-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SxV5ahToN39MueynCWjvgh7kq7eEzD7i0AJdYqAZ8akHRkIsiRB8PIvcGh70AWDt eTEz/L3QlAp1Tbw8Bo4Szg== 0001012975-05-000096.txt : 20050331 0001012975-05-000096.hdr.sgml : 20050331 20050331151200 ACCESSION NUMBER: 0001012975-05-000096 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050331 DATE AS OF CHANGE: 20050331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC REALTY TRUST CENTRAL INDEX KEY: 0000948975 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133849655 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27198 FILM NUMBER: 05719637 BUSINESS ADDRESS: STREET 1: 747 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2123551255 MAIL ADDRESS: STREET 1: 747 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 10-K 1 e331781v4.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED December 31,2004 ------------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO -------------- ------------------- COMMISSION FILE NUMBER 0-27562 --------------------------------------- ATLANTIC REALTY TRUST - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Maryland 13-3849655 - ----------------------------------- ------------------------- State or other jurisdiction of (IRS Employer Incorporation or organization Identification No.) 747 Third Avenue, New York, NY 10017 - ----------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 212-702-8561 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Shares of Beneficial Interest, NASDAQ SmallCap Market - ------------------------------------- ---------------------- $0.01 Par Value Per Share - ------------------------------------- Securities registered pursuant to Section 12(g) of the Act: None ----------------------------------------------------------- Title of class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No[X] Aggregate market value of the Shares of Beneficial Interest held by non-affiliates of the registrant as of June 30, 2004: approximately $56,613,876. Approximately 3,561,553 Shares of Beneficial Interest of the Registrant were outstanding as of March 24, 2005. TABLE OF CONTENTS Page PART I.......................................................................1 Item 1. Business........................................................1 Item 2. Properties......................................................6 Item 3. Legal Proceedings...............................................6 Item 4. Submission of Matters to a Vote of Security Holders.............6 PART II......................................................................7 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................................ 7 Item 6. Selected Financial Data.........................................8 Item 7. Management's Discussion and Analysis of Financial Condition and Liquidation Activities......................................8 Item 7A. Quantitative and Qualitative Disclosures About Market Risk......9 Item 8. Financial Statements and Supplementary Data.....................9 Item 9. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure........................................9 Item 9A. Controls and Procedures.........................................9 Item 9B. Other Information...............................................9 PART III....................................................................11 Item 10. Directors and Executive Officers of the Registrant.............11 Item 11. Executive Compensation.........................................14 Item 12. Security Ownership of Certain Beneficial Owners and Management.....................................................16 Item 13. Certain Relationships and Related Transactions.................16 Item 14. Principal Accountant Fees and Services.........................17 PART IV.....................................................................17 Item 15. Exhibits, Financial Statement Schedules, and Reports On Form 8-K.......................................................17 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING, WITHOUT LIMITATION, THOSE STATEMENTS RELATING TO THE "RPS TRUST ISSUES" AND THE "TRUST AUDIT" DISCUSSED IN ITEM 1 OF THIS ANNUAL REPORT ON FORM 10-K, STATEMENTS SET FORTH IN THE SECTION CAPTIONED "RISK FACTORS" IN THE TRUST'S REGISTRATION STATEMENT ON FORM 10 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1996 (FILE NO. 0-27562) AND STATEMENTS IN THE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" OF THIS ANNUAL REPORT ON FORM 10-K. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE TRUST UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. PART I ITEM 1. BUSINESS. Atlantic Realty Trust, a Maryland real estate investment trust (together with its subsidiary, the "Trust"), was organized pursuant to a Declaration of Trust dated July 27, 1995 (as amended, the "Declaration of Trust"). The principal office of the Trust is located at 747 Third Avenue, New York, New York 10017. The Trust commenced operations on May 10, 1996 as a result of a spinoff (the "Spin-Off Transaction") from RPS Realty Trust ("RPS"). The Spin-Off Transaction was consummated in order to permit RPS to complete an acquisition (the "Ramco Acquisition") of assets from Ramco Gershenson, Inc. and its affiliates ("Ramco"), which permitted RPS to become an equity shopping center real estate investment trust (a "REIT"). RPS undertook the Spin-Off Transaction because Ramco was unwilling to consummate the Ramco Acquisition if the assets that were contributed by RPS to the Trust (the "Trust Assets") remained in RPS. Pursuant to the Spin-Off Transaction, the board of trustees of RPS approved a distribution of one common share of beneficial interest (the "Shares") of the Trust for every eight shares of beneficial interest of RPS (the "Distribution"). Under the provisions of its Declaration of Trust, the Trust was to continue for a period of 18 months from May 10, 1996, during which time it was to reduce to cash or cash equivalents the Trust Assets and either (i) make a liquidating distribution to its shareholders or (ii) agree to merge or combine operations with another real estate entity, in either case, as soon as practicable following the Distribution and within such 18-month period. Such 18-month period was subject to extension if (i) the Trust had not achieved its objective and the holders of at least two-thirds of the outstanding Shares approved the extension of such date or (ii) a contingent tax liability relating to RPS that has been assumed by the Trust had not been satisfactorily resolved. Because the RPS Tax Issues and the Trust Audit (each as defined below) have not yet been satisfactorily resolved, the Trust has continued its business past such 18-month period. The Trust cannot currently estimate the timing of the future satisfactory resolution of the Trust Audit. Accordingly, the Trust will continue until there is a final determination of this issue. Upon obtaining a satisfactory resolution to the Trust Audit and liquidating the Trust's remaining assets, any liquidating distribution effected by the Trust would be subject to the satisfaction of the Trust's liabilities to its creditors. In the event that at the end of this period, the Trust is unable to achieve its business objectives, the members (the "Trustees") of the Trust's board of trustees (the "Board of Trustees") will appoint an independent third party to liquidate the Trust's remaining assets. As a result of the Spin-Off Transaction, the Trust acquired the Trust Assets. The Trust Assets which have not been disposed of by the Trust are described below under "-- Description of Trust Assets." The Trust's principal investment objective is to maximize shareholder value from the reduction of the Trust Assets to cash or cash equivalents. As part of its plan to liquidate the Trust Assets to cash or cash equivalents, the Trust intends, among other things, and subject to the Internal Revenue Service's ("IRS") consideration of the appeals filed, by RPS and the Trust in connection with the examination reports issued by the IRS in connection with their audits of RPS and the Trust (as more fully described below under "-- Tax Contingency") to continue to: (i) 1 contact strategic buyers of the Trust's remaining asset (the Hylan Plaza Shopping Center, located in Staten Island, New York (the "Hylan Center")) regarding possible sales transactions and (ii) list the Hylan Center for sale with qualified real estate brokers. No assurance can be given, however, that such objective will be achieved. The Trust expects to continue to invest the net proceeds from sales of the Trust Assets in short-term or temporary investments, such as certificates of deposit, pass-through mortgage-backed certificates, mortgage participation certificates and mortgaged-backed securities (or similar investment products), all or some of which investments may be guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Unless otherwise approved by the shareholders, the Trust does not expect that it will make new permanent investments or raise additional capital. In addition, the Trust does not expect to acquire additional mortgage loans or properties. In addition, the Trust has and may continue to explore the possibility of merging or entering into a business combination with another real estate entity. The Trust expects that it will pursue such a transaction only if it represents an attractive alternative to the distribution to shareholders of the net proceeds from the orderly liquidation of the Trust Assets, as described above. The merger candidates that may be available to the Trust may be limited as a result of the amount of cash and the nature of the assets which the Trust will hold. Accordingly, there can be no assurance that the Trust will successfully merge or combine operations with another real estate entity. Because the Trust has adopted a policy not to re-invest sales proceeds in additional mortgage loans on real estate (except to the extent necessary to satisfy applicable REIT requirements), a merger or other business combination involving the Trust and another real estate entity may constitute a "roll-up transaction" under applicable securities laws. In such case, the Trust would be required to comply with the heightened disclosure rules as well as special rules relating to the proxy solicitation process and the listing of the securities of the surviving company on any exchange or the inclusion for quotation of such securities on the Nasdaq Small Cap Market. Application of the roll-up rules to a company merger or business combination could delay, defer or prevent such a transaction from occurring. See "Sale of Hylan Plaza Shopping Center" below. The Trust was organized for the purpose of qualifying as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). The Trust will elect to qualify as a REIT for the year ended December 31, 2004 and intends to operate so as to continue to qualify as a REIT. As of December 31, 2004, the Trust had six employees. DESCRIPTION OF TRUST ASSETS As of December 31, 2004, the Trust owned and operated one real property, the Hylan Center and held short-term investments in the principal amount of approximately $7,300,000, consisting primarily of a certificate of deposit at a major New York bank. REAL PROPERTY INVESTMENT THE HYLAN PLAZA SHOPPING CENTER. At December 31, 2004, the Trust held an equity investment in one property, the Hylan Center. The Hylan Center is a one-story community 2 shopping center located in Staten Island, New York which was acquired by the Trust in April, 1996. The Hylan Center contains approximately 359,000 square feet of leasable space approximately 99% of which was leased and occupied as of December 31, 2004. Major tenants (i.e., tenants who accounted for 10% or more of the leasable space as of December 31, 2004) include K-Mart Corp., a department store chain ("K-Mart"), Pathmark Stores, Inc. ("Pathmark"), and the Toys "R" Us - -- NY L.L.C., a retail toy store chain ("Toys "R" Us"). These three tenants lease approximately 104,000, 60,000 and 42,000 square feet, respectively, which constitutes 29%, 17% and 12%, respectively, of the total leasable space. The K-Mart lease expires in January 2007 and provides for annual base rental payments of approximately $235,000; the Pathmark lease expires in January 2007 and provides for annual base rental payments of approximately $579,000; and the Toys "R" Us lease expires in October 2005 and provides for annual base rental payments of approximately $90,000. The K-Mart lease contains two 5-year tenant renewal options; the Pathmark lease contains six 5-year tenant renewal options; and the Toys "R" Us lease contains one 10-year tenant renewal option. Leases for approximately 55,000 square feet are due to expire on or prior to December 31, 2005. The approximate base rental revenue as of December 31, 2003 was approximately $4,422,000. The average base rental revenue per leased square foot as of December 31, 2004 was $12.78, excluding percentage rent and similar provisions. The Trust believes the property is adequately covered by insurance. As of December 31, 2004, the estimated net realizable value of the Hylan Center was approximately $81,319,000, including estimated cash flows using a disposition period of six months. Realized values may differ depending on actual disposition results and time periods. Under various federal, state, and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In connection with the ownership, operation and management of the Hylan Center, the Trust may be potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. Certain environmental laws and common law principles could also be used to impose liability for release of an exposure to hazardous substances, including asbestos-containing materials ("ACMs") into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances, including ACMs. As the owner of the Hylan Center, the Trust may be potentially liable for any such costs. QUALIFICATION AS A REIT The Trust intends to qualify as a REIT for federal income tax purposes. If the Trust so qualifies, amounts paid by the Trust as distributions to its shareholders will not be subject to corporate income taxes. For any year in which the Trust does not meet the requirements for electing to be taxed as a REIT, it will be taxed as a corporation. The requirements for qualification as a REIT are contained in Sections 856-860 of the Code and the regulations promulgated thereunder. The following discussion is a brief summary of some of those requirements. Such requirements include certain provisions relating to the nature of a REIT's assets, the sources of its income, the ownership of its stock, and the 3 distribution of its income. Among other things, at the end of each fiscal quarter, at least 75% of the value of the total assets of the Company must consist of real estate assets (including interests in mortgage loans secured by real property and interests in other REITs, as well as cash, cash items and government securities) (the "75% Asset Test"). There are also certain limitations on the amount of other types of securities which can be held by a REIT. Additionally, at least 75% of the gross income of the Company for the taxable year must be derived from certain sources, which include "rents from real property," and interest secured by mortgages on real property. An additional 20% of the gross income of the Company must be derived from these same sources or from dividends, interest from any source, or gains from the sale or other disposition of stock or securities or any combination of the foregoing. The Trust may invest the proceeds derived from the sale or other disposition of the Trust Assets in pass-through, mortgage-backed certificates, mortgage participation certificates and mortgage-backed securities, all or some of which instruments may be guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Such instruments produce qualifying income for REIT qualification purposes and also satisfy the requirements of the 75% Asset Test. A REIT is also required to distribute at least 90% of its REIT Taxable Income (as defined in the Code) to its shareholders. TAX CONTINGENCY During the third quarter of 1994, RPS held more than 25% of the value of its gross assets in overnight Treasury Bill reverse repurchase transactions which the IRS may view as non-qualifying assets for the purposes of satisfying an asset qualification test applicable to REITs, based on a Revenue Ruling published in 1977 (the "Asset Issue"). RPS requested that the IRS enter into a closing agreement with RPS that the Asset Issue would not impact RPS' status as a REIT. The IRS declined such request. In February 1995, the IRS initiated an examination of the 1991-1995 income tax returns of RPS (the "RPS Audit" and, together with the Asset Issue, the "RPS Tax Issues"). Based on developments in the law which occurred since 1977, RPS' tax counsel at that time, Battle Fowler LLP, rendered an opinion that RPS' investment in Treasury Bill repurchase obligations would not adversely affect its REIT status. However, such opinion is not binding upon the IRS. In connection with the Spin-Off Transaction, the Trust assumed all tax liability arising out of the RPS Tax Issues (other than liability that relates to events occurring or actions taken by RPS following the date of the Spin-Off Transaction) pursuant to a tax agreement, dated May 10, 1996, by and between RPS and the Trust (the "Tax Agreement"). Such agreement provides that RPS (now named Ramco-Gershenson Properties Trust), under the direction of four trustees, three of whom are also trustees of the Trust (the "Continuing Trustees") and not the Trust, will control, conduct and effect the settlement of any tax claims against RPS relating to the RPS Tax Issues. Accordingly, the Trust did not have any control as to the timing of the resolution or disposition of any such claims. In December 2003, Ramco-Gershenson Properties Trust and the Internal Revenue Service entered into a Closing Agreement with respect to all of the issues raised by the Internal Revenue Service in connection with RPS Audit. As a condition of the Closing Agreement, Ramco-Gershenson Properties Trust was obligated to pay deficiency dividends (under Code Sec. 860) with respect to its 1992 and 1993 taxable year in amounts not less than $1,386,503 4 with respect to the 1992 taxable year and $809,010 with respect to the 1993 taxable year. In addition, Ramco-Gershenson Properties Trust is obligated to pay a deficiency in its income taxes with respect to the period covered by the RPS Audit equal to $770,258, plus interest calculated at the statutory rate on the amount of the deficiency and the amount of the deficiency dividends. The aggregate amount of the deficiency dividends, income tax deficiency and interest on these amounts is approximately $7,400,000, and because the Trust is required by the Tax Agreement to reimburse Ramco-Gershenson Properties Trust for these items, they are included in the estimated cost of liquidation as of December 31, 2003. Although the Closing Agreement provides that the election of Ramco-Gershenson Properties Trust to be taxed as a "real estate investment trust" was terminated with respect to its 1994 and 1995 taxable years, it also provides that Ramco-Gershenson Properties Trust will be treated as having reelected to be taxed as a "real estate investment trust" with respect to its taxable year beginning January 1, 1996 and that the termination of its election to be taxed as a "real estate investment trust" will not prohibit it or any successor entity (which includes the Trust) from electing to be taxed as a "real estate investment trust" on or after January 1, 1996. The Trust remains obligated under the Tax Agreement to assume certain liabilities relating to the RPS Tax Issues. The Trust established a special committee (the "Special Committee regarding RPS Tax Issues") comprised of the two Trustees who are not Continuing Trustees or otherwise affiliated with Ramco-Gershenson Properties Trust to act on behalf of the Trust in evaluating the position of the Trust with respect to the RPS Tax Issues and to represent the Trust with respect to any claims asserted by Ramco-Gershenson Properties Trust for contribution arising out of the Closing Agreement. On January 21, 2004, the Trust contributed $2,200,091 in respect of the deficiency dividend required to be paid pursuant to the Closing Agreement. On June 10, 2004 the Trust paid $1,803,235 in respect of the tax and interest on the tax pursuant to the Closing Agreement. The Trust will be obligated to make additional payments with respect to the RPS Tax Issues and the Closing Agreement as a result of its obligations under the Tax Agreement. In the event the Trust is presented with further requests or claims for payment or reimbursement arising in connection with the RPS Tax Issues and the Closing Agreement, the Special Committee regarding RPS Tax Issues will evaluate the Trust's further obligations at the time of its receipt of any such claim or request. The Trust does not however expect the amounts claimed or requested to exceed approximately $3,300,000. On February 21, 2003, the IRS issued an examination report to the Trust with respect to the 1996 and 1997 taxable years of the Trust. This examination report proposes to disallow all of the loss deductions claimed by the Trust upon the disposition of Trust Assets during that period. In addition, the examination report proposes to increase the REIT taxable income of the Trust during 1996 and 1997 on account of two items reported on the Trust's tax returns for which the Trust did not claim any taxable loss or deduction. Counsel to the Trust has advised that the examination report contains numerous errors of fact with respect to the operations of the Trust and that the legal conclusions in the examination report are not consistent with the applicable provisions of the Code and the income tax regulations. The Trust timely filed an administrative appeals (the "Trust Protest") challenging the adjustments proposed in the examination report. Apart from transferring the responsibility of the Trust's appeal of the examination report to the IRS appeals office having jurisdiction for this case, no action has yet been taken by the 5 IRS with respect to the Trust's Protest to the disallowances proposed in the examination report issued to the Trust. The outcome of the Trust Protest is uncertain and the impact of the resolution could be material to the financial statements; however, the Trust anticipates that the outcome will be favorable to the Trust. INDEMNIFICATION AGREEMENT WITH KIMCO REALTY CORPORATION On March 28, 2005, the Trust entered into an Indemnification Agreement (the "Indemnification Agreement") with Kimco Realty Corporation ("Kimco") pursuant to which the Trust has agreed to allow Kimco to conduct due diligence on the Hylan Center. The indemnification agreement is being entered into in connection with Kimco's bid to acquire the Hylan Center from the trust and further provides that commencing on March 28, 2005 and for a period of forty five (45) days thereafter, neither the Trust nor any of its representatives or agents will engage in negotiations or discussions with any party other than Kimco for the sale of the capital stock or assets of the Trust, including the sale of the Hylan Center. While the Trust and Kimco have entered into the Indemnification Agreement, the Trust has not as of the date hereof accepted Kimco's offer to purchase the Hylan Center; therefore, there is no assurance that Kimco and the Trust will enter into a definitive agreement in respect thereto. SEGMENT INFORMATION The Trust considers its business to include one industry segment, investment in real estate. ITEM 2. PROPERTIES. The Trust leases approximately 4,100 square feet of office space at 747 Third Avenue, New York, New York at an annual base rent of approximately $264,000. This lease will expire on October 31, 2005. In addition, the Trust owns and operates the Hylan Center property described under Item 1. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings other than ordinary routine litigation incidental to the business (including without limitation, foreclosure proceedings), against or involving the Trust or its properties. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Trust did not submit any matter to a vote of its shareholders during the fourth quarter of 2004. 6 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) MARKET INFORMATION The Shares of the Trust have been included for quotation on the Nasdaq SmallCap Market under the symbol ATLRS. Set forth below is the range of high and low bid prices for the shares for each of the quarters during the years ended December 31, 2004 and 2003. HIGH LOW First Quarter 2003 $11.10 $ 9.75 Second Quarter 2003 $12.61 $9.75 Third Quarter 2003 $14.00 $10.81 Fourth Quarter 2003 $16.94 $11.99 First Quarter 2004 $18.30 $15.00 Second Quarter 2004 $21.00 $15.54 Third Quarter 2004 $17.30 $16.22 Fourth Quarter 2004 $18.11 $16.55 (b) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS Approximate Number of Record Holders Title of Class (As of March 7, 2005) - -------------- --------------- Shares of beneficial interest, $.01 par value 1,980 (c) DIVIDEND INFORMATION Under the Code, a REIT must meet certain qualifications including a requirement that it distribute annually to its shareholders at least 90% of its REIT Taxable Income. The Trust has continued the cash distribution policy of the predecessor programs by making quarterly distributions to its shareholders in amounts such that annual distributions equal 100% of REIT Taxable Income, thereby complying with the distribution requirements of the federal income tax laws applicable to REITs. See "Qualification as a REIT" in Item 1 above. The Trust paid distributions of $.41, $.46 and $.62 per share for the years ended December 31, 2004, 2003 and 2002 respectively. Such distributions represent ordinary income for income tax purposes. In addition in May 2004 the Trust paid a return of capital of $3.25 per share. 7 ITEM 6. SELECTED FINANCIAL DATA. The following tables set forth certain selected historical information for the Trust. The financial information should be read in conjunction with the financial statements and notes thereto included herein.
ATLANTIC REALTY TRUST 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 -------- -------- -------- -------- -------- Statement of Net Assets In Liquidation: Total Assets $89,273,922 $67,607,443 $66,876,929 $63,286,177 $62,691,522 Total Liabilities $8,600,164 $12,547,752 $4,971,363 $5,430,048 $4,545,181 Net Assets in Liquidation $80,673,758 $55,059,691 $61,905,566 $57,856,129 $58,146,371 Statement of Changes in Net Assets in Liquidation: Increase (Decrease) Distributions (13,035,333) (1,638,314) (2,208,163) (2,706,780) (3,062,936) Paid Adjustments to Reflect Liquidation Basis of Accounting 38,649,400 (5,207,561) 6,257,600 2,416,538 3,777,618 Net Change in Net Assets in Liquidation $25,614,067 $(6,845,875) $4,049,437 $(290,242) $714,682
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND LIQUIDATION ACTIVITIES. CAPITAL RESOURCES AND LIQUIDITY -- ATLANTIC REALTY TRUST The Trust's primary objective has been to liquidate its assets in an eighteen-month period from the date of the Spin-Off Transaction while realizing the maximum values for such assets; however because the RPS Tax Issues had not been settled within such time and the Trust Audit has not been satisfactorily resolved, the Trust has continued its business beyond such period. Although the Trust considers its assumptions and estimates as to the values and timing of such liquidations to be reasonable, the period of time to liquidate the assets and distribute the proceeds of such assets is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Trust's control. There can be no assurance that the net values ultimately realized and costs actually incurred for such assets will not materially differ from the Trust's estimate. The Trust does not intend to make new loans or actively engage in either the mortgage lending or the property acquisition business. The Trust believes that cash and cash equivalents on hand, proceeds generated by the real estate property that it owns and operates (the Hylan Center) and proceeds from the eventual sale of such property will be sufficient to support the Trust and meet its obligations. As of December 31, 2004, the Trust had approximately $7,852,000 in cash and short-term investments. The Trust expects that, unless it is sold or merges with another entity, it will liquidate upon resolution of the RPS Tax Issues, the Trust Audit and any resolution of any liabilities relating thereto under the Tax Agreement. RESULTS OF OPERATIONS 8 PERIOD FROM JANUARY 1, 2002 TO DECEMBER 31, 2002, JANUARY 1, 2003 TO DECEMBER 31, 2003 AND JANUARY 1, 2004 TO DECEMBER 31, 2004. As a result of the spin-off transaction, the Trust has adopted the liquidation basis of accounting. The liquidation basis of accounting is appropriate when liquidation appears imminent and the Trust is no longer viewed as a going concern. The Trust's income or loss is included in the adjustments to reflect liquidation basis of accounting. Net income for the years ended December 31, 2004, 2003 and 2002 was approximately $1,580,000, $2,187,000 and $2,701,000 respectively. The increase in net assets in liquidation in 2004 is based on the recent re-valuation of the Hylan Center. The decrease in net assets in liquidation during 2003 is primarily due to the Trust's accrual of a liability of approximately $7,400,000 to Ramco-Gershenson Properties Trust with regard to the settlement of the RPS Tax Issues, including obligations arising from the Closing Agreement. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of December 31, 2004, the Trust has approximately $7,852,000 of cash and short term investments. The earnings from these assets are affected by changes in market interest rates over which the Trust has no control. Although changes in market interest rates may significantly affect the earnings on these assets the impact in changes in rates on the Trust's net assets in liquidation is not expected to be material. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See pages F-1 through F-9, which are included herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision of and with the participation of the Company's management, including the Company's President and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934. Based upon that evaluation, the President and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective (i) to ensure that material information relating to the Trust is communicated to them on a timely basis, and (ii) to accomplish the purposes for which they were designed. There were no material changes made in the Company's internal controls over financial reporting that occurred during the quarter ended December 31, 2003 that has materially affected, or are reasonably likely to materially affect the Trust's internal control over financial reporting. ITEM 9B. OTHER INFORMATION 9 None. 10 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The Trust has adopted a Code of Ethics that applies to the Trust's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Any person wishing to receive a copy of The Code of Ethics may request a copy by contacting the Trust and providing a name and address where such copy may be sent. The Board of Trustees is composed of six Trustees, each of whom will serve until the respective successors are elected and qualified. The Trustees and executive officers of the Trust are as follows: NAME AGE OFFICES AND POSITIONS Joel M. Pashcow* 62 Chairman and President of the Trust effective as of February 29, 1996. He has been a member of the Bar of the State of New York since 1968. Chairman of RPS from inception (December 1988) through May 1996. He is a graduate of Cornell University and the Harvard Law School. Mr. Pashcow is also a trustee of Ramco-Gershenson Properties Trust and Chairman of its Executive Committee (formerly named RPS Realty Trust). Edwin J. Glickman 72 Consultant in real estate financings. Until May, 30, 2003, Mr. Glickman had served as Executive Vice President of Capital Lease Funding Corp., a company engaged in commercial real estate lending, since January 1995. Prior to that, Mr. Glickman was President of the Glickman Organization, Inc. ("Glickman") from January 1992 to December 1994. Glickman conducted real estate investment consulting services and real estate financial services, including mortgage brokerage, arranging joint ventures and equity financing. Prior to that, Mr. Glickman was Chairman of the Executive Committee of Schoenfeld Glickman Maloy Inc. from May 1989, which is a company that conducted real estate financial services, including mortgage brokerage, arranging joint ventures and equity financing. Also served successively as Executive Vice President, President and Vice Chairman of Sybedon Corporation from 1977 to 1993, which is a company that conducted real estate financial services, including mortgage brokerage, arranging 11 NAME AGE OFFICES AND POSITIONS joint ventures and equity financing. In all positions, Mr. Glickman has been engaged in real estate financial services, including mortgage brokerage, arranging joint ventures and equity financing. Stephen R. Blank* 59 Senior Fellow, Finance of the Urban Land Institute ("ULI"). Mr. Blank is also a director of, MFA Mortgage Investments, Inc., a New York Stock Exchange-listed REIT, West Coast Hospitality Corporation, a New York Stock Exchange-listed corporation and BNP Residential Trust, Inc., an American Stock Exchange-listed REIT and a member of the Board of Advisors of Paloma LLC, the General Partner of Simpson Housing Limited Partnership. Prior to joining the ULI in December of 1998, Mr. Blank was a Managing Director, Real Estate Investment Banking of CIBC Oppenheimer Corp. ("Oppenheimer") since November 1, 1993. Prior to joining Oppenheimer, Mr. Blank was a Managing Director, Real Estate Corporate Finance, of Cushman & Wakefield, Inc. for four years. Prior to that, Mr. Blank was associated for ten years with Kidder, Peabody & Co. Incorporated as a Managing Director of the firm's Real Estate Group. Mr. Blank graduated from Syracuse University in 1967 and was awarded a Masters Degree in Business Administration (Finance Concentration) by Adelphi University in 1971. He is a member of the Urban Land Institute and the American Society of Real Estate Counselors. Mr. Blank is also a trustee of Ramco-Gershenson Properties Trust (formerly named RPS Realty Trust). Edward Blumenfeld 64 A principal of Blumenfeld Development Group, Ltd., a real estate development firm principally engaged in the development of commercial properties since 1978. Arthur H. Goldberg* 62 Managing Director of Corporation Solutions Group since January 2000. President of Manhattan Associates, LLC, a merchant and investment banking firm from February 1994 to December 1999. Prior to that, Mr. Goldberg was Chairman of Reich & Company, Inc., (formerly Vantage Services, Inc.), a securities brokerage and investment brokerage firm, from January 1990 to December 1993. Mr. Goldberg was employed by Integrated Resources, Inc. from its inception in December 1968, as President and Chief 12 NAME AGE OFFICES AND POSITIONS Operating Officer from May 1973 and as Chief Executive Officer from February 1989 until January 1990. On February 13, 1990, Integrated Resources, Inc. filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. Mr. Goldberg has been a member of the Bar of the State of New York since 1967. He is a graduate of New York University School of Commerce and its School of Law. Trustee of RPS since 1988. Mr. Goldberg is also a trustee of Ramco-Gershenson Properties Trust (formerly named RPS Realty Trust). William A. Rosoff 61 Vice-Chairman of the Board of Directors of Advanta Corporation, a financial services company, since January 1996 and President of Advanta Corporation since October 1999. Prior thereto, Mr. Rosoff was associated with the law firm of Wolf, Block, Schorr and Solis-Cohen since 1969, a partner since 1975. Mr. Rosoff is a past chairman of that firm's Executive Committee and is a past chairman of its tax department. Mr. Rosoff served on the Legal Activities Policy Board of Tax Analysts, the Advisory Board for Warren, Gorham and Lamont's Journal of Partnership Taxation, and has served on the Tax Advisory Boards of Commerce Clearing House and Little, Brown and Company. Mr. Rosoff also serves on the Advisory Group for the American Law Institute. He was a fellow of the American College of Tax Counsel. Mr. Rosoff earned a B.S. degree with honors from Temple University in 1964, and earned an L.L.B. magna cum laude from the University of Pennsylvania Law School in 1967. Edwin R. Frankel 59 Since the inception of the Trust in May 1996, Mr. Frankel has served as its Executive Vice President, Chief Financial Officer, Secretary and Principal Financial and Accounting Officer. From 1988 to 1992, Mr. Frankel served as Vice President and Chief Financial Officer of RPS and from 1992 to 1996 as Senior Vice President, Chief Financial Officer and Treasurer of RPS. - ------------------------------ * Designates status as a Continuing Trustee. 13 COMMITTEES OF THE BOARD OF TRUSTEES The Audit Committee of the Board of Trustees (the "Audit Committee"), established on October 22, 1997, consists of three Trustees, Messrs. Blumenfeld, Goldberg and Glickman. The Audit Committee meets with management and the Trust's independent accountants to determine the adequacy of internal controls and other financial reporting matters. On February 10, 2000, Mr. Glickman was appointed as a third member of the Audit Committee in order for the Trust to be in compliance with new regulations promulgated by the Securities and Exchange Commission and the NASDAQ Stock Market regarding the size, duties and responsibilities of audit committees of public companies. The Board of Trustees has determined that Mr. Glickman qualifies as an "audit committee financial expert" for purposes of Item 401(h) of SEC Regulation S-K, by virtue of his service as Vice President of Capital Lease Funding, the Glickman Organization, Inc. and as otherwise set forth in the table above. In all such positions, Mr. Glickman has been engaged in real estate financial services, including mortgage brokerage, arranging joint ventures and equity financing. The Disposition Committee of the Board of Trustees (the "Disposition Committee"), established in July 1996, consists of three Trustees, Messrs. Blumenfeld, Glickman and Blank. The Disposition Committee works with management in connection with the orderly disposition of the Trust's assets. A Special Committee of the Board of Trustees (the "Special Committee") established January 13, 2004, consists of three Trustees Messrs. Messrs. Glickman, Blank and Pashcow. The Special Committee was to consider any bona fide offer or acquisition proposal made for the Trust and to ensure that all reasonable steps are taken to maximize shareholder value while having regard to the Trust's existing contractual obligations. The Special Committee regarding RPS Tax Issues, established April 17, 2003 consists of two Trustees, Messrs. Blumenfeld and Glickman. The Special Committee regarding RPS Tax Issues is charged with the responsibility to act on behalf of the Trust in evaluating the position of the Trust with respect to the RPS Tax Issues and to represent the Trust with respect to any claims asserted by RPS for contribution arising out of the Closing Agreement. ITEM 11. EXECUTIVE COMPENSATION. EXECUTIVE OFFICERS Mr. Pashcow receives no cash compensation for serving as an executive officer of the Trust. Mr. Frankel receives compensation of approximately $196,000 per annum pursuant to an employment contract entered into between the Trust and Mr. Frankel on June 11, 1998, as more fully described below. 14 SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION NAME AND RESTRICTED SECURITIES PAYOUT PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS/SARS($) PAYOUTS($) Edwin R. Frankel* Executive Vice President,Chief 2002 175,638 15,250 13,900* Financial Officer 2003 180,907 15,250 14,400* and Secretary 2004 187,156 15,250 14,400* Stanley Rappoport 2002 124,423 2003 127,885 75,000 2004 147,440 65,000
- ---------------- *Includes approximately $1,000 in imputed interest under the Frankel Note (as defined below). The Trust had no compensation committee, however all of the Trustees participated in deliberations of the Trustees concerning executive officer compensation. On June 11, 1998, the Trust entered into an employment agreement with Mr. Frankel (the "Frankel Employment Agreement"), which provided Mr. Frankel with a base salary of $158,000 (as adjusted from time to time, the "Base Salary") per annum. The term of the Frankel Employment Agreement is from June 11, 1998 until the date of a "change of control" of the Trust (as defined in the Frankel Employment Agreement) unless earlier terminated by either Mr. Frankel or the Trust upon written notice. The Frankel Employment Agreement also provides that Mr. Frankel will be entitled to a one-time payment upon the liquidation of the Trust or a change in control of 150% of Mr. Frankel's Base Salary as in effect at such time. In addition, the Frankel Employment Agreement provides for a loan from the Trust to Mr. Frankel in the principal amount of $37,500, which loan is evidenced by a promissory note, dated June 11, 1998, made by Mr. Frankel in favor of the Trust (the "Frankel Note"). The Frankel Note will be canceled upon the occurrence of certain conditions, including a Change of Control or liquidation of the Trust. In January, 2000, the Frankel Employment Agreement was amended to additionally provide that Mr. Frankel's estate or designated beneficiary will be entitled to receive a one time payment of 150% of his Base Salary as in effect at the time of his demise. In connection with his employment with the Trust, Mr. Rappoport received a bonus plan that provided as follows: (i) for the period 1996, and ending July 31, 2003, Mr. Rappoport will receive an aggregate total $100,000, such sum to be earned on a monthly pro rata basis over that period and the first $75,000 of such earned amount was paid on September 1, 2003 with the balance of such earned amount up to an additional $25,000 shall be payable on January 1, 2004, (ii) for the period beginning August 1, 2003 and ending December 31, 2003, Mr. Rappoport will earn, to the extent he remains employed by the Trust, an aggregate of $25,000 in addition to his then current salary, such sum to be earned on a monthly pro rata basis over that period an to the extent earned, the $25,000 shall be payable the earlier of June 30, 2004 and the liquidation date 15 of the Trust; and (iii) for the period beginning January 1, 2004 and ending June 30, 2004, Mr. Rappoport will earn, to the extent he remains employed by the Trust, an aggregate total of $15,000 in addition to his then current salary, such sum to be earned on a monthly pro rata basis over that period and to the extent earned, shall be payable the earlier of June 30, 2004 or the liquidation date of the Trust. TRUSTEES The Trustees do not receive any compensation for serving as trustees and likewise will not receive any compensation for attending meetings or for serving on any committees of the Board of Trustees; however, Trustees will receive reimbursement of travel and other expenses and other out-of-pocket disbursements incurred in connection with attending any meetings. During the years ended 2004, 2003 and 2002, respectively, Messrs. Edwin Glickman and Edward Blumenfeld each earned fees of $25,000 in connection with services they provided to the Trust as Members of the Disposition Committee. On March 24, 2004, the Trust entered into a Reimbursement Agreement with Joel M. Pashcow pursuant to which the Trust agreed to reimburse Mr. Pashcow for all reasonable fees and expenses, including the reasonable fees and expenses of accountants and legal counsel, incurred in connection with any personal income tax audit to which he may become subject solely as a result of his being a member of the Board of Trustees of the Trust and a member of the Board of Trustees of Ramco-Gershenson Properties Trust. The maximum reimbursement commitment of the Trust is $50,000 per fiscal year during the term of such Reimbursement Agreement. On March 24, 2004, the Trust also entered into a Reimbursement Agreement with Arthur H. Goldberg pursuant to which the Trust agreed to reimburse Mr. Goldberg for all reasonable fees and expenses, including the reasonable fees and expenses of accountants and legal counsel, incurred in connection with any personal income tax audit to which he may become subject solely as a result of his being a member of the Board of Trustees of the Trust and a member of the Board of Trustees of Ramco-Gershenson Properties Trust. The maximum reimbursement commitment of the Trust is $50,000 per fiscal year during the term of such Reimbursement Agreement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. As of March 11, 2004, each of the following persons were known by the Trust to be the beneficial owners of more than five percent of the Shares of the Trust.
Amount and Nature of Name and Address of Beneficial Percent of Title of Class Beneficial Owner Ownership Class -------------- ---------------- --------- ----- Shares of beneficial Kensington Investment Group, Inc. 191,422(1) 5.37% interest 4 Orinda Way $.01 par value Suite 200C Orinda, CA 94563 Shares of beneficial High Rise Capital 504,088(2) 14.2% interest Management $.01 par value 535 Madison Avenue 26th Floor New York, NY 10022 Shares of beneficial Kimco Realty Corporation 1,317,787(3) 37.0% interest 3333 New Hyde Park Rd. $.01 par value New Hyde Park, NY 11042
- ------------------ (1) Based upon Schedule 13G/A filing with the Securities and Exchange Commission, filed on January 10, 2005. (2) Based upon Schedule 13G filing with the Securities and Exchange Commission, filed on February 11, 2005. (3) Based upon Schedule 13D/A filing with the Securities and Exchange Commission filed February 18, 2005. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 16 Set forth below is information as to the Shares beneficially owned as of March 18, 2005 by each of the Trustees, each of the executive officers included in the Summary Compensation Table set forth in Item 11 and all Trustees and executive officers as a group, based on information furnished by each Trustee and executive officer.
Name of Trustee/ Shares Owned Percent Of Class Executive Officer Beneficially(1) ---------------- - ------------------ --------------- Joel M. Pashcow 94,154(2) 2.64% Arthur H. Goldberg 24,487(3) * William A. Rosoff 125 * Stephen R. Blank 987(4) * Edward Blumenfeld 125 * Edwin J. Glickman 10,531 * Edwin R. Frankel 0 * All Trustees and Executive Officers as a group (7 persons) 130,409 3.66%
- --------------------- * Less than 1% of class. (1) All amounts are directly owned unless stated otherwise. (2) Includes 25,890 shares held in an IRA account for the benefit of Mr. Pashcow, a retirement savings plan, a pension and profit sharing account and a money purchase plan, 47,662 shares owned by an irrevocable trust of which Mr. Pashcow is a trustee, an irrevocable trust for his daughter and a foundation of which Mr. Pashcow is trustee (for all of which trusts Mr. Pashcow has shared voting and investment powers). Mr. Pashcow disclaims beneficial ownership of the Shares owned by the foundation and each of the trusts. (3) Includes 19,563 shares owned by Mr. Goldberg's wife, 1,875 shares owned by trusts for his daughters and 3,050 shares owned by a pension trust. Mr. Goldberg disclaims beneficial ownership of the shares owned by his wife and the trusts for his daughters. (4) Includes 712 shares owned by trusts for Mr. Blank's daughters and 275 shares held in an IRA account for the benefit of Mr. Blank. Mr. Blank disclaims beneficial ownership of the shares owned by the trusts for his daughters. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information relating to Principal Accountant Fees and Services will be contained in a definitive Proxy Statement under the caption "Principal Accountant Fees and Services" which the Registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 2004, and such information is incorporated herein by reference. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. Financial Statements, Schedules and Exhibits 17 (a)(1) Financial Statements See pages F-1 through F-9, which are included herein. (a)(2) Financial Statement Schedules All schedules have been omitted because they are inapplicable, not required, or the information is included in the financial statements or notes thereto. (a)(3) Exhibits The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as a part of this Annual Report on Form 10-K. (b) No Current Reports on Form 8-K were filed by the Company during the last quarter of the period covered by this report. 18 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE Consolidated Financial Statements -- Atlantic Realty Trust and Subsidiary (Liquidation Basis of Accounting) Report of Independent Registered Accounting Firm.............................F-2 Consolidated Statements of Net Assets in Liquidation as of December 31, 2004 and 2003..............................................F-3 Consolidated Statements of Changes in Net Assets in Liquidation for the Years Ended December 31, 2004, 2003 and 2002........................F-4 Notes to Consolidated Financial Statements................................F-5-10 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of Atlantic Realty Trust We have audited the accompanying consolidated statements of net assets in liquidation of Atlantic Realty Trust and subsidiary (the "Trust") as of December 31, 2004 and 2003, and the related consolidated statements of changes in net assets in liquidation for each of the three years in the period ended December 31, 2004. These consolidated financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1 to the consolidated financial statements, the Trust was formed for the purpose of liquidating the mortgage loan portfolio and certain other assets and liabilities which were transferred to the Trust from RPS Realty Trust on May 1, 1996 and liquidating and distributing capital to the Trust's shareholders. As a result, the Trust adopted the liquidation basis of accounting, effective May 10, 1996. In our opinion, such consolidated financial statements present fairly, in all material respects, the net assets in liquidation of Atlantic Realty Trust and subsidiary as of December 31, 2004 and 2003 and the changes in their net assets in liquidation for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America on the basis described in the preceding paragraph. As discussed in Notes 1 and 6 to the consolidated financial statements, because of the inherent uncertainty of valuation when an entity is in liquidation, the amounts ultimately realized from assets disposed and costs incurred to settle liabilities may differ materially from amounts presented in the accompanying consolidated financial statements. /s/ DELOITTE & TOUCHE LLP ------------------------ MARCH 24, 2005 ------------------------ New York, New York New York, New York F-2 ATLANTIC REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS OF ACCOUNTING) December 31, December 31, 2004 2003 ---- ---- ASSETS: Investment in real estate........ $81,319,000 $44,144,250 Cash and short-term investments.. 7,852,922 23,198,093 Other assets 102,000 265,100 ---------------- ------------- Total assets............. 89,273,922 67,607,443 ---------------- ------------- LIABILITIES: Estimated costs of liquidation... 8,600,164 12,547,752 ---------------- ------------- Net assets in liquidation........ $80,673,758 $55,059,691 ---------------- ------------- See notes to consolidated financial statements. F-3 ATLANTIC REALTY TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS OF ACCOUNTING)
FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 -------------- -------------- ------------- Net assets in liquidation, beginning of period........................... $55,059,691 $61,905,566 $57,856,129 Distributions paid (13,035,333) (1,638,314) (2,208,163) Adjustments to reflect liquidation basis of accounting................. 38,649,400 (5,207,561) 6,257,600 Net assets in liquidation, end of period....................... $80,673,758 $55,059,691 $61,905,566
See notes to consolidated financial statements. F-4 ATLANTIC REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS OF ACCOUNTING) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Atlantic Realty Trust, a Maryland real estate investment trust (the "Trust"), was formed on July 27, 1995 for the purpose of liquidating its interests in real properties, its mortgage loan portfolio and certain other assets and liabilities which were transferred to the Trust from Ramco-Gershenson Properties Trust (formerly named RPS Realty Trust) ("RPS") on May 10, 1996 (the "Spin-Off Transaction"). The Trust had no operations from the date of formation to the date of the Spin-Off Transaction. The Trust adopted the liquidation basis of accounting as of the date of the Spin-Off Transaction based on its intention to liquidate its assets or merge or combine operations with another real estate entity within eighteen months from the date of the Spin-Off Transaction. The Trust intends to conduct its operations with the intent of meeting the requirements applicable to a real estate investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, the Trust will have no current or deferred income tax liabilities. Liquidation Basis of Accounting -- As a result of the Spin-Off Transaction, the Trust has adopted the liquidation basis of accounting. The liquidation basis of accounting is appropriate when liquidation appears imminent and the Trust is no longer viewed as a going concern. Under this method of accounting, assets are stated at their estimated net realizable values and liabilities are stated at the anticipated settlement amounts. The valuations presented in the accompanying Consolidated Statements of Net Assets in Liquidation represent the estimates at the dates shown, based on current facts and circumstances, of the estimated net realizable value of the assets and estimated costs of liquidating the Trust. In determining the net realizable values of the assets, the Trust considered each asset's ability to generate future cash flows, offers to purchase received from third parties, if any, and other general market information. Such information was considered in conjunction with operating the Trust's plan for disposition of assets. The estimated costs of liquidation represent the estimated cost of operating the Trust through its anticipated termination. These costs primarily include payroll, consulting and related costs, rent, shareholder relations, legal and auditing. Changes in these costs during the periods presented are reflected in the adjustments to reflect liquidation basis of accounting. Computations of net realizable value necessitate the use of certain assumptions and estimates. Future events, including economic conditions that relate to real estate markets in general, may differ from those assumed or estimated at the time such computations are made. Because of inherent uncertainty of valuation when an entity is in liquidation, the amounts ultimately realized from assets disposed and costs incurred to settle liabilities may materially differ from amounts presented. Pursuant to the terms of the Trust's Amended and Restated Declaration of Trust, the Trust was to continue for a period of 18 months from the date of the Spin-Off Transaction, subject to, among certain other things, satisfactory resolution of the RPS Tax Issues (as such term is defined in footnote 6). Because the RPS Tax Issues have not yet been satisfactorily resolved, the Trust has continued its business past that date. The Trust cannot currently estimate F-5 ATLANTIC REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS OF ACCOUNTING) the timing of the future satisfactory resolution of the RPS Tax Issues. Accordingly, the Trust will continue until there is a final determination of these issues. CONSOLIDATION -- The consolidated financial statements include the accounts of the Trust and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. 2. INVESTMENT IN REAL ESTATE ESTIMATED NET REALIZED VALUE(a)(b) PROPERTY LOCATION DECEMBER 31, DECEMBER 31, 2004 2003 ---------------- --------------- Hylan Shopping Center Staten Island, NY $81,319,000 $44,144,250 - -------------- (a) Includes estimated cash flows using a disposition period of six months and nine months for the years ended December 31, 2004 and December 31, 2003, respectively. Realized values may differ depending on actual disposition results and time periods. (b) The operations of the Trust and the Hylan Shopping Center for the years ended December 31, 2004 and December 31, 2003 are as follows: 2004 2003 ---- ---- Rental income..................... $4,669,152 $4,579,713 Expense reimbursements............ 2,529,747 2,194,211 Interest from short-term investments 125,023 267,868 Other............................. 2,376 3,004 -------------------- --------------------- 7,326,298 7,044,796 -------------------- --------------------- Operating property expenses....... 3,118,759 2,989,906 Depreciation...................... 344,067 348,831 General and administrative........ 2,432,697 2,125,909 -------------------- --------------------- 5,895,523 5,464,646 -------------------- --------------------- Net income........................ $1,430,775 $1,580,150 3. SHARES OUTSTANDING The weighted average number of common shares outstanding for each of the periods ended December 31, 2004, 2003, and 2002 was 3,561,553. 4. CASH AND SHORT-TERM INVESTMENTS Cash and short-term investments at December 31, 2004 and 2003, consist primarily of certificates of deposit at a major New York bank of $7,300,000 and $22,500,000, respectively, purchased with original maturities of three months or less, bearing interest at a fixed rate of 1.25% and 1.09%, respectively. F-6 ATLANTIC REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS OF ACCOUNTING) 5. OTHER ASSETS Other assets include the estimated interest income from the Trust's short-term investments. 6. INCOME TAXES During the third quarter of 1994, RPS held more than 25% of the value of its gross assets in overnight Treasury Bill reverse repurchase transactions which the IRS may view as non-qualifying assets for the purposes of satisfying an asset qualification test applicable to REITs, based on a Revenue Ruling published in 1977 (the "Asset Issue"). RPS requested that the IRS enter into a closing agreement with RPS that the Asset Issue would not impact RPS' status as a REIT. The IRS declined such request. In February 1995, the IRS initiated an examination of the 1991-1995 income tax returns of RPS (the "RPS Audit" and, together with the Asset Issue, the "RPS Tax Issues"). Based on developments in the law which occurred since 1977, RPS' tax counsel at that time, Battle Fowler LLP, rendered an opinion that RPS' investment in Treasury Bill repurchase obligations would not adversely affect its REIT status. However, such opinion is not binding upon the IRS. In connection with the Spin-Off Transaction, the Trust assumed all tax liability arising out of the RPS Tax Issues (other than liability that relates to events occurring or actions taken by RPS following the date of the Spin-Off Transaction) pursuant to a tax agreement, dated May 10, 1996, by and between RPS and the Trust (the "Tax Agreement"). Such agreement provides that RPS (now named Ramco-Gershenson Properties Trust), under the direction of four trustees, three of whom are also trustees of the Trust (the "Continuing Trustees") and not the Trust, will control, conduct and effect the settlement of any tax claims against RPS relating to the RPS Tax Issues. Accordingly, the Trust did not have any control as to the timing of the resolution or disposition of any such claims. In December 2003, Ramco-Gershenson Properties Trust and the Internal Revenue Service entered into a Closing Agreement with respect to all of the issues raised by the Internal Revenue Service in connection with RPS Audit. As a condition of the Closing Agreement, Ramco-Gershenson Properties Trust was obligated to pay deficiency dividends (under Code Sec. 860) with respect to its 1992 and 1993 taxable year in amounts not less than $1,386,503 with respect to the 1992 taxable year and $809,010 with respect to the 1993 taxable year. In addition, Ramco-Gershenson Properties Trust is obligated to pay a deficiency in its income taxes with respect to the period covered by the RPS Audit equal to $770,258, plus interest calculated at the statutory rate on the amount of the deficiency and the amount of the deficiency dividends. The aggregate amount of the deficiency dividends, income tax deficiency and interest on these amounts is approximately $7,400,000, and because the Trust is required by the Tax Agreement to reimburse Ramco-Gershenson Properties Trust for these items, they are included in the estimated cost of liquidation as of December 31, 2003. Although the Closing Agreement provides that the election of Ramco-Gershenson Properties Trust to be taxed as a "real estate investment trust" was terminated with respect to its 1994 and 1995 taxable years, it also provides F-7 ATLANTIC REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS OF ACCOUNTING) that Ramco-Gershenson Properties Trust will be treated as having reelected to be taxed as a "real estate investment trust" with respect to its taxable year beginning January 1, 1996 and that the termination of its election to be taxed as a "real estate investment trust" will not prohibit it or any successor entity (which includes the Trust) from electing to be taxed as a "real estate investment trust" on or after January 1, 1996. The Trust remains obligated under the Tax Agreement to assume certain liabilities relating to the RPS Tax Issues. The Trust established a special committee (the "Special Committee regarding RPS Tax Issues") comprised of the two Trustees who are not Continuing Trustees or otherwise affiliated with Ramco-Gershenson Properties Trust to act on behalf of the Trust in evaluating the position of the Trust with respect to the RPS Tax Issues and to represent the Trust with respect to any claims asserted by Ramco-Gershenson Properties Trust for contribution arising out of the Closing Agreement. On January 21, 2004, the Trust contributed $2,200,091 in respect of the deficiency dividend required to be paid pursuant to the Closing Agreement. On June 10, 2004 the Trust paid $1,803,235 in respect of the tax and interest on the tax pursuant to the Closing Agreement. The Trust will be obligated to make additional payments with respect to the RPS Tax Issues and the Closing Agreement as a result of its obligations under the Tax Agreement. In the event the Trust is presented with further requests or claims for payment or reimbursement arising in connection with the RPS Tax Issues and the Closing Agreement, the Special Committee regarding RPS Tax Issues will evaluate the Trust's further obligations at the time of its receipt of any such claim or request. The Trust does not however expect the amounts claimed or requested to exceed approximately $3,300,000. On February 21, 2003, the IRS issued an examination report to the Trust with respect to the 1996 and 1997 taxable years of the Trust. This examination report proposes to disallow all of the loss deductions claimed by the Trust upon the disposition of Trust Assets during that period. In addition, the examination report proposes to increase the REIT taxable income of the Trust during 1996 and 1997 on account of two items reported on the Trust's tax returns for which the Trust did not claim any taxable loss or deduction. Counsel to the Trust has advised that the examination report contains numerous errors of fact with respect to the operations of the Trust and that the legal conclusions in the examination report are not consistent with the applicable provisions of the Code and the income tax regulations. The Trust timely filed an administrative appeals (the "Trust Protest") challenging the adjustments proposed in the examination report. Apart from transferring the responsibility of the Trust's appeal of the examination report to the IRS appeals office having jurisdiction for this case, no action has yet been taken by the IRS with respect to the Trust's Protest to the disallowances proposed in the examination report issued to the Trust. The outcome of the Trust Protest is uncertain and the impact of the resolution could be material to the financial statements; however, the Trust anticipates that the outcome will be favorable to the Trust. F-8 ATLANTIC REALTY TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS OF ACCOUNTING) 7. DIVIDENDS/DISTRIBUTIONS TO SHAREHOLDERS Under the Internal Revenue Code, a REIT must meet certain qualifications, including a requirement that it distribute annually to its shareholders at least 90 percent of its REIT taxable income. The Trust's policy is to distribute to shareholders all taxable income. Dividend distributions for the years ended December 31, 2003, 2002 and 2001 are summarized as follows: Record Date Distribution Payment ----------- ------------ ------- December 20, 2004 $.41 per share December 29, 2004 May 10, 2004 $3.25 per share May 20, 2004 December 18, 2003 $.46 per share December 29, 2003 December 15, 2002 $.62 per share December 27, 2002 The distributions listed in the table above represent ordinary income for income tax purposes, except for the $3.25 per share distribution which was a return of capital. 8. COMMITMENTS The Trust leases approximately 4,100 square feet of office space at 747 Third Avenue, New York, New York at an annual base rent of approximately $264,000. This lease will expire on October 31, 2005. 9. SUBSEQUENT EVENTS On March 28, 2005, the Trust entered into an Indemnification Agreement (the "Indemnification Agreement") with Kimco Realty Corporation ("Kimco") pursuant to which the Trust has agreed to allow Kimco to conduct due diligence on the Hylan Center. The indemnification agreement is being entered into in connection with Kimco's bid to acquire the Hylan Center from the trust and further provides that commencing on March 28, 2005 and for a period of forty five (45) days thereafter, neither the Trust nor any of its representatives or agents will engage in negotiations or discussions with any party other than Kimco for the sale of the capital stock or assets of the Trust, including the sale of the Hylan Center. While the Trust and Kimco have entered into the Indemnification Agreement, the Trust has not as of the date hereof accepted Kimco's offer to purchase the Hylan Center; therefore, there is no assurance that Kimco and the Trust will enter into a definitive agreement in respect thereto. F-9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of March, 2005. ATLANTIC REALTY TRUST Date: March 29th, 2005 By:/s/Joel M. Pashcow ------------------------------------------ Name: Joel M. Pashcow Title: President and Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- - --------------------- Joel M. Pashcow President and Chairman of March 29, 2005 the Board - --------------------- Executive Vice President, March 29, 2005 Edwin R. Frankel Chief Financial Officer, Secretary and Principal Financial and Accounting Officer - --------------------- Trustee March 29, 2005 Edwin J. Glickman - --------------------- Trustee March 29, 2005 Stephen R. Blank - --------------------- Trustee March 29, 2005 Edward Blumenfeld - --------------------- Trustee March 29, 2005 Arthur H. Goldberg - --------------------- William A. Rosoff Trustee March 29, 2005 EXHIBIT INDEX The following exhibits are filed as part of this Annual Report on Form 10-K. EXHIBIT NO. DESCRIPTION 3.1 Amended and Restated Declaration of Trust of the Trust (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1996, File No. 0-27562, Exhibit 3.1). 3.2 Amended and Restated By-Laws of the Trust (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1996, File No. 0-27562, Exhibit 3.2). 3.3 First Amendment to Amended and Restated Declaration of Trust of the Trust (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1996, File No. 0-27562, Exhibit 3.3). 4.1 Form of Share Certificate (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1996, File No. 0-27562, Exhibit 4.1). 10.1 Lease Agreement, dated as of January 16, 1997, by and between Sage Realty Corporation, as the lessor, and the Trust, as the lessee (Incorporated by reference to the Trust's annual report on Form 10-K for the year ended December 31, 1996, File No. 0-27562, Exhibit 10.1). 10.2 Form of Assignment, Assumption and Indemnification Agreement between RPS Realty Trust and the Trust (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1997, File No. 0-27562, Exhibit 10.1). 10.3 Form of Tax Agreement between RPS Realty Trust and the Trust (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1996, File No. 0-27562, Exhibit 10.2). 10.4 Form of Information Statement (Incorporated by reference to the Trust's definitive registration statement on Form 10, dated March 28, 1996, File No. 0-27562, Exhibit 20.1). 10.5 Employment Agreement, dated as of June 11, 1998, by and between the Trust and Edwin R. Frankel (Incorporated by reference to the Trust's quarterly report on Form 10-Q for the three months ended June 30, 1998, File No. 0-27562, Exhibit 10.1). 10.6 Amendment to Employment Agreement, dated as of January 29, 2000, by and between the Trust and Edwin R. Frankel (Incorporated by reference to the Trust's annual report on Form 10-K, for the year ended December 31, 2000, File No. 0-27562, Exhibit 10.6). 10.7 Amended and Restated Standstill Agreement, dated as of July 21, 2000, by and among Atlantic Realty Trust, on the one hand, and Kimco Realty Corporation, Kimco Realty Services, Inc. and Milton Cooper, on the other hand. 10.8 Second Amended and Restated Standstill Agreement, dated as of January 31, 2003, by and among Atlantic Realty Trust, on the one hand, and Kimco Realty Corporation, Kimco Realty Services, Inc. and Milton Cooper, on the other hand. 10.9 Standstill Agreement, dated as of January 27, 2004, by and among Atlantic Realty Trust, on the one hand, and High Rise Capital Management, L.P., High Rise Capital Advisors, L.L.C., Bridge Realty Advisors, L.L.C., Zankel Management GP, L.L.C., Cedar Bridge Realty Fund, L.P., Cedar Bridge Institutional Fund, L.P., a Delaware limited partnership Arthur Zankel and David O'Connor on the other hand. (Filed as an exhibit to Form 8-K filed January 27, 2004, File No. 0-27562.) 10.10 Reimbursement Agreement, dated as of March 24, 2004 by and between Atlantic Realty Trust and Joel M. Pashcow. 10.11 Reimbursement Agreement, dated as of March 24, 2004 by and between Atlantic Realty Trust and Arthur H. Goldberg. 10.12 Indemnification Agreement, dated as of March 28, 2005, by and between Atlantic Realty Trust and Kimco Realty Corporation. 21.1 Subsidiary of the Registrant (incorporated by reference to the Trust Annual Report on 10-K, for the year ended December 31, 1999, File No. 0-27562, Exhibit 21.1). CERTIFICATION BY EDWIN R. FRANKEL PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14 I, Edwin R. Frankel, certify that: 1. I have reviewed this annual report on Form 10-K of Atlantic Realty Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and c) disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 29, 2005 /s/Edwin R. Frankel ----------------------------------- Name: Edwin R. Frankel Title Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) CERTIFICATION BY JOEL M. PASHCOW PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14 I, Joel M. Pashcow, certify that: 1. I have reviewed this annual report on Form 10-K of Atlantic Realty Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and c) disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 29, 2005 /s/Joel M. Pashcow ----------------------------------- Name: Joel M. Pashcow Title: Chairman and President (Principal Executive Officer) Exhibit 99.1 To Atlantic Realty Trust Report on Form 10-K December 31, 2004 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Chairman and President of Atlantic Realty Trust (the "Company"), hereby certifies, to the best of my knowledge, that the Form 10-K of the Company for the fiscal year ended December 31, 2004 (the "Periodic Report") accompanying this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78(d)) and that the information contained in the Periodic Report fairly represents, in all material respects, the financial condition and results of operations of the Company. The foregoing certification is incorporated solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose. Date: March 29, 2005 /s/Joel M. Pashcow ----------------------------------- Name: Joel M. Pashcow Title: Chairman and President (Principal Executive Officer) Exhibit 99.2 To Atlantic Realty Trust Report on Form 10-K December 31, 2004 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Executive Vice President, Chief Financial Officer and Secretary of Atlantic Realty Trust (the "Company"), hereby certifies, to the best of my knowledge, that the Form 10-K of the Company for the fiscal year ended December 31, 2004 (the "Periodic Report") accompanying this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78(d)) and that the information contained in the Periodic Report fairly represents, in all material respects, the financial condition and results of operations of the Company. The foregoing certification is incorporated solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose Date: March 29, 2005 /s/Edwin R. Frankel ----------------------------------- Name: Edwin R. Frankel Title: Executive Vice President Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) EX-10.10 2 exhibit1010.txt Exhibit 10.10 REIMBURSEMENT AGREEMENT ----------------------- THIS REIMBURSEMENT AGREEMENT (the "AGREEMENT"), dated as of March 24, 2004, is between Atlantic Realty Trust, a Maryland real estate investment trust (the "TRUST"), and Joel M. Pashcow, a trustee and officer of the Trust, (the "MEMBER"). WHEREAS, the United States Internal Revenue Service (the "IRS") is in the process of auditing certain of the income tax returns of the Trust (the "TRUST AUDIT"); and WHEREAS, the Member, a trustee and officer of the Trust, was previously a trustee and officer of RPS Realty Trust ("RPS"), a predecessor-in-interest to the Trust; and WHEREAS, RPS was previously audited by the IRS (the "RPS AUDIT") in proceedings that ultimately resulted in a very favorable settlement for RPS and the Trust; and WHEREAS, several allegations have been made in the Trust Audit proceedings that were previously asserted in the RPS Audit proceedings and ultimately proved unfounded; and WHEREAS, in the event the Trust Audit does not produce the desired results the IRS examining agent is attempting to achieve or ultimately results in a favorable outcome for the Trust as was achieved in the RPS Audit, such examining agent may proceed to conduct or cause to be conducted audits of the personal taxes of each of the joint trustees and officers of RPS and the Trust, including the Member (each such audit, a "MEMBER AUDIT"); and WHEREAS, while the Member may be entitled to indemnification relating to claims, actions or proceedings against the Member solely for his actions as a trustee or officer of the Trust pursuant to the Trust's Declaration of Trust, Bylaws and/or Maryland law and is covered by director and officer insurance, he believes that this Agreement is desirable to augment such protection in light of the fact that it may be difficult or impossible to prove that the initiation of an audit of his personal taxes is directly connected to (i) his position as a trustee and officer of the Trust, (ii) the RPS Audit or (iii) the Trust Audit; and WHEREAS, the Board of Trustees of the Trust believes that the Member should be indemnified for certain expenses incurred by him in connection with any Member Audit and that in the event the Member is unable to link such audit to (i) his position as an officer and trustee of the Trust, (ii) the RPS Audit or (iii) the Trust Audit, he should still, in good faith, be entitled to compensation for his incurrence of such expenses pursuant a contractual obligation of the Trust; NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. REIMBURSEMENT; PROCEDURE FOR REIMBURSEMENT. (a) The Trust shall reimburse the Member for all reasonable fees and expenses, including, without limitation, the reasonable fees and expenses of accountants and legal counsel (collectively, "EXPENSES"), incurred in connection with any Member Audit in an amount not to exceed $50,000.00 (the "FISCAL YEAR MAXIMUM AMOUNT") for each fiscal year during the term of this Agreement. Notwithstanding anything to the contrary herein, in the event a Member Audit is conducted and it shall be proven that the Member failed to properly file such Member's taxes, the Trust shall not be required to reimburse the Member for any (i) amounts of federal, New York State or New York City income taxes found by the auditors to be delinquent, due or owing, (ii) interest associated with the failure of the Member to make the payments set forth in subsection (i) of this section on or prior to the date on which such payment was due or (iii) penalties associated with (x) the Member's failure to properly file the Member's taxes, (y) the Member's failure to make any tax payment on time or (z) otherwise incurred in connection with the foregoing subsections (i) and (ii). Notwithstanding anything to the contrary herein, Member Audits shall only include audits of any Member with respect to tax years commencing on or after January 1, 2000 and ending no later than one year following the final settlement, termination, dismissal or other conclusion of the Trust Audit (each a "TAX YEAR"). (b) The Member shall provide to the Trust a written request for reimbursement (the "REIMBURSEMENT REQUEST") and a statement setting forth the derivation of the Expenses for which the Member is requesting reimbursement (the "REIMBURSEMENT INVOICE"). Upon receipt by the Trust of the Reimbursement Request and the Reimbursement Invoice, the Trust shall reimburse the Member for all Expenses set forth in the Reimbursement Request up to the Maximum Amount, within thirty (30) days of receipt thereof; PROVIDED, HOWEVER, such Expense amounts shall not be paid to the extent such amounts are contested in good faith by the Trust ("CONTESTED AMOUNTS"). Any Contested Amounts shall be settled promptly by the Member and the Trust. For purposes of this Agreement, the "MAXIMUM AMOUNT" shall be the lesser of (i) the amount of the Reimbursement Request and (ii) an amount equal to (a) the number of years this Agreement has been in effect multiplied by (b) the Fiscal Year Maximum Amount minus (c) any amount previously paid to the Member under any previous Reimbursement Request. 2. TERM. This Agreement shall be effective as of the date first above written and shall continue in existence until the earlier of (i) three years following the filing of any tax return relating to the final Tax Year to which the Agreement is applicable, unless a Member Audit has been initiated in which case, until the final settlement, termination, dismissal or other conclusion of all Member Audits for each of the Tax Years and (ii) termination by mutual agreement of the parties hereto set forth in writing and signed by the parties hereto or their successors and assigns. 3. MODIFICATION. This Agreement may not be amended or modified except by a written instrument duly executed by the Trust and the Member. 4. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous understandings, agreements or representations by or between the parties. 5. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and the respective successors and assigns, PROVIDED HOWEVER that neither party shall be entitled to assign or delegate any of its rights or duties hereunder without first obtaining the express prior written consent of other party. 2 6. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same document. 7. HEADINGS. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 8. GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the state of New York, without regard to conflict of laws principles. [Signature Page Follows] 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. ATLANTIC REALTY TRUST By: /S/ EDWIN R. FRANKEL ----------------------------------- Name: Edwin R. Frankel Title: Executive Vice President Chief Financial Officer JOEL M. PASHCOW /S/ JOEL M. PASHCOW ----------------------------------------- EX-10.11 3 e263946v4.txt Exhibit 10.11 REIMBURSEMENT AGREEMENT ----------------------- THIS REIMBURSEMENT AGREEMENT (the "Agreement"), dated as of March 24, 2004, is between Atlantic Realty Trust, a Maryland real estate investment trust (the "Trust"), and Arthur H. Goldberg, a trustee of the Trust, (the "Member"). WHEREAS, the United States Internal Revenue Service (the "IRS") is in the process of auditing certain of the income tax returns of the Trust (the "Trust Audit"); and WHEREAS, the Member, a trustee of the Trust, was previously a trustee and/or officer of RPS Realty Trust ("RPS"), a predecessor-in-interest to the Trust; and WHEREAS, RPS was previously audited by the IRS (the "RPS Audit") in proceedings that ultimately resulted in a very favorable settlement for RPS and the Trust; and WHEREAS, several allegations have been made in the Trust Audit proceedings that were previously asserted in the RPS Audit proceedings and ultimately proved unfounded; and WHEREAS, in the event the Trust Audit does not produce the desired results the IRS examining agent is attempting to achieve or ultimately results in a favorable outcome for the Trust as was achieved in the RPS Audit, such examining agent may proceed to conduct or cause to be conducted audits of the personal taxes of each of the joint trustees and/or officers of RPS and the Trust, including the Member (each such audit, a "Member Audit"); and WHEREAS, while the Member may be entitled to indemnification relating to claims, actions or proceedings against the Member solely for his actions as a trustee of the Trust pursuant to the Trust's Declaration of Trust, Bylaws and/or Maryland law and is covered by director and officer insurance, he believes that this Agreement is desirable to augment such protection in light of the fact that it may be difficult or impossible to prove that the initiation of an audit of his personal taxes is directly connected to (i) his position as a trustee of the Trust, (ii) the RPS Audit or (iii) the Trust Audit; and WHEREAS, the Board of Trustees of the Trust believes that the Member should be indemnified for certain expenses incurred by him in connection with any Member Audit and that in the event the Member is unable to link such audit to (i) his position as an trustee of the Trust, (ii) the RPS Audit or (iii) the Trust Audit, he should still, in good faith, be entitled to compensation for his incurrence of such expenses pursuant a contractual obligation of the Trust; NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Reimbursement; Procedure for Reimbursement. (a) The Trust shall reimburse the Member for all reasonable fees and expenses, including, without limitation, the reasonable fees and expenses of accountants and legal counsel (collectively, "Expenses"), incurred in connection with any Member Audit in an amount not to exceed $50,000 (the "Fiscal Year Maximum Amount") for each fiscal year during the term of this Agreement. Notwithstanding anything to the contrary herein, in the event a Member Audit is conducted and it shall be proven that the Member failed to properly file such Member's taxes, the Trust shall not be required to reimburse the Member for any (i) amounts of federal, New York State or New York City income taxes found by the auditors to be delinquent, due or owing, (ii) interest associated with the failure of the Member to make the payments set forth in subsection (i) of this section on or prior to the date on which such payment was due or (iii) penalties associated with (x) the Member's failure to properly file the Member's taxes, (y) the Member's failure to make any tax payment on time or (z) otherwise incurred in connection with the foregoing subsections (i) and (ii). Notwithstanding anything to the contrary herein, Member Audits shall only include audits of any Member with respect to tax years commencing on or after January 1, 2000 and ending no later than one year following the final settlement, termination, dismissal or other conclusion of the Trust Audit (each a "Tax Year"). (b) The Member shall provide to the Trust a written request for reimbursement (the "Reimbursement Request") and a statement setting forth the derivation of the Expenses for which the Member is requesting reimbursement (the "Reimbursement Invoice"). Upon receipt by the Trust of the Reimbursement Request and the Reimbursement Invoice, the Trust shall reimburse the Member for all Expenses set forth in the Reimbursement Request up to the Maximum Amount, within thirty (30) days of receipt thereof; provided, however, such Expense amounts shall not be paid to the extent such amounts are contested in good faith by the Trust ("Contested Amounts"). Any Contested Amounts shall be settled promptly by the Member and the Trust. For purposes of this Agreement, the "Maximum Amount" shall be the lesser of (i) the amount of the Reimbursement Request and (ii) an amount equal to (a) the number of years this Agreement has been in effect multiplied by (b) the Fiscal Year Maximum Amount minus (c) any amount previously paid to the Member under any previous Reimbursement Request. 2. Term. This Agreement shall be effective as of the date first above written and shall continue in existence until the earlier of (i) three years following the filing of any tax return relating to the final Tax Year to which the Agreement is applicable, unless a Member Audit has been initiated in which case, until the final settlement, termination, dismissal or other conclusion of all Member Audits for each of the Tax Years and (ii) termination by mutual agreement of the parties hereto set forth in writing and signed by the parties hereto or their successors and assigns. 3. Modification. This Agreement may not be amended or modified except by a written instrument duly executed by the Trust and the Member. 4. Entire Agreement. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous understandings, agreements or representations by or between the parties. 5. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and the respective successors and assigns, provided however that neither party shall be entitled to assign or delegate any of its rights or duties hereunder without first obtaining the express prior written consent of other party. 2 6. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same document. 7. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 8. Governing Law. This Agreement shall be governed by and construed under the laws of the state of New York, without regard to conflict of laws principles. [Signature Page Follows] 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. ATLANTIC REALTY TRUST By: /s/ Edwin R. Frankel ----------------------- Name: Edwin R. Frankel Title: Executive Vice President Chief Financial Officer ARTHUR H. GOLDBERG /s/ Arthur H. Goldberg ---------------------- EX-10.12 4 acquisitionhylanave.txt EXECUTION COPY -------------- INDEMNIFICATION AGREEMENT ------------------------- THIS INDEMNIFICATION AGREEMENT (this "AGREEMENT") is entered into as of the 28th day of March 2005, by and among Atlantic Realty Trust ("Seller") and Kimco Realty Corporation ("Buyer"). RECITALS A. Buyer and Seller have entered into exclusive good faith negotiations of a Purchase and Sale Agreement ("Purchase and Sale Agreement"), in connection with that certain property commonly known as Hylan Plaza Shopping Center located in Staten Island, New York (collectively with the land and improvements thereon, the "Property"). B. Buyer desires to conduct the Property Diligence (as defined below) on the terms and conditions provided herein. C. Seller is willing to permit Buyer to do the Property Diligence on the terms and conditions provided herein. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: AGREEMENT PROPERTY DILIGENCE. Seller hereby agrees to permit Buyer and its representatives to enter onto the Property to conduct due diligence on the Property including, without limitation, inspecting and performing tests upon the Property (including, without limitation, environmental, including "Phase II" environmental testing, structural, engineering and other tests) (collectively, the "Property Diligence"). Buyer shall be exclusively responsible for all of its and its representative's costs and fees associated with its investigation and review of the Property. Buyer shall conduct and shall cause its representatives to conduct any inspections and reviews in a commercially reasonable, prudent and professional manner and in compliance with all applicable laws. A representative of Seller may, at its option, be present during any inspections or reviews of the property. Buyer agrees to repair promptly any damage or disturbance Buyer or its representatives shall cause to the Property. Nothing in this Agreement shall preclude Buyer or its representatives from complying with any express legal obligation to report environmental violations or other circumstances existing at the Property to any governmental authority (to the extent that Buyer can prove that such an obligation exists) and such compliance alone shall not be the basis for any liability to Buyer hereunder. BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify, defend and hold Seller harmless from any and all claims, damages, costs and liability resulting directly from Buyer or its representatives conducting the Property Diligence in a manner that does not comply with the requirements of Section 1 above, except to the extent the same is caused by Seller's gross negligence or willful misconduct; provided, that in no event shall Buyer be liable for consequential, punitive, or special damages. Buyer shall exercise commercially reasonable efforts to minimize disruption to the tenants of the Property in connection with the Property Diligence and Buyer's or its representative's activities. No consent by Seller to any such activity shall be deemed to constitute a waiver by Seller or the assumption of liability or risk by Seller. NO LIENS CREATED BY BUYER. Buyer shall not permit any mechanic's or materialman's liens or any other liens to attach to the Property by reason of the performance of the Property Diligence or the purchase of any materials by Buyer or Buyer's representatives in connection with the Property Diligence. CONFIDENTIALITY. Buyer agrees to treat any information concerning the Property furnished by the Seller or obtained by the Buyer in the course of its diligence activities pursuant to Section 1 (the "Confidential Material") strictly confidential. Except as required by law, neither Buyer nor any of it employees, officers, directors, agents, advisors or representatives ("Representatives") shall disclose any Confidential Material to any other person. The term "Confidential Material" does not include information which (i) is already in Buyer's possession, provided that such information is not subject to another confidentiality agreement with or other obligation of secrecy to the Seller, (ii) becomes generally available to the public other than as a result of a disclosure, directly or indirectly, by Buyer or its Representatives, or (iii) becomes available to Buyer on a non-confidential basis from a source other than the Seller or its Representatives, provided that such source is not bound by a confidentiality agreement with or other obligation of secrecy to the Seller. NOTICES. All notices, demands, requests and other communications required pursuant to the provisions of this Agreement ("Notice") shall be in writing and shall be delivered to the addresses set forth on the signature pages hereto. EXCLUSIVE NEGOTIATIONS. During the period commencing on the date hereof and ending forty five days after the date hereof (such period, the "Exclusivity Period"), Seller will not, directly or through its officers, directors, employees, affiliates, brokers, investment bankers, attorneys and other agents and representatives (collectively, "Representatives"), solicit, encourage, engage in negotiations or discussions with, or furnish any confidential information or data to, any third party (other than Buyer) relating to a potential or actual proposal to acquire any of the capital stock or assets of the Seller, including the Property (an "Acquisition Proposal") and will cease and instruct its Representatives to immediately cease any such activities. Seller will promptly provide Buyer with any written Acquisition Proposals, and promptly inform Buyer of the material terms of any oral Acquisition Proposals, received by Seller or its Representatives during the Exclusivity Period. BINDING EFFECT; NO OBLIGATION. This Agreement shall be binding upon and inure to the benefit of Seller and Buyer, and their respective heirs, personal representatives, successors and permitted assigns. Neither the execution of this Agreement nor any of the terms or conditions set forth herein shall create any obligation for Buyer to do any or all of the Property Diligence. Unless and until a definitive agreement between Seller and Buyer concerning the purchase and sale of the Property, Buyer will not be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this or any written or oral expression with respect to such a transaction by any of its directors, officers, employees, agents or any other representatives or its advisors, and has no obligation to continue to pursue such a transaction. -2- GOVERNING LAW AND VENUE. The laws of the state of New York shall govern the validity, construction, enforcement, and interpretation of this Agreement with respect to the Property, except for the conflict of law provisions thereof which would result in the application of the laws of another jurisdiction. All claims, disputes and other matters in question with respect to the Property arising out of or relating to this Agreement, or the breach thereof, shall be decided by proceedings instituted and litigated in a state or federal court for the district in which the Property is situated, and the parties hereto expressly consent to the venue and jurisdiction of such court. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number of identical counterparts. If so executed, each of such counterparts is to be deemed an original for all purposes and all such counterparts shall, collectively, constitute one Agreement. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterparts. CONSTRUCTION. No provision of this Agreement shall be construed in favor of, or against, any particular party by reason of any presumption with respect to the drafting of this Agreement; both parties, being represented by counsel, having fully participated in the negotiation of this instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] -3- NOW WHEREFORE, the parties hereto have executed this Agreement as of the date first set forth above. SELLER: ------- ATLANTIC REALTY TRUST By: /s/ Edwin R. Frankel -------------------- Name: Edwin R. Frankel Title: Chief Financial Officer Address for notices: Atlantic Realty Trust 747 3rd Avenue New York, New York 10017 Attention: Joel Pashcow With a copy to (which shall not consti- tute notice): Proskauer Rose LLP 1585 Broadway New York, New York 10036-8200 Attention: Peter M. Fass, Esq. [Signature Page to Indemnification Agreement] BUYER: ----- KIMCO REALTY CORPORATION By: /s/ Bruce M. Kauderer ---------------------- Name: BRUCE M. KAUDERER Title: VICE PRESIDENT Address for notices: Kimco Realty Corporation 3333 New Hyde Park Road New Hyde Park, New York 11042-0020 Attention: General Counsel With a copy to (which shall not consti- tute notice): Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, NY 10019 Attention: Adam O. Emmerich, Esq. [Signature Page to Indemnification Agreement] -----END PRIVACY-ENHANCED MESSAGE-----