HMG Definitive Proxy
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Check
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[
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Proxy Statement
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Additional Materials
[ ] Soliciting
Material under ss. 240.14a-12
HMG/COURTLAND
PROPERTIES, INC.
(Name
of
Registrant as Specified In Its Charter)
N/A
(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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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined):
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or the Form or Schedule and the date of its filing.
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Schedule or Registration Statement No.:
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3) Filing
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4) Date
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HMG/COURTLAND
PROPERTIES, INC.
1870
South Bayshore Drive
Coconut
Grove, Florida 33133
(305)
854-6803
NOTICE
OF
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD AUGUST 17, 2006
|
TO
THE SHAREHOLDERS:
|
July
21, 2006
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The
annual meeting of shareholders of HMG/Courtland Properties, Inc. (the "Company")
will be held at 10:30 A.M., on Thursday, August 17, 2006, at the Grove Isle
Club
and Resort, 4 Grove Isle Drive, Coconut Grove, Florida for the following
purposes:
| 1. |
To
elect a Board of Directors;
|
| 2. |
To
act upon the renewal of the Advisory Agreement between the Company
and HMG
Advisory Corp.; and
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| 3. |
To
transact such other business as may properly come before the
meeting.
|
The
record date for determining shareholders entitled to notice of and to vote
at
the annual meeting is July 10, 2006.
Enclosed
is a copy of the Company's Annual Report to Shareholders (Form 10-KSB) for
the
fiscal year ended December 31, 2005.
It
is
important, whether or not you plan to attend the meeting in person, that you
fill in, sign and date the accompanying proxy and return it promptly in the
postage prepaid envelope which is enclosed for your convenience. The signing
and
mailing of the proxy will not affect your right to vote your shares in person
if
you attend the meeting and desire to do so.
By
Order
of the Board of Directors
Lawrence
I. Rothstein
President
and Secretary
PROXY
STATEMENT
OF
HMG/COURTLAND
PROPERTIES, INC.
The
accompanying proxy is solicited by the Board of Directors for use at the annual
meeting of shareholders and is being mailed with this Proxy Statement to all
shareholders on or about July 21, 2006. If a proxy card is properly signed
and
is not revoked by the shareholder, the shares of common stock of the Company
(the "Shares") represented thereby will be voted at the meeting in accordance
with the instructions, if any, of the shareholder. If no instructions are given,
they will be voted for the election of directors nominated by the Board of
Directors and for approval of the renewal of the advisory agreement (the
"Advisory Agreement") between the Company and HMG Advisory Corp. (the
"Adviser"). Any shareholder may revoke his proxy at any time before it is voted
by giving written notice of revocation to the Secretary of the
Company.
Holders
of Shares of record at the close of business on July 10, 2006 are entitled
to
notice of and to vote at the meeting. On that date, there were 1,023,955 Shares
outstanding. Each Share is entitled to one vote on all business of the meeting.
The holders of a majority of the outstanding Shares, present in person or
represented by proxy, will constitute a quorum at the meeting. Abstentions
and
broker non-votes are counted for purposes of determining the presence or absence
of a quorum for the transaction of business. Abstentions are counted in
tabulations of the votes cast on proposals presented to shareholders, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved. As of July 10, 2006, Transco Realty Trust ("Transco"), 1870
South Bayshore Drive, Coconut Grove, Florida 33133, was the beneficial owner
of
477,300 Shares, or 47% of the outstanding Shares, and Emanuel Metz, CIBC
Oppenheimer Corp., One World Financial Center, 200 Liberty Street, New York,
New
York 10281, was the beneficial owner of 59,500 Shares, or 6% of the outstanding
Shares. Beneficial ownership is based on sole voting and investment
power.
The
Company has been advised by its officers and nominees for directors, and their
affiliated shareholders, Transco, Courtland Group, Inc. ("CGI") and T.G.I.F.
Texas, Inc. ("T.G.I.F.") that they intend to vote for the election of each
of
the nominees and for the approval of the Advisory Agreement. Such shareholders
own in the aggregate 607,230 shares, or 54% of the outstanding Shares. As a
result, each of the nominees is expected to be elected as a director and the
Advisory Agreement is expected to be approved. As noted below, certain directors
of the Company are affiliated with principal shareholders of the Company and
are
principal shareholders, directors and officers of the Adviser. See "Election
of
Directors" below for information concerning holders who may be deemed to own
beneficially more than 5% of the outstanding Shares.
ELECTION
OF DIRECTORS
The
entire Board of Directors will be elected at the annual meeting of shareholders
to serve until the next annual meeting of shareholders and until the election
and qualification of their successors. In the event any nominee should not
continue to be available for election, proxies may be voted for the election
of
a substitute nominee or the Board of Directors may elect to reduce the number
of
directors. The Board of Directors has no reason to anticipate that any nominee
will not be available for election. All of the nominees have been elected
previously by the shareholders.
An
affirmative vote by the holders of a majority of the Shares
present-in-person-or-by proxy at the Annual Meeting of Shareholders is required
for the election of each director.
Set
forth
below is certain information about each current director, each nominee for
director and the Shares held by all directors and executive
officers.
Shares
Held as of a July 10, 2006
|
Name,
Age, Year First
Became
a Director or
Officer
of the Company
|
|
Principal
Occupation or Employment During the
Past
Five Years Other than with
the
Company and Other Information
|
Shares
Owned by the Nominee or Members of His Family1
|
Additional
Shares in which the Nominee has, or Participates in, the Voting or
Investment Power2
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Total
Shares and Percent of Class6
|
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Maurice
Wiener
63-1974
Chairman of the Board of Directors, and Chief Executive
Officer
|
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Chairman
of the Board and Chief Executive Officer of the Adviser; Executive
Trustee, Transco Realty Trust; Director, T.G.I.F. Texas, Inc.; Chairman
of
the Board and Chief Executive Officer of CGI.
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61,0004
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541,8303
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602,630
53%
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Lawrence
I. Rothstein 52-1983 Director, President, Treasurer and
Secretary
|
|
Director,
President, Treasurer and Secretary of Adviser; Trustee and Vice-President
of Transco; Director, President, and Secretary of CGI; Vice-President
of
T.G.I.F. Texas, Inc.
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50,0004
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541,8303
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591,830
52%
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Walter
G. Arader
86-1977
Director
|
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President,
Walter Arader and Associates, inc. (financial and management
consultants).
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15,4004
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0
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15,400
1%
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Clinton
Stuntebeck
67-2004
Director
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Partner
Emeritus, Schnader Harrison Segal & Lewis, LLP (2004); Chairman,
Concordia Holdings, Ltd. (investment and business consulting) Senior
Partner, Schnader Harrison Segal & Lewis, LLP.
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5,0004
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0
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5,000
*
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Harvey
Comita 75-1992 Director
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Business
Consultant; Trustee, Transco Realty Trust.
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10,0004
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477,3005
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487,300
43%
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All
Directors and Executive Officers as a Group
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167,4004
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541,8303
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709,230
63%
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____________________________
* Less
than
one percent
| (1) |
Unless
otherwise indicated, beneficial ownership is based on sole voting
and
investment power with respect to the
Shares.
|
| (2) |
Shares
listed in this column represent Shares held by entities with which
the
directors or officers are associated. The directors, officers and
members
of their families have no ownership rights in the Shares listed in
this
column. See note 3 below.
|
| (3) |
This
number includes the number of Shares held by Transco (477,300 Shares),
CGI
(54,530 shares) and T.G.I.F. Texas, Inc. ("T.G.I.F.") (10,000 shares).
Several of the directors of the Company are directors, trustees,
officers
or shareholders of Transco, CGI and
T.G.I.F.
|
| (4) |
This
number includes Shares subject to options granted under the 2000
Stock
Option Plan as follows: Mr. Wiener, 40,500; Mr. Rothstein, 29,900;
5,000
each to Mr. Arader, Mr. Comita and Mr. Stuntebeck; and 16,700 to
two
officers. Reference is made to "Compensation of Directors and Executive
Officers and Other Transactions" for further information about the
2000
Stock Option Plan.
|
| (5) |
This
number represents the number of Shares held by Transco, of which Mr.
Comita is a trustee.
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| (6) |
This
percentage assumes the exercise of all outstanding
options.
|
For
information concerning relationships of certain directors and officers of the
Company to the Adviser, see "Approval of Renewal of the Advisory
Agreement."
As
a
result of these relationships, the persons named above may be deemed to share
investment power and voting power of Shares held by each firm with which they
are associated in conjunction with a number of other persons, including in
several cases, persons who are neither directors nor officers of the
Company.
Meetings
of the Board of Directors
The
Board
of Directors held 3 meetings during 2005. During this period all of the
directors of the Company attended at least 75% of the total number of meetings
of the Board and any committee of which they were a member. The Board of
Directors encourages director attendance at the Annual Meeting of the
Shareholders. All of the members of the Board of Directors attended the 2005
Annual Meeting of the Shareholders.
Committees
of the Board of Directors
The
Board
of Directors has an Audit Committee and a Stock Option Committee. The Company
does not
have
a Compensation Committee. Messrs. Arader and Comita serve as members of the
Audit Committee. The Audit Committee met 5 times during 2005.
Messrs.
Arader and Comita serve as members of the Stock Option Committee. The committee
is authorized to grant options to officers and key employees of the Company.
The
Stock Option Committee met once during 2005.
Nominating
Committee
The
Board
of Directors does not have a standing Nominating Committee due to the size
of
the Board; however,
the
Company's three independent directors review and make recommendations to the
Board regarding
the size and composition of the Board, consider and recruit candidates for
director nominees based upon recommendations from current outside directors,
members of management, outside consultants or search firms, and shareholders;
recommends on an annual basis a slate of director nominees for approval by
the
Board and the shareholders and reviews our committee structure and membership.
The independent directors are Messrs. Arader, Comita and
Stuntebeck.
All
three
independent directors are "independent" directors as defined by the current
American Stock Exchange listing standards. The Company does not have a
Nominating Committee charter.
In
evaluating and determining whether to recommend a person as a candidate for
election as a director, the three independent directors' criteria reflects
the
requirements of the recently adopted American Stock Exchange rules with respect
to independence and the following factors: the needs of the Company with respect
to the particular talents and experience of its directors, personal and
professional integrity of the candidate, level of education and/or business
experience, broad-based business acumen, the level of understanding of the
Company's business and the income-producing commercial properties industry,
strategic thinking and a willingness to share ideas, and diversity of
experiences, expertise and background. These directors will use these and other
criteria that they deem appropriate to evaluate potential nominees and will
not
evaluate proposed nominees differently depending upon who has made the
recommendation.
The
three
independent directors will consider proposed nominees whose names are submitted
to them by shareholders. They have not adopted a formal process for that
consideration because they believe that this informal consideration process
will
be adequate. The three independent directors intend to review periodically
whether a more formal policy should be adopted.
Any
shareholder who desires to recommend a nominee for director must submit a
letter, addressed to Secretary, HMG/Courtland Properties, Inc., 1870 South
Bayshore Drive, Coconut Grove, Florida 33133, and which is clearly identified
as
a "Director Nominee Recommendation." All recommendation letters must identify
the author as a shareholder and provide a brief summary of the candidate's
qualifications, as well as contact information for both the candidate and the
shareholder. Shareholders who wish to make a recommendation for a nominee to
be
elected at the Company's 2007 Annual Meeting must submit their recommendation
by
March 3, 2007, to allow for meaningful consideration and evaluation of the
nominees by the three independent directors.
REPORT
OF THE AUDIT COMMITTEE
The
primary purpose of the Audit Committee is to assist the Board of Directors
in
monitoring the integrity of our financial statements, our independent auditor's
qualifications and independence, the performance of our independent auditors,
and our compliance with legal and regulatory requirements. The Audit Committee
was established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Board of Directors
has determined that each member of the Audit Committee, Messrs. Arader and
Comita, is (1) an "audit committee financial expert," as that term is defined
in
Item 401(e) of Regulation S-B of the Exchange Act, and (2) "independent" as
defined by the listing standards of the American Stock Exchange and Section
10A(m)(3) of the Exchange Act. The committee operates pursuant to a charter
that
was last amended by the Board on June 16, 2003. A copy of the charter was an
appendix to the 2003 proxy statement.
Management
is responsible for the preparation, presentation and integrity of the Company's
financial statements, accounting and financial reporting principles and internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The independent auditors for the Company's
2005 fiscal year, Berenfeld, Spritzer, Schecter & Sheer ("BSSS"), were
responsible for performing an independent audit of the consolidated financial
statements in accordance with generally accepted auditing
standards.
In
performing
its
oversight role, the Audit Committee has, among other things covered in its
charter, reviewed and discussed the audited financial statements with management
and the independent auditors. The committee has also discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with
Audit Committees,
as
currently in effect. The committee has received the written disclosures and
the
letter from the independent auditors required by Independence Standards Board
Standard No.1, Independence
Discussions with Audit Committees,
as
currently in effect. The committee has also considered whether the provision
of
non-audit services by the independent auditors
is
compatible with maintaining the auditors' independence and has discussed with
the auditors the auditors' independence.
Based
on
the reviews, reports and discussions described in this Report, and subject
to
the limitations on the role and responsibilities of the committee referred
to in
this Report and in the charter, the Audit Committee recommended to the Board
of
Directors that the audited financial statements be included in the Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2005.
The
members of the Audit Committee are not professionally engaged in the practice
of
auditing or accounting and are not necessarily experts in the fields of
accounting or auditing, nor with respect to auditor independence. Members of
the
committee rely without independent verification on the information provided
to
them and on the representations made by management and the independent auditors.
Accordingly, the Audit Committee's oversight does not provide an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or appropriate internal controls and procedures
designed to assure compliance with accounting standards and applicable laws
and
regulations. Furthermore, the Audit Committee's considerations, efforts and
discussions referred to above do
not
assure that the audit of the Company's financial statements has been carried
out
in accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that BSSS is in fact "independent."
Members
of the Audit
Committee:
Walter
G.
Arader
Harvey
Comita
INDEPENDENT
PUBLIC ACCOUNTANTS
BSSS
serves as our independent accountants. In performing its oversight role, the
Audit Committee reviewed whether to retain BSSS as our independent accounting
firm for the 2006 fiscal year as part of its regular process of recommending
an
independent auditor to the Board of Directors. The committee has recommended
to
the Board of Directors the selection of BSSS as the Company's independent
auditors for 2006, and the Board of Directors has concurred in its
recommendation. A representative of BSSS is not expected to be present at the
Annual Meeting. The Audit Committee pre-approved all services rendered to the
Company by its independent accountants.
The
aggregate fees billed by the Company's accounting firm for the years ended
December 31, 2005 and December 31, 2004 are as follows:
Fees
of Accountants
| |
|
Aggregate
Amount Billed
|
|
Share
of Total
|
|
| |
|
December
31, 2005
|
|
December
31, 2004
|
|
December
31, 2005
|
|
December
31, 2004
|
|
|
Audit
Fees, including review of quarterly financial statements
|
|
$
|
79,000
|
|
$
|
71,000
|
|
|
77
|
%
|
|
76
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees (consists of fees related to tax compliance and
planning)
|
|
|
24,000
|
|
|
22,000
|
|
|
23
|
%
|
|
24
|
%
|
|
Total
Fees
|
|
$
|
103,000
|
|
$
|
93,000
|
|
|
100
|
%
|
|
100
|
%
|
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
Executive
officers receive no cash compensation from the Company in their capacity as
executive officers. Executive officers are eligible to receive stock options
pursuant to the 2000 Stock Option Plan.
Compensation
of Directors.
Each
director receives an annual fee of $8,000, plus expenses and $500 for each
meeting attended of the Board of Directors.
Exercise
and Grant of Options.
In
November 2000, the Company’s Board of Directors authorized the 2000 Stock Option
Plan (the “Plan”), which was approved by the shareholders in June 2001. The Plan
provides for the grant of options to purchase up to 120,000 shares of the
Company’s common stock to the officers and directors of the Company. Under the
Plan options are vested immediately upon grant and may be exercised at any
time
within ten (10) years from the date of grant. Options are not transferable
and
expire upon termination of employment, except to a limited extent in the event
of retirement, disability or death of the grantee. The Plan, which permits
the
grant of qualified and non-qualified options expires in 2010, and is intended
to
provide incentives to the directors and officers of the Company, as well as
to
enable the Company to obtain and retain the services of certain key employees.
The Plan is administered by a Stock Option Committee (the “Committee”) appointed
by the Board of Directors. The Committee selects those directors, officers
and
key employees of the Company to whom options for shares of common stock of
the
Company shall be granted. The Committee determines the purchase price of shares
deliverable upon exercise of an option; such price may not, however, be less
than 100% of the fair market value of a share on the date the option is granted.
Payment of the purchase price may be made in cash, Company stock, or by delivery
of a promissory note, except that the par value of the stock must be paid in
cash or Company stock. Shares purchased by delivery of a note must be pledged
to
the Company.
On
June
25, 2001, options were granted to all officers and directors to purchase an
aggregate of 86,000 Shares at no less than 100% of the fair market value at
the
date of grant. The average exercise price of the options granted in 2001 was
$7.84 per share. The Company’s stock price on the date of grant was $7.57 per
share. There were no options granted or exercised in 2004.
On
March
31, 2005, a director of the Company was granted options to purchase 5,000 Shares
at $12.25 per share (market value). The options are not restricted, fully vested
and expire in March 2015.
On
April
1, 2005, an officer of the Company exercised options to purchase 1,500 shares
which had been previously granted. The exercise price of $12,495 and an existing
promissory note due to the Company of $135,000 were satisfied by delivery by
of
12,000 Shares at the then market value of $12.25 per share and $495, all in
accordance with the Plan. Pursuant to the reload feature of the Plan, the
officer received an option to purchase 12,000 Shares at $12.25 per
share.
On
August
16, 2005, two officers of the Company exercised options to purchase a total
of
400 shares which had been previously granted. The total exercise price of $3,026
and existing promissory notes due to the Company from these officers totaling
$70,000 were satisfied by delivery to the Company a total of 6,000 Shares at
the
then market value of $12.10 per share and $428, all in accordance with the
Plan.
Pursuant to the reload feature of the Plan these officers received options
to
purchase 6,000 shares at $12.10 per share.
A
summary
of the status of the Plan as it relates to the Company’s two executive officers
(Mr. Wiener and Mr. Rothstein) as of December 31, 2005 and 2004, are presented
below:
Outstanding
Option Grants
|
Name
of Executive Officer
|
|
Shares
Subject to Grant of Options
|
|
|
|
Maurice
Wiener
Chairman
of the Board and
Chief
Executive Officer
|
|
|
40,500
|
(1) (2) |
|
| |
|
|
|
|
|
|
Lawrence
I. Rothstein
Director,
President and
Chief
Financial Officer
|
|
|
29,900
|
(2) |
|
| |
|
|
|
|
|
|
TOTAL
|
|
|
70,400
|
|
|
(1)
These
options were granted to Mr. Wiener (28,500) and Mr. Rothstein (24,900) at an
exercise price of $8.33 and $7.57, respectively. The closing price for the
Shares on the American Stock Exchange was $7.57 per share on June 25, 2001,
the
date of grant. All options expire on June 24, 2011. Mr. Wiener’s and Mr.
Rothstein’s options include 12,000 and 5,000 reload options granted at an
exercise price of $12.25 per share and $12.10 per share,
respectively.
(2)
Represents 42% and 25%, respectively, of all options granted.
Section
16(a) Beneficial Ownership Reporting Compliance.
Section
16(a) of the Exchange Act requires the Company's directors and executive
officers to file with the Securities and Exchange Commission initial reports
of
beneficial ownership and reports of change in beneficial ownership of the
Company's Shares. Such officers and directors are required by SEC regulations
to
furnish to the Company copies of all Section 16(a) reports that they file.
Based
solely on a review of the copies of such forms furnished to the Company, or
written representations that no other reports were required, the Company
believes that during 2005, its officers and directors of the Company complied
with all applicable Section 16(a) filing requirements.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
following
discussion describes the organizational structure of the Company's subsidiaries
and affiliates.
Transco
Realty Trust ("Transco")
Transco
is a publicly-held 47% shareholder of the Company. Mr. Wiener is the executive
trustee and an officer of Transco and holds approximately 27% of Transco's
stock. Mr. Rothstein serves as a trustee and an officer of Transco. Mr. Comita
serves as a trustee of Transco.
Courtland
Group, Inc. ("CGI")
CGI
served as the Company's investment adviser until January 1, 1998 and owns
approximately 35% of Transco's stock and owns approximately 5% of the Company's
Shares. CGI is majority owned by Mr. Wiener, its Chairman and CEO.
HMG
Advisory Corp. (the "Adviser")
The
day-to-day operations of the Company are handled by the Adviser. Reference
is
made to "Approval of Advisory Agreement" below for further information about
the
duties and remuneration of the Adviser. The Adviser is majority-owned by Maurice
Wiener, its Chairman and CEO.
Courtland
Investments, Inc. ("CII")
The
Company holds a 95% non-voting interest and Masscap Investment Company
("Masscap") holds a 5% voting interest in CII. In May 1998, the Company and
Masscap entered into a written agreement in order to confirm and clarify the
terms of their previous continuing arrangement with regard to the ongoing
operations of CII, all of which provide the Company with complete authority
over
all decision making relating to the business, operation, and financing of CII
consistent with the Company's status as a real estate investment
trust.
CII
and
its wholly-owned subsidiary own 100% of Grove Isle Club, Inc., Grove Isle Yacht
Club Associates, Grove Isle Marina, Inc., CII Spa, LLC, Courtland Bayshore
Rawbar, LLC and it also owns 15% of Grove Isle Associates, Ltd., (the Company
owns the other 85%).
T.G.I.F.
Texas, Inc. (“T.G.I.F.”)
CII
owns
approximately 49% of the outstanding shares of T.G.I.F. Mr. Wiener is a director
and Chairman of T.G.I.F. and owns, directly and indirectly, approximately 18%
of
the outstanding shares of T.G.I.F. T.G.I.F. also owns 10,000
Shares.
The
following discussion describes
all material transactions, receivables and payables involving related parties.
The Company believes that all of the transactions described below were on terms
as favorable to the Company as comparable transactions with unaffiliated third
parties.
The
Adviser.
As
of
December 31, 2005 and 2004, the Adviser owed the Company approximately $184,000
and $234,000, respectively. Amounts due from the Adviser bear interest at the
prime rate plus 1% payable monthly, with principal due on demand.
The
Adviser leases its executive offices from CII pursuant to a lease agreement.
This lease agreement is at the going market rate for similar property and calls
for base rent of $48,000 per year payable in equal monthly installments.
Additionally, the Adviser is responsible for all utilities, maintenance, and
security expenses relating to the leased premises. The lease term is five years
expiring in November 2009.
In
August
2004, the HMG Advisory Bayshore, Inc. ("HMGABS") (a wholly owned subsidiary
of
the Adviser) was formed for the purposes of overseeing the Monty's restaurant
operations acquired in August 2004. HMGABS receives a management fee $25,000
per
year from Bayshore Rawbar, LLC. For the years ended December 31, 2005 and 2004,
HMGBS earned approximately $25,000 and $8,000, respectively, in such management
fees.
South
Bayshore Associates ("SBA").
SBA
is a
joint venture in which Transco and the Company hold interests of 25% and 75%,
respectively. The sole major asset of SBA is a demand note from Transco, bearing
interest at the prime rate, with an outstanding balance of approximately
$331,000 in principal and interest as of December 31, 2005, compared to a
balance of $432,000 as of December 31, 2004.
The
Company also holds a demand note from SBA bearing interest at the prime rate
plus 1% with an outstanding balance as of December 31, 2005 and 2004, of
approximately $1,048,000 and $1,122,000, in principal and accrued interest,
respectively. Interest payments of $120,000 and $20,000 were made in 2005 and
2004, respectively. Accrued and unpaid interest is not added to the principal.
Because the Company consolidates SBA, the note payable and related interest
income is eliminated in consolidation.
CGI.
As of
December 31, 2005 and 2004, CGI owed the Company approximately $253,000 and
$303,000, respectively. Amounts due from CGI bear interest at the prime rate
plus 1% payable monthly, with principal due on demand.
CII.
The
Company holds a demand note due from its 95%-owned consolidated subsidiary,
CII,
bearing interest at the prime rate plus 1% with an outstanding balance of
$5,220,000 and $4,491,000 as of December 31, 2005 and 2004, respectively. During
2005 and 2004, advances from the Company to CII totaled $1.4 million and $3.1
million, respectively. Repayments from CII to the Company during 2005 and 2004,
were $673,000 and $1.9 million, respectively. Accrued and unpaid interest is
capitalized and included in advances. Because CII is a consolidated subsidiary
of the Company, the note payable and related interest is eliminated in
consolidation.
In
1986,
CII acquired from the Company the rights to develop the marina at Grove Isle
for
a promissory note of $620,000 payable at an annual rate equal to the prime
rate.
The principal matured on January 2, 2006 and in June 2006, the maturity date
was
extended to January 2, 2011. Interest payments are due each January 2. Because
the Company consolidates CII, the note payable and related interest income
is
eliminated in consolidation.
CII
compensates one employee directly in his capacity as project manager for the
Company's Texas property. This employee is Mr. Bernard Lerner who is a Vice
President of Courtland Investments, Inc. and is also a cousin of the Company's
Chairman and CEO Mr. Maurice Wiener. For the years ended December 31, 2005
and
2004, CII paid Mr. Lerner $85,000.
CII
Spa, LLC.
In
September 2004, the Company entered into an agreement with Noble House
Associates, LLC ("NHA"), an affiliate of the Westgroup, for the purpose of
developing and operating on the
Grove
Isle property, a commercial project consisting of a first class spa, together
with related improvements and amenities (the "Grove Isle Spa"). A subsidiary
of
the Company, CII Spa, LLC ("CIISPA") and NHA formed a Delaware limited liability
company, Grove Spa, LLC ("GS") which is owned 50% by CIISPA and 50% by NHA.
Construction of Grove Isle Spa was completed in the first quarter of 2005 and
operations commenced in March 2005. GS sub-leases the Grove Isle Spa property
from Westgroup. The initial term of the sublease commenced on September 15,
2004
and ends on November 30, 2016, with the GS having the right to extend the term
for two additional consecutive 20 year terms on the same terms as the original
sublease. Annual base rent of the sublease is $10,000, plus GS shall pay real
estate taxes, insurance, utilities and all other costs relating to Grove Isle
Spa.
In
December 2004, the loan which secured by the Grove Isle property was renewed
and
extended with an additional $1 million borrowed. The additional $1 million
(less
loan costs) was loaned to GS to partially fund the construction of the spa.
The
Company received a promissory note from GS under the same terms as the renewed
and extended bank loan. Since this loan is between two consolidated entities
(i.e. Grove Isle Associates, Ltd and Grove Spa, LLC) it is eliminated in
consolidation.
T.G.I.F.
As
of
December 31, 2005 and 2004, CII owed approximately $3,661,000 to T.G.I.F. All
advances between CII and T.G.I.F. are due on demand and bear interest at the
prime rate plus 1%. All interest due has been paid. As of December 31, 2005
and
2004, T.G.I.F. had amounts due from Mr. Wiener of approximately $707,000. These
amounts are due on demand and bear interest at the prime rate. All interest
due
has been paid. Mr. Wiener received consulting and director's fees from T.G.I.F
of approximately $37,000 and $41,000 for the years ended December 31, 2005
and
2004, respectively.
Exercised
Stock Options and Related Promissory Notes
On
August
24, 2000, certain officers and directors of the Company exercised all of their
stock options and purchased a total of 70,000 Shares for $358,750. The Company
received $70,000 in cash and $288,750 in promissory notes for the balance.
The
balance of the notes as of December 31, 2004 was $258,750, and in 2005 all
balances were satisfied.
APPROVAL
OF RENEWAL
OF
THE ADVISORY AGREEMENT
The
Advisory Agreement.
At the
2005 Annual Meeting of Shareholders, the advisory agreement (the "Advisory
Agreement") between the Company and HMG Advisory Corp. (the "Adviser") was
amended and renewed for a one-year term expiring on December 31, 2006. On July
22, 2005, the shareholders approved the renewal of the Advisory Agreement
between the Company and the Adviser for a term commencing January 1, 2006,
and
expiring December 31, 2006.
Under
the
terms of the Advisory Agreement, the renewal must be approved by the holders
of
a majority of the Shares. If the shareholders approve the Advisory Agreement,
it
will be amended and renewed for a one-year term.
The
Adviser is majority owned by Mr. Wiener with the remaining shares owned by
certain officers, including Mr. Rothstein. The officers and directors of the
Adviser are as follows: Maurice Wiener, Chairman of the Board and Chief
Executive officer; Lawrence I. Rothstein, President, Treasurer, Secretary and
Director; and Carlos Camarotti, Vice President Finance and Assistant
Secretary.
The
following description of the Advisory Agreement contains a summary of its
material terms.
General
Provisions.
The
Advisory Agreement is not assignable without the consent of the unaffiliated
directors of the Company and the Adviser. The Advisory Agreement provides that
officers, directors, employees and agents of the Adviser or of its affiliates
may serve as directors, officers or agents of the Company.
Duties
of Adviser.
The
Adviser in performing its duties under the Advisory Agreement is at all times
subject to the supervision of the directors of the Company and has only such
authority as the directors delegate to it as their agent. The Adviser
counsels and presents to the Company investments consistent with the objectives
of the Company and performs such research and investigation as the directors
may
request in connection with the policy decisions as to the type and nature of
investments to be made by the Company. Such functions include evaluation of
the
desirability of acquisition, retention and disposition of specific Company
assets. The Adviser also is responsible for the day-to-day investment operations
of the Company and conducts relations with mortgage loan brokers, originators
and servicers, and determines whether investments offered to the Company meet
the requirements of the Company. The Adviser provides executive and
administrative personnel, office space and services required in rendering such
services to the Company. To the extent required to perform its duties under
the
Agreement, the Adviser may deposit into and disburse from bank accounts opened
in its own name any money on behalf of the Company under such terms and
conditions as the Company may approve.
Allocation
of Expenses.
Under
the Advisory Agreement, the Adviser pays: all salary and employment expenses
of
its own personnel and of the officers and employees of the Company who are
affiliates of the Adviser; all of the administrative, rent and other office
expenses (except those relating to a separate office, if any, maintained by
the
Company) relating to its services as Adviser; and travel (to the extent not
paid
by any party other than the Company or the Adviser) and advertising expenses
incurred in seeking investments for the Company.
The
Company is required to pay all expenses of the Company not assumed by the
Adviser, including, without limitation, the following: (a) the cost of borrowed
money; (b) taxes on income, real property and all other taxes applicable to
the
Company; (c) legal, accounting, underwriting, brokerage, transfer agent's,
registrar's, indenture trustee's, listing, registration and other fees,
printing, engraving, and other expenses and taxes incurred in connection with
the issuance, distribution, transfer, registration and stock exchange listing
of
the Company's securities; (d) fees and expenses of advisors and independent
contractors, consultants, managers and other agents employed directly by the
Company; (e) expenses connected with the acquisition, disposition or ownership
of mortgages or real property or other investment assets, including, to the
extent not paid by any party other than the Company or the Adviser, but not
limited to, costs of foreclosure, costs of appraisal, legal fees and other
expenses for professional
services,
maintenance, repairs and improvement of property, and brokerage and sales
commissions, and expenses of maintaining and managing real property equity
interests; (f) the expenses of organizing or terminating the Company; (g) all
insurance costs (including the cost of directors' liability insurance) incurred
in connection with the protection of the Company's property as required by
the
directors; (h) expenses connected with payment of dividends or interest or
distributions in cash or any other form made or caused to be made by the
directors to holders of securities of the Company, including a dividend
reinvestment plan, if any; (i) all expenses connected with communications to
holders of securities of the Company and the other bookkeeping and clerical
work
necessary in maintaining relations with holders of securities, including the
cost of printing and mailing checks, certificates for securities and proxy
solicitation materials and reports to holders of the Company's securities;
(j)
to the extent not paid by borrowers from the Company, the expenses of
administering, processing and servicing mortgage, development, construction
and
other loans; (k) the cost of any accounting, statistical, or bookkeeping
equipment necessary for the maintenance of the books and records of the Company;
(1) general legal, accounting and auditing fees and expenses; (m) salaries
and
other employment expenses of the personnel employed by the Company who are
not
affiliates of the Adviser, fees and expenses incurred by the directors, officers
and employees in attending directors' meetings, and fees and travel and other
expenses incurred by the directors and officers and employees of the Company
who
are not affiliates of the Adviser. Expenses relating to the grant of options
to
all directors, officers and key employees of the Company under a plan approved
by the shareholders of the Company are borne by the Company.
Remuneration
of the Adviser.
For
services rendered under the Advisory Agreement that was in effect during 2005,
the Adviser was entitled to receive as regular compensation a monthly fee equal
to the sum of (a) $75,000 (equivalent to $900,000 per year) and (b) 20% of
the
amount of any unrefunded commitment fees received by the Company with respect
to
mortgage loans and other commitments which the Company was not required to
fund
and which expired within the next preceding calendar month. In 2005 and 2004,
the Adviser's annual compensation under the Advisory Agreement amounted to
approximately $937,000 and $1,215,000 in fees, respectively, of which $900,000
represented regular compensation and approximately $37,000 and $315,000
represented incentive compensation for 2005 and 2004, respectively. The Adviser
continues to receive the incentive compensation outlined below.
The
Advisory Agreement also provides that the Adviser shall receive incentive
compensation for compensation for each fiscal year of the Company equal to
the
sum of (a) 10% of the realized capital gains (net of accumulated net realized
capital losses) and extraordinary nonrecurring items of income of the Company
for such year, and (b) 10% of the amount, if any, by which Net Profits of the
Company exceed 8% per annum of the Average Net Worth of the Company. "Net
Profits" is defined as the gross earned income of the Company for such period
(exclusive of gains and losses from the disposition of assets), minus all
expenses other than non-cash charges for depreciation, depletion and
amortization and the incentive compensation payable to the Adviser, and minus
all amounts expended for mortgage amortization on long-term mortgage
indebtedness, excluding extraordinary and balloon payments. "Average Net Worth"
is defined as the average of the amount in the shareholders' equity accounts
on
the books of the Company, plus the accumulated non-cash reserves for
depreciation, depletion and amortization shown on the books of the Company,
determined at the close of the last day of each month for the computation
period.
If
and to
the extent that the Company requests the Adviser, or any of its directors,
officers, or employees, to render services for the Company, other than those
required to be rendered by the Adviser under the Advisory Agreement, such
additional services are to be compensated separately on terms to be agreed
upon
between such party and the Company from time to time, which terms must be fair
and reasonable and at least as favorable to the Company as similar arrangements
for comparable transactions of which the Company is aware with organizations
unaffiliated with the Adviser. The Adviser received $33,000 in 2005 and $20,000
in 2004, respectively, for managing certain of the Company's
affiliates.
Set
forth
below is the aggregate compensation paid to the Adviser during the two fiscal
years ended December 31, 2005 and 2004.
|
Form
of Compensation
|
|
Amount
|
|
| |
|
2005
|
|
2004
|
|
|
Regular
Compensation
|
|
$
|
900,000
|
|
$
|
900,000
|
|
|
20%
of Unrefunded Commitment Fees
|
|
|
-0-
|
|
|
-0-
|
|
|
Incentive
Compensation
|
|
|
37,000
|
|
|
315,000
|
|
|
Management
Fees
|
|
|
33,000
|
|
|
20,000
|
|
|
Total
|
|
$
|
970,000
|
|
$
|
1,235,000
|
|
Brokerage
Fees Paid the Adviser.
Under
the Advisory Agreement, the Adviser and its affiliates are prohibited from
receiving from the Company any brokerage or similar fees for the placement
of
mortgages or other investments with the Company. However, the Adviser and its
affiliates can receive normal brokerage commissions from borrowers in connection
with transactions involving the Company, provided that such commissions are
fully disclosed to all directors of the Company and the directors approve of
the
transaction and that such commissions (which to the extent paid by the borrower
and retained by the Adviser or its affiliates may reduce the yield to the
Company) are fair and reasonable and in accord with the prevailing rates in
the
locality in which the transaction is consummated for the type of conditions,
receive normal brokerage commissions from sellers, buyers, lessees and other
parties with whom the Company engages in transactions.
Management
of the Adviser.
Set
forth below are the names, offices with the Adviser and principal occupations
of
the current executive officers and directors of the Adviser.
|
Name
and Offices
with
the Adviser
|
Principal
Occupation
|
| |
|
|
Maurice
Wiener
Chairman
of the Board of
Directors
and Chief Executive Officer
|
See
"Election of Directors."
|
|
Lawrence
Rothstein
President,
Treasurer, Secretary
and
Director
|
See
"Election of Directors."
|
|
Carlos
Camarotti
Vice
President-Finance and
Assistant
Secretary
|
Vice
President and Assistant
Secretary
of the Adviser
|
The
Directors recommend that the shareholders approve the renewal of the Advisory
Agreement. An affirmative vote by the holders of a majority of the Shares
present in person or by proxy at the Annual Meeting of Shareholders is required
for approval of the Advisory Agreement.
SOLICITATION
OF PROXIES
The
cost
of soliciting proxies will be borne by the Company. In addition to the use
of
the mails, proxies may be solicited by directors, officers and employees of
the
Company personally, by telephone or by telegraph.
OTHER
BUSINESS
The
Board
of Directors is not aware of any business other than those items referred to
above to be presented for action at the meeting. However, should any other
matters requiring a vote of the shareholders arise, the agents named in the
accompanying proxy will vote in accordance with their own best
judgment.
PROPOSALS
FOR NEXT YEAR'S MEETING
Shareholder
proposals intended to be presented in the Company's proxy materials for the
next
Annual Meeting of Shareholders must be received by March 3, 2007, and must
satisfy the requirements of the proxy rules promulgated by the Securities and
Exchange Commission. A shareholder who wishes to make a proposal at the next
Annual Meeting of Shareholders without including the proposal in the Company's
proxy statement must notify the Company by May 16, 2007. If a shareholder fails
to give notice by this date, then the persons named as proxies in the proxies
the Company solicits for the next Annual Meeting of Shareholders will have
discretionary authority to vote on the proposal.
COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
Shareholders
may communicate with the Board of Directors by sending correspondence, in care
of the Company's Secretary, HMG/Courtland Properties, Inc., 1870 South Bayshore
Drive, Coconut Grove, Florida 33131, with an instruction to forward the
communication to the particular director. The Company's Secretary will promptly
forward all such shareholder communications to that director.
HOUSEHOLDING
INFORMATION
The
Commission adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more shareholders sharing the same address by
delivering a single proxy statement and annual report addressed to those
shareholders. This process, which is commonly referred to as "householding,"
potentially means extra convenience for shareholders and cost savings for
companies.
The
Company and a number of brokers with accountholders who are shareholders of
the
Company will be "householding" the Company's proxy materials and annual report.
As indicated in the notice previously provided by the Company and these brokers
to the Company's shareholders, a single proxy statement and annual report will
be delivered to multiple shareholders sharing an address unless contrary
instructions have been received from an affected shareholder. Once you have
received notice from the Company or your broker that it or they will be
"householding" communications to your address, "householding" will continue
until you are notified otherwise or until you revoke your consent. If, at any
time, you no longer wish to participate in "householding" and would prefer
to
receive a separate proxy statement or annual report, please contact the Company
at the address or telephone number appearing on the first page of this proxy
statement, directing your request to the attention of the Secretary, or notify
your broker.
Shareholders
who currently receive multiple copies of the proxy statement or annual report
at
their address and would like to request "householding" of their communications
should contact the Company at the address appearing on the first page of this
proxy statement, directing the request to the attention of the Secretary, or
should contact their broker.
_________________________________________________
A
copy of the Annual Report on Form 10-KSB for the year ended December 31, 2005
including financial statements and schedules thereto, filed with the Securities
and Exchange Commission, may be obtained by shareholders without charge upon
written request to: Secretary, HMG/Courtland Properties, Inc., 1870 South
Bayshore Drive,
Coconut
Grove, Florida 33133
YOU
CAN SAVE YOUR COMPANY ADDITIONAL EXPENSE BY SIGNING AND
RETURNING
YOUR PROXY AS PROMPTLY AS POSSIBLE
_________________________________________________
FORM
OF PROXY
Please
date, sign and mail your
proxy
card back as soon as possible!
Annual
Meeting of Shareholders
HMG/COURTLAND
PROPERTIES, INC.
August
17, 2006
Please
Detach and Mail in the Envelope Provided
| |
|
For
|
Withheld
|
Nominees:
|
M.
Wiener
|
|
For
|
Against
|
Abstain
|
|
1.
|
Election
of Directors
|
o
|
o
|
|
L.
Rothstein
W.
Arader
C.
Stuntebeck
H.
Comita
|
2.
Approval of renewal of the Advisory Agreement between Company and
HMG
Advisory Corp.
|
o
|
o
|
o
|
|
FOR
except vote withheld from the following nominees:
___________________________
|
|
|
|
|
|
|
|
|
3. In
their discretion, upon such other matters as may properly come
before the
meeting or any adjournment thereof, all in accordance with the
Company's Proxy Statement, receipt of which is hereby
acknowledged.
|
|
This
proxy when properly executed will be voted in accordance with the
above
instructions. In the absence of such specifications this proxy
will be
voted FOR Proposals 1 and
2.
|
PLEASE
MARK, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
Signature(s)
__________________________________________________ Date
__________________________________
Note:
(Please sign exactly as your name appears. Persons signing as executors,
trustees, guardians, etc. please so indicate when
signing.)