Shareholders of Mortgage Investors of Washington voted yesterday to give up the firm's status as a tax-exempt real estate investment trust (REIT).
The vote does not require the trustees of Mortgage Investors to "de-REIT," but it gives them the authority to do so, said Peyton B. Fletcher, president.
The trustees - the equivalent of a board of directors in a corporate organization - had sought that power, saying it would provide greater flexibility in managing the troubled company.
Almost 42 per cent of Mortgage Investors assets are in nonearning investments, totaling 136 million. Another $7 million in loans and properties are classed as only partially earnings, the proxy statement for the meeting showed.
Becoming a conventional real estate investment company would improve the company's bargaining position with its creditors, Fletcher said. The 19 banks with which the company does business have agreed tentatively to grant another extension on loans, he said.
Dropping its status as a REIT will mean the company is no longer bound by federal REIT rules requiring that 90 per cent of profits be paid to shareholders. But as a real estate investment company, profits will subject to federal taxes.
The company lost $4,590,000 in fiscal year 1977 and $924,000 the previous year and has had no profits to give to shareholders. It would have a tax loss of about $2 million to apply to any earnings, Fletcher noted.
Fletcher cautioned that restrictions placed on the company by its banks in exchange for extending the repayment date of loans probably will prohibit or limit any dividene to stockholders.
In its latest quarterly report, for the three months ended JQUNE /, Mortgage Investors showed a profit of $226,814, its first earnings in eight quarters.
The president and restrictions in the federal law estaglishing REITs preclude the company from takiing an active role in managing properties. Without the restrictions of an REIT, the company could become active in property management and depelopment, "areas in which our trustees have considerable experience,'" Fletcher said.
The decision to "de-REIT" was mootilvated by conviction that "REITs are dead" he noted. Because many real estate investment trusts have failed, banks and other lenders are unwilling to provide funds, and investors will no longer buy shares, making it impossible to raise capital.
The fundamental change in the company's structure drew little comment from the 75 persons who attended the meeting. A year earlier some 300 angry shareholders filled two meeting rooms and bombarded the management with criticism.
Several shareholders yesterday objected to some of the nominees for trustees, but they were elected over-whelmingly.
Two shareholders, complained that no shares of the trust are owned by either trustee Calrence Kettler, presiddnet of Kettler Bros., Inc., a builder and property manager or by Leonard Silverstein, on attorney.
Q "If they aren't willing to put their money in, they can't be worth very much to the company," one woman complained.
Another stockholder charged that serving as a trustee was a conflict of interest ftr James H. Lemon Jr., president of Johnston, Lemoon & Co.