The 39-year-old Miami-based company has advised shareholders it must redeem a certain number of its outstanding shares of common stock to retain its classification as a REIT under the Internal Revenue Code.
In a shareholder's report, the company attributed the action to a specific provision under the federal code that prohibits the ownership of more than 50% of value of the outstanding shares, and other securities convertible to such shares, by five or fewer individuals over the last half of the taxable year.
The REIT declared 1,019,135 common shares outstanding as of May 14, according to the shareholder's report. All five of the company's directors and executive officers, as a group on that date, claimed ownership to 58% of the total shares outstanding.
Jay Hyde, senior director of communications for the National Association of Real Estate Investment Trusts, tells GlobeSt.com. the situation is rare.
"I'm told this is a very unusual occurrence," says Hyde after consulting with one of the trade association's tax specialists. "To his (the specialist's) recollection, it's happened once over the past decade."
Speaking through an unidentified assistant, Lawrence Rothstein, HMG/Courtland president, declined a request from GlobeSt.com for comment.
The disclosure follows the company's ranking as the best performing REIT in the U.S. during 2000 on a total return basis, Hyde says. The REIT posted an increase of 90.33% on total return, which is calculated as stock price appreciation or depreciation plus any dividends.
On June 25, HMG/Courtland shareholders vote on whether to approve the redemption by amending and restating the company's certificate of incorporation as a means to control the concentration of stock ownership.
The redemption price would be paid at the prevailing market rate, the company advised. Shares in the REIT closed unchanged Thursday at $7.05 on no volume on the American Stock Exchange. Over the past 52 weeks, shares have traded as high as $9.75 and as low as $5.87.
Reporting total assets of $31.6 million for the year ended Dec. 31, the company owns hotels, private clubs, retail sites and marine-yacht slips. Through the subsidiary Courtland Investments Inc., the REIT owns an interest in the exclusive Grove Isle Club & Resort, a 50-room hotel and private club on a seven-acre private island just off the Miami community of Coconut Grove.
The company last reported a net gain of $836,306, or 77 cents a share, on total revenue of $1 million for the three months ended March 31, compared with a net gain of $1.4 million, or $1.29 per diluted share, on total revenue of $2.3 million for the same period in 2000.
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