SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
BRT REALTY TRUST
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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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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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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BRT REALTY TRUST
60 CUTTER MILL ROAD
SUITE 303
GREAT NECK, NEW YORK 11021
(516) 466-3100
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 15, 2004
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The Annual Meeting of Shareholders of BRT Realty Trust will be held on
Monday, March 15, 2004, at 9:00 a.m. (local time), at the offices of BRT Realty
Trust, 60 Cutter Mill Road, Suite 303, Great Neck, N.Y. for the following
purposes:
1. To elect one Class II Trustee to serve until the 2007 Annual Meeting of
Shareholders;
2. To ratify the selection of Ernst & Young LLP as independent auditors
for the 2004 fiscal year; and
3. To transact any other business as may properly come before the meeting.
Shareholders of record at the close of business on January 20, 2004 will be
entitled to notice of and to vote at the meeting. It is important that your
shares be represented and voted at the meeting. You can vote your shares by
completing and returning the proxy card sent to you. Certain shareholders can
also vote their shares over the internet or by telephone. If internet or
telephone voting is available to you, voting instructions are printed on the
proxy card sent to you. You can revoke a proxy at any time prior to its exercise
at the meeting by following the instructions in the accompanying proxy
statement.
Simeon Brinberg
Secretary
Great Neck, New York
January 28, 2004
BRT REALTY TRUST
60 CUTTER MILL ROAD
SUITE 303
GREAT NECK, NEW YORK 11021
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PROXY STATEMENT
We are providing this Proxy Statement to the shareholders of BRT Realty
Trust in connection with the solicitation of proxies by our Board of Trustees
for use at the Annual Meeting of Shareholders. In this Proxy Statement we refer
to BRT Realty Trust as "BRT", "we", "our" or the "Trust". The Annual Meeting
will be held at our offices, 60 Cutter Mill Road, Suite 303, Great Neck, New
York, at 9:00 A.M., on Monday, March 15, 2004.
The date of this Proxy Statement is January 28, 2004, the approximate date
on which we are mailing this Proxy Statement and the accompanying form of proxy
to shareholders. Our fiscal year begins on October 1st and ends on September
30th. References in this Proxy Statement to the year 2003 or fiscal 2003 refers
to the twelve month period from October 1, 2002 to September 30, 2003.
The executive offices of BRT are located at 60 Cutter Mill Road, Suite 303,
Great Neck, New York, 11021. Our telephone number is (516) 466-3100.
VOTING PROCEDURES
Shareholders of record at the close of business on January 20, 2004 are
entitled to notice of and to vote at the Annual Meeting. You are entitled to one
vote for each share of Beneficial Interest you own on January 20, 2004. On
January 20, 2004 there were 7,598,940 shares outstanding. In order to carry on
the business at the Annual Meeting, we must have a quorum present in person or
by proxy. This means that at least a majority of the outstanding shares must be
represented at the Annual Meeting, either in person or by proxy. The affirmative
vote of a plurality of the outstanding shares of Beneficial Interest present and
voting at the Annual Meeting, in person or by proxy, is required to elect the
nominee as a Class II Trustee. The affirmative vote of a majority of the
outstanding shares of Beneficial Interest is required to ratify the selection of
Ernst & Young LLP as independent auditors. There is no cumulative voting in
connection with the election of the Trustee.
Because many shareholders cannot attend the meeting in person, it is
necessary that a large number of shares be represented by proxy. Most
shareholders have a choice of voting over the internet, by using a toll-free
telephone number or by completing a proxy card and mailing it in the postage
paid envelope provided. Please refer to your proxy card or to the information
provided by your bank, broker, or other holder of record to see which options
are available to you. You should be aware that if you vote over the internet,
you may incur costs, such as telephone and internet access charges for which you
will be responsible. The internet and telephone voting facilities for
shareholders of record will close at 12:01 a.m., E.S.T. on March 15, 2004. If
you vote by telephone or via the internet, it is not necessary to return a proxy
card. The internet and telephone voting procedures are designed to authenticate
shareholders and to allow you to confirm that your instructions have been
properly recorded.
If you wish to name as a proxy someone other than the proxies named on the
proxy card, you may do so by crossing out the names of the designated proxies
and inserting the name of another person. In that case it will be necessary to
sign the proxy card and deliver it to the person so named and for the person so
named to be present at and to vote at the meeting. Proxy cards so marked should
not be mailed to us or to American Stock Transfer and Trust Company.
You can revoke your proxy at any time before it is exercised. To revoke
your proxy you may file a written revocation with our Secretary, or you may
deliver a properly executed proxy bearing a later date. If you vote by telephone
or internet, you may also revoke your proxy with a timely and valid later
telephone or internet vote, as the case may be. You may also revoke your proxy
by attending the meeting and voting in person. If not so revoked, the shares
represented by such proxy will be voted.
2
Votes withheld from the nominee for Trustee, abstentions on the proposal
relating to the selection of the independent auditors and broker non-votes are
counted as present and entitled to vote for purposes of determining whether a
quorum has been reached. Votes withheld from the nominee for Trustee and
abstentions on the proposal relating to the selection of the independent
auditors have the same effect as votes against them. Broker non-votes have the
same effect as a vote against the selection of the independent auditors, but
will have no effect on the outcome of the election of the Trustee.
If you hold your shares through a broker, your shares may be voted even if
you do not vote or attend the Annual Meeting. Under the rules of the New York
Stock Exchange, if you hold your shares through a broker, your broker is
permitted to vote your shares on the election of the Trustee and on the proposal
relating to the selection of the independent auditors even if the broker does
not receive instructions from you.
All shares of Beneficial Interest entitled to vote and represented by
properly completed proxies received prior to the meeting and not revoked will be
voted at the meeting in accordance with your instructions. If no choice is
indicated on the proxy card, the persons named as your proxies will vote the
shares "FOR" the nominee for Class II Trustee and "FOR" the selection of Ernst &
Young LLP as independent auditors for the 2004 fiscal year, and as the proxy
holders may determine, in their discretion, with respect to other matters that
properly come before the meeting. The Board of Trustees is not currently aware
of any business to be acted upon at the Annual Meeting other than that which is
described in this Proxy Statement. A representative of American Stock Transfer
and Trust Company will tabulate the votes and act as inspector of elections.
COST OF PROXY SOLICITATION
We will pay the cost of soliciting proxies. In addition to the solicitation
of proxies by mail and through our regular employees, we will request banks,
brokers, custodians, nominees and other record holders to forward copies of the
Proxy Statement and other soliciting materials to persons for whom they hold
shares of Beneficial Interest and to request authority for the exercise of
proxies. We will reimburse such record holders for their reasonable
out-of-pocket expenses in forwarding proxies and proxy materials to
shareholders.
3
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, TRUSTEES AND OFFICERS
The following table sets forth information concerning shares of Beneficial
Interest owned by (i) all persons known to own beneficially 5% or more of our
outstanding shares of Beneficial Interest, (ii) all Trustees and the nominee for
Trustee, (iii) each executive officer named in the Summary Compensation Table,
and (iv) all Trustees and executive officers as a group.
AMOUNT OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------ ------------ --------
Gould Investors L.P.(2)..................................... 2,108,048 27.59%
Patrick J. Callan(3)........................................ 50,750 *
280 Park Avenue,
38th Floor West
New York, NY 10017
Fredric H. Gould(2)(3)(4)(5)................................ 2,689,379 35.20%
Jeffrey A. Gould(2)(3)(6)................................... 236,850 3.10%
Matthew J. Gould(2)(3)(7)................................... 2,354,195 30.81%
Mitchell Gould(2)........................................... 28,850 *
Louis C. Grassi(3).......................................... 750 *
Grassi & Company CPA P.C.
2001 Marcus Avenue
Lake Success, NY 11042
David Heiden(2)............................................. 43,250 *
David G. Herold(3).......................................... 32,750 *
16 Southdown Court
Huntington, NY 11743
Arthur Hurand(3)............................................ 20,516 *
4182 Pier North Blvd., Suite D
Flint, MI 48504
Gary Hurand(3)(8)........................................... 228,581 2.99%
4182 Pier North Blvd., Suite D
Flint, MI 48504
Mark H. Lundy(2)............................................ 44,065 *
Henry Moskowitz and the Argo Corporation(9)................. 570,700 7.47%
50 West 17th Street
New York, NY 10011
George Zweier(2)............................................ 13,200 *
All Trustees and Officers as a group (16 in number)(10)..... 4,026,284 52.70%
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* Less than 1%
(1) Securities are listed as beneficially owned by a person who directly or
indirectly holds or shares the power to vote or to dispose of the
securities, whether or not the person has an economic interest in the
securities. In addition, a person is deemed a beneficial owner if he has
the right to acquire beneficial ownership of shares within 60 days, whether
upon the exercise of a stock option or otherwise. The percentage of
beneficial ownership is based on 7,598,940 shares of Beneficial Interest
outstanding on January 20, 2004.
(2) Address is 60 Cutter Mill Road, Great Neck, NY 11021.
(3) A Trustee.
(4) Includes 257,990 shares of Beneficial Interest owned by the pension and
profit sharing trusts of BRT Realty Trust and REIT Management Corp. of
which Fredric H. Gould and two non-Trustee officers are trustees, as to
which shares Mr. Gould has shared voting and investment power.
4
(5) Includes 34,762 shares of Beneficial Interest held by Mr. Gould as
co-trustee for the children of his brother (as to which shares Mr. Gould
disclaims beneficial interest), 25,000 shares of Beneficial Interest owned
by a trust for the benefit of Mr. Gould's grandchildren of which Mr. Gould
is a trustee (as to which shares Mr. Gould disclaims beneficial interest),
and 18,988 shares of Beneficial Interest owned by a partnership in which
Mr. Gould is a general partner. Also includes 30,048 shares owned by One
Liberty Properties, Inc., of which Mr. Gould is an officer and director and
2,108,048 shares of Beneficial Interest owned by Gould Investors L.P. Mr.
Gould is Chairman of the Board and sole shareholder of the Managing General
Partner of Gould Investors L.P. Does not include 25,015 shares of
Beneficial Interest owned by Mrs. Fredric H. Gould, as to which shares Mr.
Gould disclaims beneficial interest and Mrs. Gould has sole voting and
investment power.
(6) Includes 22,252 shares of Beneficial Interest owned by Mr. Gould as
custodian for his minor children (as to which shares Mr. Gould disclaims
beneficial interest) and 25,000 shares of Beneficial Interest owned by a
trust for the benefit of Mr. Gould's children and others, of which Mr.
Gould is a trustee (as to which shares Mr. Gould disclaims beneficial
interest). Does not include 40,000 shares of Beneficial Interest owned by
Mrs. Jeffrey A. Gould as to which shares Mr. Gould disclaims beneficial
interest and Mrs. Gould has sole voting and investment power.
(7) Includes 15,666 shares of Beneficial Interest owned by Mr. Gould as
custodian for his minor children (as to which shares Mr. Gould disclaims
beneficial interest), 25,000 shares of Beneficial Interest owned by a trust
for the benefit of Mr. Gould's children and others, of which Mr. Gould is a
trustee (as to which shares Mr. Gould disclaims beneficial interest) and
2,108,048 shares of Beneficial Interest owned by Gould Investors L.P. Mr.
Gould is President of the Managing General Partner of Gould Investors L.P.
Does not include 39,500 shares of Beneficial Interest owned by Mrs. Matthew
J. Gould as to which shares Mr. Gould disclaims beneficial interest and
Mrs. Gould has sole voting and investment power.
(8) Includes 50,477 shares of Beneficial Interest owned by a partnership in
which Mr. Hurand is a partner, and 121,377 shares of Beneficial Interest
owned by a corporation in which Mr. Hurand is an officer and shareholder.
(9) Based on information provided by the shareholder. Includes 82,600 shares of
Beneficial Interest owned by the Henry Moskowitz and Rose Moskowitz 1999
Family Foundation.
(10) This total is qualified by notes (4) through (8). Includes an aggregate of
22,875 shares of Beneficial Interest which underlie options.
5
BOARD OF TRUSTEES
ELECTION OF TRUSTEES
The Board of Trustees is divided into three classes, each of which is
elected for a staggered term of three years. The Declaration of Trust provides
for the number of Trustees to be between five and fifteen, the exact number to
be determined by the Board of Trustees. The Board has fixed the number of
Trustees at six. The Board may, following the Annual Meeting, increase the size
of the Board and fill any resulting vacancy or vacancies.
At the Annual Meeting, one Class II Trustee will be elected. The nominee is
currently serving as a Trustee. Five other individuals serve as Trustees but are
not standing for election because their terms extend past the Annual Meeting.
Proxies will not be voted for a greater number of nominees than are named in the
Proxy Statement. We expect the nominee to be able to serve if elected. However,
if the nominee is unable to serve as a Trustee, unless a shareholder withholds
authority, the persons named in the proxy card may vote for any substitute
nominee proposed by the Board of Trustees.
The nominee, if elected, will serve until the Annual Meeting to be held in
the year 2007. Each other Trustee will serve until the Annual Meeting to be held
in the year set forth below.
The following table sets forth the name and age of the nominee for election
to the Board of Trustees and of each Trustee whose term of office will continue
after the Annual Meeting, the principal occupation of each during the past five
years and the period during which each has served as a Trustee.
TERM TRUSTEE
NAME AGE EXPIRING PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
---- --- -------- -------------------------------------------- -------
CLASS II
Louis C. Grassi...................... 48 2007 Managing Partner of Grassi & Co. CPA's since 2003
1984; Director of Flushing Financial Corp.
CLASS III
Fredric H. Gould(1).................. 68 2005 Chairman of the Board of BRT since 1983; 1983
Chief Executive Officer of BRT from March
1996 to December 31, 2001; Chairman of the
Board of Georgetown Partners, Inc., Managing
General Partner of Gould Investors L.P. and
sole member of Gould General LLC., a general
partner of Gould Investors L.P.; Chairman of
the Board of One Liberty Properties, Inc.;
President of REIT Management Corp.; Director
of East Group Properties, Inc.
Gary Hurand.......................... 57 2005 President of Dawn Donut Systems, Inc. since 1990
1973; Director of Republic Bancorp.
CLASS I
Patrick J. Callan(1)................. 67 2006 Real Estate Consultant; Principal of The 1984
RREEF Funds, pension fund real estate
investments, from 1984 to January 2001;
Director of M&T Bank Corporation; Member of
Manufacturers & Traders Trust Company
Directors Advisory Council -- New York City
Division.
6
TERM TRUSTEE
NAME AGE EXPIRING PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
---- --- -------- -------------------------------------------- -------
Jeffrey A. Gould..................... 38 2006 President and Chief Executive Officer of BRT 1997
from January 1, 2002 to present; President
and Chief Operating Officer of BRT from
March 1996 to December 31, 2001; Director of
One Liberty Properties, Inc.
David G. Herold...................... 62 2006 Private Investor; President and Chief 1997
Executive Officer of Metro Bancshares, Inc.,
the savings and loan holding company for
Bayside Federal Savings and Loan
Association, from 1988 to 1994.
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(1) Member of the Executive Committee. Arthur Hurand, a Trustee who is also a
member of the Executive Committee, is not standing for reelection.
Fredric H. Gould is the father of Jeffrey A. Gould.
MEETINGS AND COMMITTEES OF THE BOARD OF TRUSTEES
BRT is governed by a Board of Trustees and various committees of the Board.
During fiscal 2003 the Board of Trustees held four regularly scheduled meetings
and enacted resolutions by unanimous consent on several occasions. Each Trustee
attended at least 75% of the aggregate number of Board and applicable Committee
meetings in 2003. The Board of Trustees has four standing committees; an
Executive Committee, an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee. The Board of Trustees has adopted
a Charter for each committee (other than the Executive Committee). Copies of
these charters are posted on BRT's website at www.brtrealty.com. You may also
obtain a copy of the charters by writing to us at 60 Cutter Mill Road, Great
Neck, New York 11021, Attention: Secretary.
The Audit Committee, which is comprised of Messrs. David G. Herold, Patrick
J. Callan and Louis C. Grassi met four times during fiscal 2003. Herbert C.
Lust, II served as a member of the Audit Committee until his retirement from the
Board in June 2003. Mr. Grassi was appointed a member of the Audit Committee in
June 2003. The Audit Committee is responsible for (1) the quality and integrity
of BRT's financial statements and internal controls, (ii) BRT's compliance with
legal and regulatory requirements, (iii) the independent auditor's qualification
and independence, and (iv) the performance of BRT's internal audit function and
independent auditors. The Board of Trustees has determined that each member of
the Audit Committee satisfies the independence, financial literacy and expertise
requirements of the New York Stock Exchange. The Board of Trustees has
determined that Louis C. Grassi meets the Securities and Exchange Commission
definition of an "Audit Committee Financial Expert". A copy of the Audit
Committee Charter is annexed hereto as Appendix A.
The Compensation Committee is composed of independent trustees and
currently consists of Messrs. Callan and Herold. Herbert C. Lust, II served as a
member of the Compensation Committee until his retirement from the Board in June
2003. The Compensation Committee met one time during fiscal 2003. The
Compensation Committee assists management in making recommendations to the Board
of Trustees with respect to officers' (including the Chief Executive Officer)and
key employees' salaries, bonuses and stock incentive awards. The Compensation
Committee administers BRT's stock option plan and equity incentive plan.
The Nominating and Corporate Governance Committee is composed of
independent trustees and currently consists of Messrs. Callan, Grassi and
Herold. The Nominating and Corporate Governance Committee was formed in
September 2003. The responsibilities of the Committee include proposing a slate
of trustees for election to the Board of Trustees at the Annual Shareholders'
Meeting, identification and recommendation of candidates to fill vacancies on
the Board of Trustees between Annual Shareholder Meetings and monitoring and
recommending changes to the Trust's Corporate Governance Guidelines.
7
In November 2003 the Securities and Exchange Commission adopted disclosure
rules regarding policies on shareholder nominations of board members. As of the
date of this proxy statement the Committee has not formulated such a policy.
Prior to the Trust's 2005 Annual Meeting of Shareholders the Committee will
determine if such a policy should be adopted. If such a policy is adopted, it
will provide, among other things, the procedures to be followed by shareholders,
the minimum qualifications to be met by all potential nominees, and a
description of the specific experience, skills and qualities which the Committee
believes are necessary for trustees to possess.
The Nominating and Corporate Governance Committee did not hold any meetings
in 2003. It held its first meeting in December 2003 to select the slate of
trustee nominees for election to the Board of Trustees at the Annual Meeting.
On January 13, 2004, the Nominating and Corporate Governance Committee
adopted a Code of Business Conduct and Ethics which applies to all trustees and
employees, including the Trust's principal executive officer, principal
financial officer, principal accounting officer or controller or persons
performing similar functions. The Committee has also adopted Corporate
Governance Guidelines to assist the Board of Trustees in the exercise of its
responsibilities. The Code of Business Conduct and Ethics and the Corporate
Governance Guidelines may be found on our website at www.brtrealty.com. You may
also obtain a copy of the Code of Business Conduct and Ethics and the Corporate
Governance Guidelines by writing to us at 60 Cutter Mill Road, Great Neck, New
York 11021, Attention: Secretary.
In accordance with New York Stock Exchange Corporate Governance listing
standards, the Trust's non-management Trustees will meet at regularly scheduled
executive sessions without management. Non-management trustees are all those
trustees who are not officers of BRT. The Board does not intend to designate a
"Lead Director" or a single trustee to preside at executive sessions. The person
who presides over executive sessions of non-management trustees will be one of
the independent trustees and the presiding trustee will rotate among the
independent trustees.
Shareholders who want to send a communication to the Board of Trustees or
to an individual Trustee may do so by writing to the Board or a specific trustee
c/o Secretary, BRT Realty Trust, 60 Cutter Mill Road, Great Neck, NY 11021.
Inquiries will be reviewed by the Trust's Secretary and if the inquiry is
relevant to and consistent with BRT's operations, policies and business
philosophy will be forwarded to the intended recipient of such correspondence.
BRT does not require its Board Members to attend the Annual Meeting of
Shareholders. At the Annual Meeting of Shareholders held in March 2003, four of
our trustees were in attendance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are as set forth in the preceding
section. None of the members has ever been an officer or employee of BRT or any
of its subsidiaries and no "compensation committee interlocks" existed during
fiscal 2003.
COMPENSATION OF TRUSTEES
Members of our Board of Trustees who are not employees of BRT are paid an
annual retainer of $15,000. Each member of the Audit Committee is paid an annual
retainer of $5,000, the Chairman of the Audit Committee is paid an additional
annual retainer of $1,000, each member of the Compensation Committee is paid an
annual retainer of $3,000 and each member of the Nominating and Corporate
Governance Committee is paid an annual retainer of $2,000. In addition, in 2003
each non-employee Trustee of BRT was awarded 750 Beneficial Shares under the BRT
Realty Trust 2003 Incentive Plan. The restricted shares granted to the Trustees
have a five year vesting period during which period the registered owner is
entitled to vote and to receive cash distributions on such shares. Non-employee
Trustees who reside outside of the local area also receive reimbursement for
travel expenses incurred in attending Board and Committee Meetings.
8
INDEPENDENCE OF TRUSTEES
The rules of the New York Stock Exchange require that BRT have and maintain
a Board that includes a majority of independent directors.
The following standards for "director" independence are applicable to BRT
in accordance with the New York Stock Exchange corporate governance listing
standards:
- No trustee of BRT qualifies as "independent" unless the Board
affirmatively determines that the trustee has no material relationship
with BRT or any of its subsidiaries (either directly or as a partner,
shareholder or officer of an organization that has a relationship with
BRT or any of its subsidiaries);
- A trustee who is an employee, or whose immediate family member is an
executive officer of BRT or any of its subsidiaries is not independent
until three years after the end of such employment relationship;
- A trustee who receives, or whose immediate family member receives, more
than $100,000 per year in direct compensation from BRT or any of its
subsidiaries, other than director and committee fees and pension or other
forms of deferred compensation for prior services (provided such
compensation is not contingent in any way on continued service), is not
independent until three years after he or she ceases to receive more than
$100,000 per year in such compensation;
- A trustee who is affiliated with or employed by, or whose immediate
family member is affiliated with or employed in a professional capacity
by, a present or former internal or external auditor of BRT or any of its
subsidiaries is not "independent" until three years after the end of the
affiliation or the employment or auditing relationship;
- A trustee who is employed, or whose immediate family member is employed,
as an executive officer of another company for which any of BRT's or any
of its subsidiaries' present executives serve on that company's
compensation committee is not "independent" until three years after the
end of such service or the employment relationship; and
- A trustee who is an executive officer or an employee, or whose immediate
family member is an executive officer, of a company that makes payments
to, or receives payments from, BRT or any of its subsidiaries for
property or services in an amount which, in any single fiscal year,
exceeds the greater of $1 million, or 2% of such other company's
consolidated gross revenues, is not "independent" until three years after
falling below such threshold.
The Board has determined that Patrick J. Callan, Louis C. Grassi and David
Herold meet the aforementioned independence standards but that Gary Hurand, a
partner in an entity which owns a preferred limited partnership interest in
Gould Investors L.P., does not satisfy the independence standards. As of the
date of the Annual Meeting, BRT will have six Trustees, three of whom are
"independent." Accordingly, BRT will not have a majority of independent
Trustees. However, Gary Hurand's term of office will expire at the Annual
Meeting to be held in March 2005. Under the New York Stock Exchange transition
rule, since BRT has a staggered board, BRT has until the second Annual Meeting
after January 15, 2004, but no later than December 31, 2005, to comply with the
New York Stock Exchange's requirement that a majority of its board consists of
independent directors. At or prior to its 2005 Annual Meeting, BRT's Board of
Trustees will take such action as may be necessary to establish a Board of
Trustees that includes a majority of independent trustees.
If a quorum is present, the nominee for Class II Trustee shall be elected
by the affirmative vote of the holders of a plurality of the shares of
Beneficial Interest present or represented at the meeting.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ELECTION OF LOUIS C. GRASSI AS
A TRUSTEE. THE PERSONS NAMED IN THE PROXY CARD INTEND TO VOTE SUCH PROXY FOR THE
ELECTION AS TRUSTEE OF LOUIS C. GRASSI, UNLESS YOU INDICATE THAT YOUR VOTE
SHOULD BE WITHHELD.
9
INDEPENDENT AUDITORS
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee and the Board of Trustees is seeking ratification of
the appointment of Ernst & Young LLP as independent auditors for the fiscal year
ending September 30, 2004. A representative of Ernst & Young LLP is expected to
be present at the Annual Meeting and will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
We are not required to have our shareholders ratify the selection of Ernst
& Young LLP as our independent auditors. We are doing so, because we believe it
is a matter of good corporate practice. If the shareholders do not ratify the
selection, the Audit Committee and the Board of Trustees will reconsider whether
or not to retain Ernst & Young LLP. Even if the selection is ratified, the Board
of Trustees and the Audit Committee, in their discretion, may change the
appointment at any time during the year if they determine that such a change
would be in the best interests of BRT and its shareholders.
The affirmative vote of the holders of a majority of outstanding shares of
Beneficial Interest present at the Annual Meeting, in person or by proxy, is
required to ratify the appointment of Ernst & Young LLP as independent auditors
for the fiscal year ending September 30, 2004.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS. THE PERSONS NAMED IN THE PROXY CARD
INTEND TO VOTE SUCH PROXY FOR THE PROPOSAL UNLESS YOU SPECIFY OTHERWISE.
AUDIT AND OTHER FEES
The following table presents the fees for professional audit services
billed by Ernst & Young LLP for the audit of our annual consolidated financial
statements for the years ended September 30, 2002 and 2003, and fees billed for
other services rendered to us by Ernst & Young LLP for each of such years:
FISCAL
-------------------
2002 2003
-------- --------
Audit fees(1)............................................... $143,000 $151,750
Tax fees(2)................................................. 18,500 18,000
All other fees(3)........................................... 3,000
-------- --------
Total fees................................................ $161,500 $172,750
---------------
(1) Audit fees include fees for review of consolidated financial statements
included in our quarterly reports on Form 10-Q and fees for services
normally provided by an independent auditor in connection with statutory and
regulatory filings or engagements.
(2) Tax fees consists of fees for tax advice, tax compliance and tax planning.
(3) All other fees consists of fees paid for the review in 2003 of a
Registration Statement on Form S-8 filed by BRT.
The Audit Committee has concluded that the provision of non-audit services
listed above is compatible with maintaining the independence of Ernst & Young
LLP.
PRE-APPROVAL POLICY FOR AUDIT AND NON-AUDIT SERVICES
The Audit Committee must pre-approve all audit and non-audit services
involving BRT's independent auditors.
In addition to the audit work necessary for BRT to file required reports
under the Securities Exchange Act of 1934 (i.e., quarterly reports on Form 10-Q
and annual reports on Form 10-K) the independent auditors
10
may perform non-audit services, other than those prohibited by the
Sarbanes-Oxley Act of 2002, provided they are pre-approved by the Audit
Committee.
The independent auditors are prohibited from providing the following types
of services:
- bookkeeping or other services related to BRT's accounting records or
financial statements;
- financial information systems, design and implementation;
- appraisal or valuation services, fairness opinions or contribution - in -
kind reports;
- actuarial services;
- internal outsourcing services;
- management functions or human resources;
- broker or dealer, investment adviser or investment banking services; and
- legal services and expert services related to the audit.
APPROVAL PROCESS
At an Audit Committee meeting held in December of each year, the Committee
reviews and approves the audit scope concerning the audit of BRT's consolidated
financial statements for the fiscal year which commenced the preceding October
1st, including the audit fee associated with the audit. In addition at that
meeting, the Committee approves the provision of tax related non-audit services
and the maximum expenditure which may be incurred for such tax services for such
year. Any fees for the audit in excess of those approved at the meeting and any
fees for tax related services in excess of the maximum established by the
Committee must receive the prior approval of the Audit Committee.
Proposals for any other non-audit services to be performed by the
independent auditors must be approved by the Audit Committee in advance at a
regularly scheduled meeting, by unanimous consent or at a meeting held by
telephone conference.
11
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Trustees is comprised of three
independent trustees and operates under a written charter adopted by the Board
of Trustees, a copy of which, as amended, is included as Appendix A to this
Proxy Statement. The Committee reviews the charter on an annual basis. The Board
of Trustees has reviewed the New York Stock Exchange listing standards
definition of independence for Audit Committee members and has determined that
each member of the Committee is independent.
The Committee is appointed by the Board of Trustees to oversee and monitor,
among other things, the financial reporting process, the independence and
performance of the independent auditors and the internal controls. It is the
responsibility of executive management to prepare financial statements in
accordance with generally accepted accounting principles and of the independent
auditors to perform an independent audit of the financial statements and to
express an opinion on the conformity of those financial statements with
generally accepted accounting principles.
In this context, the Committee met on four occasions and held discussions
with management and the independent auditors. Management represented to the
Committee that the year-end consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The Committee also discussed with BRT's management the
process used for the certifications under the Sarbanes-Oxley Act of 2002 of the
Trust's filings with the Securities and Exchange Commission. In fiscal 2003 the
Committee met to review the unaudited quarterly financial statements prior to
filing of each Form 10-Q with the Securities and Exchange Commission. In fiscal
2003, the Committee also reviewed each quarterly earnings press release prior to
public release. The Committee discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committee).
In addition, the Committee discussed with the independent auditors the
auditors' independence from BRT and its management, and has received the written
disclosures and letter from the independent auditors required by Independence
Standards Board Standard No. 1 (Independence Discussions With Audit Committees).
Further, the Committee reviewed and approved the auditor's fees, both for
performing audit and non-audit services and considered whether the provision of
non-audit services by the independent auditors was compatible with maintaining
the auditors' independence and concluded that it was compatible.
The Committee meets with the independent auditors, with and without
management present, to discuss the results of their examinations, the
evaluations of the internal controls, and the overall quality of the financial
reporting.
Based on the reviews and discussions referred to above, the Committee
recommended that the audited financial statements for the year ended September
30, 2003 be included in Annual Report on Form 10-K for the year ended September
30, 2003 for filing with the Securities and Exchange Commission.
The Committee has approved the retention of Ernst & Young LLP as
independent auditors for the fiscal year ended September 30, 2004 after
reviewing the firm's performance, fee structure and independence from BRT and
its management.
David G. Herold
Patrick J. Callan
Louis C. Grassi
12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses the compensation paid and accrued for
services rendered in all capacities to BRT during the last three fiscal years
for the Chief Executive Officer of BRT and the four other most highly
compensated executive officers whose annual compensation exceeded $100,000 for
the 2003 fiscal year (collectively the "Named Executive Officers").
LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL ---------------------- STOCK AWARDS UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) ($)(1) OPTIONS (#) COMPENSATION $(2)
------------------ ------ ---------- --------- ------------- ----------- -----------------
Fredric H. Gould(3)(4)............. 2003 -- -- $35,838 -- --
Chairman of the 2002 -- -- -- -- --
Board 2001 -- -- -- 10,000 --
Jeffrey A. Gould(3)................ 2003 $335,074 -- $35,838 -- $30,000
President and 2002 $293,750 -- -- 6,000 $28,875
Chief Operating 2001 $275,000 -- -- 10,000 $25,500
Officer; Chief Executive Officer
David Heiden....................... 2003 $163,075 $ 8,000 $11,438 -- $25,661
Vice President 2002 $148,596 $10,000 -- 5,000 $23,789
2001 $128,829 $15,000 -- 10,000 $21,574
Mitchell Gould..................... 2003 $158,818 $ 9,000 $11,438 -- $25,173
Vice President 2002 $142,653 -- -- 5,000 $21,398
2001 $121,134 $15,000 -- 10,000 $20,420
George Zweier...................... 2003 $104,833 $10,000 $10,675 -- $17,225
Vice President 2002 $101,991 $11,500 -- 5,000 $17,282
2001 $ 92,234 $11,500 -- 10,000 $15,796
Mark H. Lundy(5)................... 2003 $123,650 -- $35,838 -- --
Vice President 2002 $118,906 -- -- 6,000 --
2001 $115,392 -- -- 10,000 --
---------------
(1) Represents the grant of restricted stock awards which the executive has the
right to receive, subject to vesting. The restricted stock awards vest after
five years. The value set forth above is based on the closing price on May
2, 2003, the date of the award, which was $15.25. The restricted stock
awards receive cash dividends at the rate paid on all BRT's shares. The
number of restricted shares awarded were 2,350 shares for each of Fredric H.
Gould, Jeffrey A. Gould and Mark H. Lundy and 750 shares, 750 shares and 700
shares for David Heiden, Mitchell Gould and George Zweier, respectively.
(2) Represents annual contributions under the BRT Realty Trust Pension Plan for
Jeffrey A. Gould, David Heiden, Mitchell Gould and George Zweier. The only
other type of Other Annual Compensation for each of the Named Executive
Officers is in the form of perquisites and is less than the level required
for reporting.
(3) Fredric H. Gould served as Chief Executive Officer through December 31,
2001. Effective January 1, 2002, Jeffrey A. Gould became Chief Executive
Officer.
(4) The compensation reported does not include compensation of $537,000 received
by Fredric H. Gould from REIT Management Corp., the advisor to BRT.
Reference is made to the caption "Interest of Management in Certain
Transactions" for a discussion of fees paid by BRT to REIT Management Corp.
and fees paid by BRT to Majestic Property Management Corp. Fredric H. Gould
is the sole shareholder of REIT Management Corp. and Majestic Property
Management Corp.
(5) Mark H. Lundy does not receive compensation directly from BRT. He is
compensated by Gould Investors L.P. and other related entities and his
salary is allocated to BRT pursuant to a shared services agreement. The
salary set forth is the amount allocated to BRT. See "Interest of Management
in Certain Transactions."
13
BRT PENSION PLAN
BRT has a non-contributory defined Pension Plan covering employees. The
Pension Plan is administered by Fredric H. Gould, Simeon Brinberg and David W.
Kalish (Messrs. Brinberg and Kalish are non-trustee officers of BRT). Annual
contributions are based on 15% of an employee's annual earnings, not to exceed
$30,000 per employee. Partial vesting commences one year after employment,
increasing annually until full vesting is achieved at the completion of five
years of employment. The method of payment of benefits to participants upon
retirement is determined solely by the participant, who may elect a lump sum
payment or the purchase of an annuity, the amount of which is determined
primarily by the amount of contributions. The following table sets forth the
amount contributed to the Pension Plan in fiscal 2003 for the benefit of each
Named Executive Officer, (other than Fredric H. Gould and Mark H. Lundy who do
not participate in the Pension Plan), the aggregate amount accrued to date and
the credited years of service for each Named Executive Officer.
AGGREGATE
AMOUNT AMOUNT
CONTRIBUTED ACCUMULATED CREDITED YEARS
NAME IN 2003 TO DATE OF SERVICE
---- ----------- ----------- --------------
Jeffrey A. Gould........................................ $30,000 $694,286 16
David Heiden............................................ $25,661 $142,273 5
Mitchell Gould.......................................... $25,173 $131,776 5
George Zweier........................................... $17,225 $ 94,668 5
OPTION GRANTS AND EXERCISES; UNEXERCISED OPTIONS
OPTION GRANTS IN 2003
BRT did not grant any stock options during fiscal 2003.
OPTION EXERCISES IN 2003 AND FISCAL YEAR END OPTION VALUES
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED SEPTEMBER 30, 2003 SEPTEMBER 30, 2003 ($)(2)
ON VALUE REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- --------------- ----------- ------------- ----------- -------------
Fredric H. Gould....... 2,500 15,000 0 7,500 0 84,975
Jeffrey A. Gould....... 7,125 44,364 0 15,125 0 164,880
David Heiden........... 8,750 54,750 0 13,750 0 150,194
Mitchell Gould......... 8,750 61,625 0 13,750 0 150,194
Mark H. Lundy.......... 11,875 130,270 1,500 15,125 12,945 164,880
George Zweier.......... 1,250 9,766 3,750 12,500 39,133 133,766
---------------
(1) Represents the fair market value of the shares underlying the stock options
on the date of exercise less the stock option exercise price.
(2) Represents the difference between the exercise price of options and $19.08,
the closing price of shares of Beneficial Interest of BRT Realty Trust on
September 30, 2003.
14
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is currently composed of two independent
non-employee Trustees; Patrick J. Callan and David G. Herold. Herbert C. Lust,
II, an independent non-employee Trustee, served as a member of the Compensation
Committee until his retirement from the Board of Trustees in June 2003 and
participated in all compensation decisions for fiscal 2003, other than year end
bonus determinations. The Committee is responsible for advising management and
the Board of Trustees on matters pertaining to compensation arrangements for
executive employees, as well as administration of the Trust's stock option plan
and the BRT Realty Trust 2003 Incentive Plan.
COMPENSATION OVERVIEW
The annual compensation of executive officers is composed of three
elements: (i) an annual component made up of base salary; (ii) an annual bonus;
and (iii) long term incentive-based compensation for executive officers realized
through the granting of stock options and the awarding of restricted shares
under the 2003 Incentive Plan.
BASE SALARY AND BONUS
Base salaries are targeted to be competitive with salaries paid to senior
executives at other real estate investment trusts of similar size and take into
account an individual's achievements and performance, the operating performance
of BRT Realty Trust in the most recently concluded fiscal year and the number of
years an individual has been associated with BRT Realty Trust in an executive
capacity. The determination by the Committee of base compensation is subjective
and is not based on any structured formula. In determining compensation for the
2003 fiscal year the Committee took into account the expertise which the
executive officers demonstrated in managing the business. Among other things,
the Committee gave consideration to the operating results, the activities in
loan origination, underwriting and managing the loan portfolio, the management
of the real estate portfolio, and activities of BRT Realty Trust in joint
venture investments.
BRT Realty Trust does not have a bonus plan in existence and it does not
establish a bonus pool. Any bonuses granted are granted on a case by case basis,
with the amount thereof being subjective. The Committee takes into
consideration, among other things, the base compensation of each officer, the
performance of each officer during the most recently concluded fiscal year, the
results of operations for such year, and the recommendations of management.
LONG TERM COMPENSATION -- STOCK OPTIONS AND RESTRICTED STOCK AWARDS
Stock options, which are purely discretionary and are not based on any
formula, may be granted periodically to provide incentive for the creation of
shareholder value over the long term, since the full benefit of the compensation
provided for under stock options cannot be realized unless there is an
appreciation in the price of the shares over a specified number of years. Under
the existing stock option plan options are granted at an exercise price equal to
the fair market value of the shares on the date of grant and are exercisable
over a number of years with phased in vesting.
In 2003 the Board of Directors authorized, and BRT's shareholders approved,
the adoption of the BRT Realty Trust 2003 Incentive Plan which authorizes the
grant of incentive and non-statutory options and the awarding of restricted
shares. The granting of options and the awarding of restricted shares under the
2003 Incentive Plan is at the discretion of the Compensation Committee and is
not based on any formula. No options have been granted under the 2003 Incentive
Plan. In 2003 the Compensation Committee approved the awarding of 28,800
restricted shares to a total of 23 persons including employees, officers,
trustees and consultants of BRT. The awards granted in 2003 provide for a five
year vesting period and, therefore, the shares awarded are not to be transferred
by the recipient until the five year vesting period has been satisfied.
Accordingly, unless vesting is accelerated by the Compensation Committee, an
award of restricted shares under the 2003 Plan cannot be realized unless the
awardee remains with the Trust for a period of five years during which five year
period the awardee realizes the benefits of any cash distributions paid on the
shares awarded to him. The Compensation Committee believes that awarding
restricted shares under the 2003 Plan
15
provides the recipients with an incentive to devote their best efforts in
pursuing the success of BRT by providing awardees with an opportunity to share
in the growth and prosperity of BRT through the ownership of shares of BRT.
CEO COMPENSATION
Jeffrey A. Gould became Chief Executive Officer of BRT effective January 1,
2002. In setting Mr. Gould's compensation, the Compensation Committee seeks to
provide compensation which is competitive with other real estate investment
trusts of similar size as BRT. In addition, the Committee evaluates Mr. Gould's
personal performance as well as the financial performance of the Trust in the
prior fiscal year and the overall return of BRT's shareholders in the prior
fiscal year; i.e., dividend yield and incremental stock value, if any. The final
determination of Mr. Gould's compensation is subjective in nature.
Patrick J. Callan
David G. Herold
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Fredric H. Gould, Chairman of our Board of Trustees, is Chairman of the
Board of Directors of One Liberty Properties, Inc., a real estate investment
trust listed on the New York Stock Exchange engaged in the ownership of a
diversified portfolio of income producing real properties net leased to tenants
substantially under long-term leases. He is also Chairman of the Board of
Directors and sole stockholder of the Managing General Partner of Gould
Investors L.P. and sole member of a limited liability company which is also a
General Partner of Gould Investors L.P. Jeffrey A. Gould, a Trustee and our
President and Chief Executive Officer is a Senior Vice President and Director of
One Liberty Properties, Inc. and a Vice President of the Managing General
Partner of Gould Investors L.P. Matthew J. Gould, one of our Senior Vice
Presidents, is a Senior Vice President and Director of One Liberty Properties,
Inc., and President of the Managing General Partner of Gould Investors L.P.
Gould Investors L.P. owns approximately 28% of our outstanding shares of
Beneficial Interest. In addition, David W. Kalish, Simeon Brinberg, Mark H.
Lundy and Israel Rosenzweig, each of whom is an executive officer of BRT Realty
Trust, are also executive officers of One Liberty Properties, Inc. and of the
Managing General Partner of Gould Investors L.P. Arthur Hurand, one of our
Trustees (Mr. Hurand is not standing for re-election), is a director of One
Liberty Properties, Inc.
We and certain related entities, including Gould Investors L.P. and One
Liberty Properties, Inc., occupy common office space and use certain services
and personnel in common. In 2003 we paid Gould Investors L.P. $656,000 for
general and administrative expenses, including rent, telecommunication services,
computer services, bookkeeping, secretarial and other clerical services and
legal and accounting services. This amount includes $60,131 contributed to the
annual rent of $362,000 paid by Gould Investors L.P., One Liberty Properties,
Inc. and related entities to a subsidiary of Gould Investors L.P. which owns the
building in which the offices of these entities are located and an aggregate of
$476,000 allocated to us for services (primarily legal and accounting) performed
by some of the above executive officers who are not engaged by us on a full-
time basis, including the amounts allocated by Mark H. Lundy as set forth in the
"Summary Compensation Table" and $82,261, $90,003 and $94,818 of salary
allocated by David W. Kalish, Simeon Brinberg and Israel Rosenzweig,
respectively. The allocation of general and administrative expenses is computed
in accordance with a Shared Services Agreement and is based on the estimated
time devoted by executive, administrative and clerical personnel to the affairs
of each participating entity. The services of secretarial personnel generally
are allocated on the same basis as that of the executive to whom each secretary
is assigned. BRT also leases under a direct lease with a subsidiary of Gould
Investors L.P. approximately 1,800 square feet at an annual rental of $51,000,
which is a competitive rent for comparable office space in the area in which the
building is located.
We and REIT Management Corp. ("REIT") are parties to an Advisory Agreement
pursuant to which REIT furnishes administrative services with respect to our
assets and, subject to the supervision of the
16
Trustees, advises us with respect to our investments. For services performed by
REIT under the Advisory Agreement, REIT receives an annual fee of 1/2 of 1% of
invested assets (as defined in the Advisory Agreement) other than mortgages
receivable, subordinated land leases and investments in unconsolidated ventures,
with a 1% fee payable on mortgages receivable, subordinated land leases and
investments in unconsolidated ventures. The fee to REIT includes non-accruing
mortgage receivables to the extent they exceed allowances for loan losses. The
fee is computed and payable quarterly, subject to adjustment at year end based
on the audited financial statements. During 2003 REIT earned $875,000 under the
Advisory Agreement. Borrowers of BRT may pay fees directly to REIT for services
rendered. These fees totaled $601,000 in fiscal 2003.
All of the outstanding shares of REIT are owned by Fredric H. Gould, the
Chairman of our Board. Fredric H. Gould and Matthew J. Gould, one of our Senior
Vice President, are salaried officers of REIT and received compensation from
REIT of $537,300 and $630,617 respectively in 2003. Simeon Brinberg, David W.
Kalish and Mark H. Lundy, officers of BRT Realty Trust, received consulting fees
from REIT in 2003 of $45,833, $62,501 and $93,749, respectively.
The Advisory Agreement provides that directors, officers, and employees of
REIT may serve as Trustees, officers and employees of BRT, but such persons may
not receive cash compensation from BRT Realty Trust for services rendered in the
latter capacities.
The Advisory Agreement, which was entered into in February 1983, has been
renewed for a term ending December 31, 2007 and is renewable on an annual basis
by the Board of Trustees, for a maximum five year period. Notwithstanding such
renewal, the shareholders have the right to rescind the renewal of the Advisory
Agreement authorized at the preceding Board of Trustees' Meeting, if at a
special meeting of shareholders called by holders of at least twenty percent of
the outstanding shares specifically for such purpose, a majority of the
outstanding shares entitled to vote thereon determine that the Advisory
Agreement shall not be renewed. In the event the Advisory Agreement is not
renewed in any year by the Board of Trustees or such renewal is rescinded by a
majority of the outstanding shares entitled to vote thereon at a special meeting
called for such purpose, the Advisory Agreement will have a balance of four
years remaining on the existing term.
In 2003, we paid Majestic Property Management Corp., a company in which we
have no ownership interest and which is 100% owned by the Chairman of our Board
of Trustees, fees for management services and brokerage fees totaling $92,000.
Majestic Property Management Corp. provides real property management, real
estate brokerage and construction supervision services for affiliated and
non-affiliated entities. Fredric H. Gould received compensation from Majestic
Property Management Corp. of $323,286 in 2003 and Jeffrey A. Gould, Matthew J.
Gould, David W. Kalish, Mark H. Lundy and Israel Rosenzweig received
compensation from Majestic Property Management Corp. in 2003 of $226,194,
$226,194, $75,144, $110,341 and $226,194, respectively. The management services
provided to BRT include, among other things, rent billing and collection,
leasing, compliance with regulatory statutes and rules (i.e., New York City rent
control and rent stabilization rules), construction supervision and property
sales.
The fees paid by BRT Realty Trust to Majestic Property Management Corp. and
REIT Management Corp. and the expenses reimbursed to Gould Investors L.P. under
the Shared Services Agreement were approved by our Audit Committee and Board of
Trustees. The fees to Majestic Property Management Corp. were based on fees
which we believe are no greater than fees which would have been charged by
unaffiliated persons for comparable services. The fees paid to REIT are pursuant
to the Advisory Agreement discussed above and the expenses reimbursed to Gould
Investors L.P. were reimbursed pursuant to a Shared Services Agreement approved
by the Board of Trustees, including a majority of the independent Trustees.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and trustees, and persons who beneficially own more than 10% of our
shares, to file Initial Reports of Ownership and Reports of
17
Changes in Ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Executive officers, trustees and greater than 10%
beneficial owners are required by SEC regulations to furnish us with copies of
all Section 16(a) forms they file. BRT prepares and files the requisite forms on
behalf of its executive officers and Trustees.
Based on a review of information supplied to us by our executive officers
and trustees, we believe that all Section 16(a) filing requirements applicable
to our executive officers and Trustees with respect to fiscal 2003 were met
except for the following: two amended Form 4s were filed on behalf of Seth
Kobay, Treasurer of BRT, on January 31, 2003, to correct information contained
in Form 4s filed on January 10 and 13, 2003; a Form 5 was filed by David W.
Kalish, a Senior Vice President of BRT on October 31, 2003 to correct a
computational error which appeared in Form 4s filed June 16, 2003 and September
17, 2003.
18
STOCK PERFORMANCE GRAPH
This graph compares the performance of shares of Beneficial Interest of BRT
Realty Trust with the Standard & Poor's 500 Stock Index and a peer group index
consisting of publicly traded mortgage REITs prepared by the National
Association of Real Estate Investment Trusts. The graph assumes $100 invested on
September 30, 1998 and assumes the reinvestment of dividends.
[STOCK PERFORMANCE GRAPH]
Cumulative Total Return
---------------------------------------------------------
9/98 9/99 9/00 9/01 9/02 9/03
BRT REALTY TRUST.... 100.00 150.53 142.11 177.26 243.77 394.73
S&P 500 INDEX....... 100.00 127.81 144.78 106.24 84.48 105.09
NAREIT MORTGAGE..... 100.00 63.35 60.02 98.96 133.87 195.76
19
SUBMISSION OF SHAREHOLDER PROPOSALS
The annual meeting of BRT for the year ending September 30, 2004 is
scheduled to be held in March 2005. In order to have any proposal presented by a
shareholder at the meeting included in the proxy statement and form of proxy
relating to the meeting, the proposal must be received by BRT not later than
September 24, 2004.
For any proposal that is not submitted for inclusion in next year's proxy
statement, but is instead intended to be presented directly at the 2005 annual
meeting, SEC rules permit BRT to exercise discretionary authority to the extent
conferred by proxy if BRT:
- receives notice of the proposal before December 13, 2004 and advises
stockholders in the 2005 proxy statement of the nature of the proposal
and how management intends to vote on such matter, or
- does not receive notice of the proposal before December 13, 2004.
OTHER MATTERS
The Board does not know of any matter other than those stated in this Proxy
Statement which are to be presented at the Annual Meeting. If any other matter
should properly come before the meeting, the persons named in the proxy card
will vote the shares represented by it in accordance with their best judgment.
Discretionary authority to vote on other matters is included in the proxy.
By order of the Board of Trustees
Simeon Brinberg, Secretary
Dated: January 28, 2004
20
APPENDIX A
BRT REALTY TRUST
AUDIT COMMITTEE OF THE BOARD OF TRUSTEES
CHARTER
I. PURPOSE
The Audit Committee (the "Committee) is a committee of the Board of
Trustees (the "Board"). The primary function of the Committee is to represent
and assist the Board with the oversight of: (i) the quality and integrity of the
Trust's financial statements and internal controls, (ii) the Trust's compliance
with legal and regulatory requirements, (iii) the independent auditor's
qualifications and independence, and (iv) the performance of the Trust's
internal audit function and independent auditors. The Committee will fulfill its
responsibilities by carrying out its activities and duties consistent with this
Charter. The Committee shall be given full and direct access to the Trust's
management, Trust's employees and independent auditors as necessary to carry out
these responsibilities.
II. COMPOSITION
The Audit Committee shall be comprised of three or more Trustees. The
members of the Audit Committee shall be nominated by the Nominating and
Corporate Governance Committee and elected by the Board at the annual
organizational meeting to one-year terms or until their successors are elected
and qualified. Each member shall satisfy the independence, experience and
financial literacy requirements of The New York Stock Exchange, the
Sarbanes-Oxley Act of 2002 and applicable rules and regulations of the
Securities and Exchange Commission.
At least one member of the Audit Committee shall be a "financial expert"
and have "accounting or related financial management expertise" as required by
the Sarbanes-Oxley Act of 2002, The New York Stock Exchange listing standards
and the rules and regulations of the Securities and Exchange Commission. The
designation of one or more members as a "financial expert" shall not impose any
duties, obligations or liabilities on such member greater than the regular
duties, obligations and liabilities as a member of the Committee or the Board.
If any Committee member simultaneously serves on the audit committee of
other public companies, the Board must determine that such simultaneous service
or services will not impair the ability of such member to effectively serve on
the Trust's Audit Committee.
Unless a Chair is elected by the full Board, the members of the Committee
may designate a Chair by majority vote of the full Committee membership.
No consulting, advisory or compensatory fees shall be paid by or for the
Trust to any member of the Committee or to any entity with which he or she is
affiliated, other than trustee and committee fees payable by the Trust in the
regular course. Board and committee fees may be payable in cash, shares, options
and/or in kind. Committee members may receive additional compensation from the
Trust for their service on the Committee.
III. MEETINGS.
The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The timing of the meetings shall be determined by the
Committee. However, the Committee will meet at any time that the independent
auditors believe communication with the Committee is required. As part of its
job to foster open communication, the Committee shall meet periodically with
management, the trustees and the independent auditors in separate executive
sessions to discuss any matter which the Committee or each of these groups
believes should be discussed privately. Minutes shall be kept of each meeting of
the Committee.
A-1
IV. RESPONSIBILITIES AND DUTIES
The Committee shall have the following duties and responsibilities:
GENERAL RESPONSIBILITIES:
- To report Committee actions to the full Board and make appropriate
recommendations.
- To inquire as to the independence of the independent auditors. As part of
this responsibility, the Committee will ensure that the independent
auditors submit on a periodic basis to the Committee a formal written
statement delineating all relationships between such auditors and the
Trust. The Committee is responsible for actively engaging in a dialogue
with the independent auditors with respect to any disclosed relationships
or services that may impact the objectivity and independence of the
independent auditors and for recommending that the Board take appropriate
action in response to the independent auditors' report to satisfy itself
of the independent auditors' independence.
- To conduct or authorize investigations into matters within the
Committee's scope of responsibility. The Committee is authorized to the
extent it deems necessary or appropriate, at the Trust's expense and
without Board approval, to retain independent counsel, accountants or
other advisors to assist the Committee in fulfilling its duties. The
Committee may request any officer, trustee or employee of the Trust or
the Trust's outside counsel or independent auditors to attend any meeting
of the Committee or to meet with any members of or consultants to the
Committee.
- To review and approve, specifically and in advance, any permitted
non-audit services proposed to be provided to the Trust by its
independent auditors, and ensure that such services do not interfere with
the independence of such auditors, and do not give rise to an appearance
of impropriety. Pre-approval of permitted non-audit services may be
delegated to the Chairman or another member of the Committee.
- To consider policies and procedures for audit partner rotation on a
five-year cycle.
- To establish procedures for the receipt, retention and treatment of
complaints received by the Trust regarding accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding accounting, auditing or
internal control issues.
- To meet separately and periodically, with management and with independent
auditors.
- To review and establish hiring policies regulating the hiring by the
Trust of employees or former employees of the Trust's independent
auditors.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT AUDITORS AND REVIEWING INTERNAL AUDIT
FUNCTION:
- To be directly and solely responsible for the appointment, retention and
evaluation of the independent auditors and to directly and be solely
responsible for the approval of any replacement of the independent
auditors. The Committee also will review and approve fees paid to the
independent auditors, including audit and non-audit fees.
- To confirm and assure the objectivity of the internal audit function and
the independence of independent auditors, including a review of
management consulting services provided by the independent auditors.
RESPONSIBILITIES REGARDING THE ANNUAL AUDIT, INTERNAL AUDITS AND QUARTERLY AND
ANNUAL FINANCIAL STATEMENTS:
- At least annually, the Committee will obtain and review a report by the
independent auditors describing: the firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more
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independent audits carried out by the firm, and any steps taken to deal
with any such issues; and (to assess the auditor's independence) all
relationships between the independent auditors and the Trust.
- The Committee will strive to insure that the independent auditors provide
the Committee with a timely notification and analysis of significant
financial reporting issues.
- The Committee will have discussions with management and the independent
auditors regarding the annual report filed with the Securities and
Exchange Commission (Form 10-K) and other published documents containing
the Trust's financial statements. Each Form 10-K must be approved by the
Committee prior to filing, either at a meeting, or by a telephone
conference call in which management and the independent auditors
participate.
- The Committee will have discussions with management and the independent
auditors regarding each quarterly report filed with the Securities and
Exchange Commission (Form 10-Q). Each Form 10-Q must be approved by the
Committee prior to filing, either at a meeting, or by a telephone
conference call in which management and the independent auditors
participate.
THE COMMITTEE WILL DISCUSS THE FOLLOWING WITH THE INDEPENDENT AUDITORS:
- The planned arrangements and scope of the annual audit.
- The adequacy of the Trust's internal controls, including computerized
information systems controls and security.
- Any significant findings and recommendations made by the independent
auditors together with management's response.
- The need for the independent auditors to assess their responsibility for
detecting accounting and financial reporting errors, fraud, and
defalcations, illegal acts and noncompliance with the Trust's Code of
Business Conduct and Ethics and regulating requirements.
- The need for changes or improvements, including improvements in
efficiency, in financial or accounting practices or controls.
THE COMMITTEE WILL DISCUSS WITH MANAGEMENT AND THE INDEPENDENT AUDITORS:
- The Trust's annual financial statements and related notes and quarterly
financial statements, including all of the Trust's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
- The independent auditor's audit of and report on the financial
statements.
- The independent auditor's qualitative judgment about the quality, not
just the acceptability, of the accounting principles and financial
disclosures.
- The matters required to be discussed by Statement on Auditing Standards
No. 61, as it may be amended, including but not limited to:
- Methods used to account for significant unusual transactions.
- Effect of significant accounting policies in controversial or emerging
areas.
- Process and basis for sensitive accounting estimates.
- Disagreements between independent auditors and management over
accounting or disclosure matters.
- Any serious difficulties or disputes with management encountered during
the course of the audit. The Committee is directly responsible for the
resolution of disagreements between management and the Trust's
independent auditors regarding financial reporting.
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- The Trust's significant risks and exposures and the steps management has
taken to monitor and control such exposures, including the Trust's risk
assessment and risk management policies or guidelines, if any.
PERIODIC RESPONSIBILITIES:
- Review annually the Committee's charter for adequacy and recommend any
changes to the Board.
- Meet with the independent auditors and management in separate executive
sessions to discuss matters that should be discussed privately with the
Committee.
- Review the Committee's methodology and functions at least annually;
evaluate its performance and institute appropriate changes to improve
performance or reflect changes in the business environment.
- Prepare an annual Committee report or other proxy statement disclosure
about the Committee in accordance with rules and regulations of the
Securities and Exchange Commission and other applicable law.
- Include a copy of the Committee charter as an appendix to the proxy
statement at least once every three years.
- Review and update periodically the Trust's policies and procedures that
pertain to the Trust's financial reporting process, system of internal
controls, and compliance and ensure that management has established a
system to enforce these policies.
- Discuss with management the Trust's earnings press releases, as well as
financial information and earnings guidance provided to analysts and
rating agencies, if any.
- Perform an annual self-evaluation of its performance and compliance with
the Charter.
The Committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Trust's financial
statements. Members of the Committee rely without independent verification on
the information provided to them and the representations made to them by
management and the independent auditors, and look to management to provide full
and timely disclosure of all material facts affecting the Trust. Accordingly,
the Committee's oversight does not provide an independent basis to determine
that management has maintained appropriate accounting and financial reporting
policies, appropriate internal controls and procedures or appropriate disclosure
controls and procedures, or that the Trust's reports and information provided
under the Securities Exchange Act of 1934 are accurate and complete.
Furthermore, the Committee's consideration and discussions referred to in this
Charter do not assure that the audit of the Trust'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, that the Trust's auditors are in fact "independent", or
that the matters required to be certified by the Trust's Chief Executive Officer
("CEO"), Chief Financial Officer ("CFO") or other officers of the Trust under
the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the
Securities and Exchange Commission have been properly and accurately certified.
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ANNUAL MEETING OF SHAREHOLDERS OF
BRT REALTY TRUST
March 15, 2004
TO VOTE BY MAIL
Date, sign and mail your proxy card in the envelope provided as soon as
possible; or
TELEPHONE
Call toll-free 1-800-PROXIES from any touch tone telephone and follow the
instructions. Have your control number and the proxy card available when
you call; or
INTERNET
Access www.voteproxy.com and follow the on-screen
instructions. Have your proxy card available when you access the web page.
Please sign, date and return promptly in the enclosed envelope. Please mark
your vote in BLUE or BLACK Ink as shown here [X]
WITHHOLD
AUTHORITY
FOR THE FOR THE
NOMINEE NOMINEE
1. Election of / / / / Nominee: Louis C. Grassi
Class II
Trustee
FOR AGAINST ABSTAIN
2. Appointment of Ernst & Young / / / / / /
LLP as independent auditors
for the fiscal year ending
September 30, 2004.
3. In their discretion,the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed
hereby by the undersigned shareholder.
PLEASE RETURN USING ENCLOSED ENVELOPE
Date , 2004 Date , 2004
-------------- ----- ------------------------------ ----
SIGNATURE SIGNATURE IF HELD JOINTLY
Please sign exactly as name appears on this proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney,
trustee, or guardian, please give full title as such. If a corporation, please
sign full corporation name by duly authorized officer. If a partnership, please
sign in partnership name by authorized person(s).
BRT REALTY TRUST
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
March 15, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Simeon Brinberg and David W. Kalish as
Proxies each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Beneficial
Interest, $3.00 par value of BRT Realty Trust held of record by the undersigned
on January 20, 2004 at the Annual Meeting of Shareholders to be held on March
15, 2004 or any adjournments thereof.
(To Be Signed on Reverse Side.)