offering. The shopping center
properties relating to the subject tax assessments have been previously disposed
in connection with the plan of liquidation. Accordingly, the principal and
interest components of the settlement payment have been charged to Gain (loss)
on sale of shopping center properties and Other income (expense), respectively,
in the accompanying Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 2002.
6. Shopping Center Portfolio
As a consequence of the transactions completed to date pursuant to the
plan of liquidation, the Company's remaining shopping center portfolio at June
30, 2002 comprises four properties located in California (3) and Kentucky (1).
These shopping centers, three of which have anchor store premises under lease to
Kmart, represent an aggregate 377,000 square feet of gross leasable area. The
Company is actively marketing these properties for sale. Although management
will endeavor to consummate a sale transaction(s), there can be no assurance
that a sale(s) will be completed on satisfactory terms, if at all.
7. Legal Proceedings
On October 2, 2000, a class action was filed in the United States
District Court for the Southern District of New York against the Company and its
directors. The complaint alleged a number of improprieties concerning the
pending plan of liquidation of the Company. The Company believes that the
asserted claims are without merit, and will defend such action vigorously. On
November 9, 2000, the Court, ruling from the bench, denied the plaintiff's
motion for a preliminary injunction. This bench ruling was followed by a written
order dated November 30, 2000 wherein the Court concluded that the plaintiff had
failed to demonstrate either that it was likely to succeed on the merits of its
case or that there were sufficiently serious questions going to the merits of
its case to make it fair ground for litigation.
On February 19, 2002, the Company announced that on February 5, 2002,
the Court denied the plaintiff's motion for class action certification. The
plaintiff may elect to proceed with that claim on its own now that class
certification has been denied. The plaintiff also has asserted derivative claims
for alleged breaches of fiduciary duty by the directors of the Company. The
Company believes that such derivative claims are deficient for, among other
reasons, the grounds upon which class certification was denied. The Company
believes that all of the asserted claims are without merit, and will defend such
action vigorously.
On February 28, 2002, the Company announced that the plaintiff had
sought permission from the Court of Appeals for the Second Circuit to appeal the
denial of class certification discussed above. In order for plaintiff to have
obtained permission to appeal, it had to demonstrate that the denial of class
certification effectively terminated the litigation and that the District
Court's decision was an abuse of its discretion. The Company opposed plaintiff's
application. If the Court of Appeals granted plaintiff's request, plaintiff
would then have been able to appeal the District Court's denial of class
certification.
On May 28, 2002, the United States Court of Appeals for the Second
Circuit ordered that the plaintiff's petition to appeal the District Court's
denial of class certification also be denied. The Company has incurred
significant costs in connection with defense of this litigation, which are
covered under the Company's directors and officer's insurance policy and
included in other assets in the accompanying Condensed Consolidated Balance
Sheet.
PART I
FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
accompanying Condensed Consolidated Financial Statements and Notes thereto, and
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001. These unaudited financial statements include all adjustments which are, in
the opinion of management, necessary to reflect a fair presentation of the
results for the interim periods presented, and all such adjustments are of a
normal recurring nature.
When used in this Quarterly Report on Form 10-Q, the words "may",
"will", "expect", "anticipate", "continue", "estimate", "project", "intend" and
similar expressions are intended to identify forward-looking statements
regarding events, conditions and financial trends that may affect the Company's
future plans of operations, business strategy, results of operations and
financial position. Such forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual results may
differ materially from those included within the forward-looking statements as a
result of various factors.
Results of Operations
During the second, third and fourth quarters of 2001, and the second
quarter of 2002, the Company disposed of four shopping center properties
pursuant to its plan of liquidation. See Note 5 of the accompanying Notes to
Condensed Consolidated Financial Statements. The disposition of these properties
gives rise to significant changes when comparing the Company's results of
operations for the three and six months ended June 30, 2002 and 2001.
Comparison of Three Months Ended June 30, 2002 and 2001
Revenues from rental property was $735,000 for the quarter ended June
30, 2002 compared to $1,233,000 for the comparable period in 2001. Expenses in
the second quarter of 2002 totaled $491,000, compared to $704,000 in 2001. These
changes result primarily from the disposition of four shopping center properties
pursuant to the plan of liquidation during the second, third and fourth quarters
of 2001, and the second quarter of 2002.
Other income (expense), net and Gain (loss) on sale of shopping center
properties for the three months ended June 30, 2002, include $253,943 and
$647,790 (net of minority share of $2,210), respectively, in charges relating to
the settlement of real property transfer tax obligations. See Note 5 of the
accompanying Notes to Condensed Consolidated Financial Statements.
Comparison of Six Months Ended June 30, 2002 and 2001
Revenues from rental property was $1,623,000 for the six months ended
June 30, 2002, compared to $2,649,000 for the comparable period in 2001.
Expenses in the first six months of 2002 totaled $949,000, compared to
$1,351,000 in 2001. These changes result primarily from the disposition of four
shopping center properties pursuant to the plan of liquidation during the
second, third and fourth quarters of 2001, and the second quarter of 2002.
Other income (expense), net and Gain (loss) on sale of shopping center
properties for the six months ended June 30, 2002, include $253,943 and $647,790
(net of minority share of $2,210), respectively, in charges relating to the
settlement of real property transfer tax obligations. See Note 5 of the
accompanying Notes to Condensed Consolidated Financial Statements.
Liquidity and Capital Resources
The Company expects to invest temporarily available cash in short-term,
investment-grade interest bearing securities, such as securities of the United
States government or its agencies, high-grade commercial paper and bank
deposits.
The Company expects to meet its short-term and long-term liquidity
requirements generally through net cash provided by operations. The Company
believes that its net cash provided by operations will be sufficient to allow
the Company to make distributions necessary to enable the Company to continue to
qualify as a REIT. The Company also believes that the foregoing sources of
liquidity will be sufficient to fund its short-term liquidity needs for the
foreseeable future. The net cash provided by operations from its four (4)
remaining properties are anticipated to be sufficient to fund the operation of
such properties and those of the Company. The Company is actively seeking to
dispose of all such properties and to complete its liquidation as soon as
practicable. There can be no assurance, however, that this will occur in the
near future or at prices sufficient to aggregate the currently estimated $18.25
in total per share liquidating distributions to the shareholders of the Company.
Pending the sale of its remaining shopping center properties, the
Company will continue to utilize its long-standing asset and property management
practices to maximize cash flow from these existing properties and endeavor to
enhance their value through its knowledge of the shopping center industry.
Cash Flows
Cash flow used in operating activities was $597,000 and $645,000 for
the six months ended June 30, 2002 and 2001, respectively. This change reflects
the combined effects of (i) a reduction in liquidation and litigation related
costs incurred during the first half of 2002 as compared to 2001, (ii) the
settlement of real property transfer tax obligations relating to the Company's
1997 Formation Transactions and 1998 initial public stock offering during the
first half of 2002, and (iii) the above mentioned disposition of four shopping
center properties pursuant to the plan of liquidation during the second, third
and fourth quarters of 2001, and the second quarter of 2002.
Cash flow from investing activities was $3,657,000 and $7,549,000 for
the six months ended June 30, 2002 and 2001, respectively. See Note 5 of the
accompanying Notes to Condensed Consolidated Financial Statements for
information pertaining to the sales of shopping center properties during those
respective periods.
Inflation
Substantially all of the Company's leases contain provisions designed to
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar
inflation indices. In addition, many of the Company's leases are for terms of
less than 10 years, which permits the Company to seek to increase rents upon
re-rental at market rates. Most of the Company's leases require the tenant to
pay their share of operating expenses, including common area maintenance, real
estate taxes and insurance, thereby reducing the Company's exposure to increase
in costs and operating expenses resulting from inflation.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
None.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On October 2, 2000, a class action was filed in the United States District Court
for the Southern District of New York against the Company and its directors. The
complaint alleged a number of improprieties concerning the pending plan of
liquidation of the Company. The Company believes that the asserted claims are
without merit, and will defend such action vigorously. On November 9, 2000, the
Court, ruling from the bench, denied the plaintiff's motion for a preliminary
injunction. This bench ruling was followed by a written order dated November 30,
2000 wherein the Court concluded that the plaintiff had failed to demonstrate
either that it was likely to succeed on the merits of its case or that there
were sufficiently serious questions going to the merits of its case to make it
fair ground for litigation.
On February 19, 2002, the Company announced that on February 5, 2002, the Court
denied the plaintiff's motion for class action certification. The plaintiff may
elect to proceed with that claim on its own now that class certification has
been denied. The plaintiff also has asserted derivative claims for alleged
breaches of fiduciary duty by the directors of the Company. The Company believes
that such derivative claims are deficient for, among other reasons, the grounds
upon which class certification was denied. The Company believes that all of the
asserted claims are without merit, and will defend such action vigorously.
On February 28, 2002, the Company announced that the plaintiff had sought
permission from the Court of Appeals for the Second Circuit to appeal the denial
of class certification discussed above. In order for plaintiff to have obtained
permission to appeal, it had to demonstrate that the denial of class
certification effectively terminated the litigation and that the District
Court's decision was an abuse of its discretion. The Company opposed plaintiff's
application. If the Court of Appeals granted plaintiff's request, plaintiff
would then have been able to appeal the District Court's denial of class
certification.
On May 28, 2002, the United States Court of Appeals for the Second Circuit
ordered that the plaintiff's petition to appeal the District Court's denial of
class certification also be denied. The Company has incurred significant costs
in connection with defense of this litigation, which are covered under the
Company's directors and officer's insurance policy.
Except as noted above, the Company is not presently involved in any litigation
nor to its knowledge is any litigation threatened against the Company or its
subsidiaries that, in management's opinion, would result in any material adverse
effect on the Company's ownership, management or operation of its properties, or
which is not covered by the Company's liability insurance.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
Exhibit Number Description
- -------------- -----------
2.1 Plan of Liquidation and Dissolution of the Company (filed as
exhibit 2.1 to the Company's Current Report on Form 8-K dated
April 28, 2000, and incorporated herein by reference).
3.1 Amended and Restated Articles of Incorporation of the Company
(filed as Exhibit 3.1 to the Company's Current Report on Form
8-K dated December 31, 1997, and incorporated herein by
reference).
3.2 Articles Supplementary of Series A Preferred Stock (filed as
Exhibit 3.2 to the Company's Form 8-K dated December 31, 1997
and incorporated herein by reference).
3.3 Articles Supplementary dated July 27, 1999, (filed as Exhibit
3.1 to the Company's Current Report on Form 8-K dated July 15,
1999, and incorporated herein by reference).
3.4 Third Amended and Restated By-Laws of the Company dated July
27, 1999, (filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K dated July 15, 1999, and incorporated
herein by reference).
3.5 Form of Certificate of Common Stock (filed as Exhibit 3.4 to
the Company's Registration Statement on Form S-11,
Registration No. 333-47975, and incorporated herein by
reference).
4.1 Shareholder Rights Agreement, dated as of March 31, 1999,
between the Company and BankBoston, N.A. (filed as Exhibit 4.1
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by reference).
4.2 Amendment No. 1, dated July 27, 1999, to Shareholder Rights
Agreement dated as of March 31, 1999, between the Company and
Bank Boston N.A., as Rights Agent (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated July 15, 1999, and
incorporated herein by reference).
4.3 Articles Supplementary for Series A Junior Participating
Preferred Stock (filed as Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998, and
incorporated herein by reference).
10.1 Amended and Restated Agreement of Limited Partnership of the
Operating Partnership (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-11, Registration No. 333-
47975, and incorporated herein by reference).
10.2 First Amendment to the Amended and Restated Agreement of
Limited Partnership of the Operating Partnership (filed as
Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, and incorporated herein by
reference).
10.3 Contribution and Exchange Agreement, dated August 11, 1997,
among National Properties Investment Trust, the Board of
Trustees, the Company, the Operating Partnership and certain
contributing partnerships or limited liability companies
associated with a private real estate firm controlled by
Philip Pilevsky and certain partners and members thereof
(filed as Exhibit 10.6 to the Company's Registration Statement
on Form S-4, Registration No. 333-41431, and incorporated
herein by reference).
10.4 Amended and Restated Management Agreement, dated as of March
30, 1998, among the Company, the Operating Partnership and
Philips International Management Corp. (filed as Exhibit 10-8
to the Company's Form 10-K for the year ended December 31,
1997, and incorporated herein by reference).
10.5 Amended and Restated Non-Competition Agreement, dated as of
March 30, 1998, among the Company, the Operating Partnership,
Philip Pilevsky and Sheila Levine (filed as Exhibit 10.9 to
the Company's Form 10-K for the year ended December 31, 1997,
and incorporated herein by reference).
10.6 Amendment No. 1 to Contribution and Exchange Agreement, dated
as of December 29, 1997 (filed as Exhibit 10.13 to the
Company's Form 8-K dated December 31, 1997, and incorporated
herein by reference).
10.7 Credit Agreement among the Operating Partnership and
Prudential Securities Credit Corporation (filed as Exhibit
10.18 to the Company's Report on Form 10-Q for the period
ended March 31, 1998 and incorporated herein by reference).
10.8 Purchase and Sale Agreement dated as of April 28, 2000, by and
among Munsey Park Associates, LLC, a New York limited
liability company, North Shore Triangle, LLC, a New York
limited liability company, Philips Yonkers, LLC, a New York
limited liability company, Philips Henry, LLC, a New York
limited liability company, Philips Shopping Center Fund, L.P.,
a Delaware limited partnership, and Philips Lake Mary
Associates, L.P., a Delaware limited partnership, and Kimco
Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.1 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated
herein by reference).
10.9 Redemption Agreement dated as of April 27, 2000, by and among
the Operating Partnership and Philip Pilevsky (filed as
exhibit 10.2 to the Company's Current Report on Form 8-K dated
April 28, 2000, and incorporated herein by reference).
10.10 Asset Contribution, Purchase and Sale Agreement dated as of
April 28, 2000, by and among the Company, the Operating
Partnership, Certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company and
Kimco Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.3 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated
herein by reference).
10.11 Amended and Restated Redemption Agreement dated as of April
27, 2000, by and among Philips International Realty, L.P., a
Delaware limited partnership, and Philip Pilevsky (filed as
exhibit 10.1 to the Company's Current Report on Form 8-K dated
April 28, 2000, and incorporated herein by reference).
10.12 Redemption Agreement dated as of April 28, 2000, by and among
Philips International Realty, L.P., a Delaware limited
partnership, and Allen Pilevsky (filed as exhibit 10.2 to the
Company's Current Report on Form 8-K dated April 28, 2000, and
incorporated herein by reference).
10.13 Redemption Agreement dated as of April 28, 2000, by and among
Philips International Realty, L.P., a Delaware limited
partnership, and Fred Pilevsky (filed as exhibit 10.3 to the
Company's Current Report on Form 8-K dated April 28, 2000, and
incorporated herein by reference).
10.14 Redemption Agreement dated as of April 28, 2000, by and among
Philips International Realty, L.P., a Delaware limited
partnership, and SL Florida LLC, a Delaware limited liability
company (filed as exhibit 10.4 to the Company's Current Report
on Form 8-K dated April 28, 2000, and incorporated herein by
reference).
10.15 First Amendment to Asset Contribution, Purchase and Sale
Agreement dated as of May 31, 2000, by and among Philips
International Realty, L.P., a Delaware limited partnership,
the Company, certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company, and
Kimco Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.5 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated
herein by reference).
10.16 Second Amendment to Asset Contribution, Purchase and Sale
Agreement dated as of June 15, 2000, by and among Philips
International Realty, L.P., a Delaware limited partnership,
the Company, certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company, and
Kimco Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.6 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated
herein by reference).
10.17 Third Amendment to Asset Contribution, Purchase and Sale
Agreement dated as of June 20, 2000, by and among Philips
International Realty, L.P., a Delaware limited partnership,
the Company, certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company, and
Kimco Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.7 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated
herein by reference).
10.18 Amended and Restated Purchase and Sale Agreement dated as of
June 20, 2000, by 1517-25 Third, L.P., a New York limited
partnership, Philip Pilevsky, SL Florida LLC, a Delaware
limited liability company, Allen Pilevsky and Fred Pilevsky
(filed as exhibit 10.8 to the Company's Current Report on Form
8-K dated April 28, 2000, and incorporated herein by
reference).
10.19 Amended and Restated Purchase and Sale Agreement dated as of
June 20, 2000, by Philips International Realty, L.P., a
Delaware limited partnership, Philips Lake Worth Corp., a New
York corporation, and Philip Pilevsky (filed as exhibit 10.9
to the Company's Current Report on Form 8-K dated April 28,
2000, and incorporated herein by reference).
10.20 Amendment to Amended and Restated Purchase and Sale Agreement
dated as of April 4, 2001, by and between the Company, Philips
Lake Worth Corp., a New York corporation, and Philip Pilevsky.
(b) Reports on Form 8-K
On April 30, 2002, the Company filed with the SEC a Current Report on
Form 8-K dated April 16, 2002 reporting under Item 2 that the Company completed
the sale of its McHenry Commons shopping center property in McHenry, Illinois,
pursuant to its plan of liquidation. In addition, on June 27, 2002 the Company
filed with the SEC, a Form 8-K/A dated April 16, 2002 amending its initial
report on Form 8-K dated April 16, 2002 to provide certain pro forma financial
information.
SIGNATURES
Pursuant to the requirements 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.
PHILIPS INTERNATIONAL REALTY CORP.
August 14, 2002 /s/ Philip Pilevsky
-----------------------
(Date) Philip Pilevsky
Chairman of the Board and Chief Executive Officer