UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 4, 2012
BRT REALTY TRUST
(Exact name of Registrant as specified in charter)
| Massachusetts | 001-07172 | 13-2755856 | ||
(State or other jurisdiction of incorporation) | (Commission file No.) | (IRS Employer I.D. No.) |
| 60 Cutter Mill Road, Suite 303, Great Neck, New York | 11021 | |
| (Address of principal executive offices) | (Zip code) |
Registrant's telephone number, including area code 516-466-3100
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note
On October 10, 2012, we filed a Current Report on Form 8-K (the “Current Report”) disclosing that we entered into a joint venture and the purchase by the venture of a 208 unit multi-family residential property (the “Property”) located in North Charleston, South Carolina for a net purchase price of $21.5 million, of which $17.7 million was financed with mortgage debt.
We are filing this amendment to the Current Report to include under (i) Item 9.01(a), audited statements of revenues and certain expenses of the Property and (ii) Item 9.01(b), our unaudited pro forma financial statements reflecting the acquisition of the Property.
Item 9.01 Financial Statements and Exhibits.
| (a) | Financial Statements of Businesses Acquired. | Page | |
| (i) | Independent Auditors’ Report | 1 | |
| (ii) | Statements of Revenues and Certain Expenses for the year ended December 31, 2011 and the six months ended June 30, 2012 | 2 | |
| (iii) | Notes to Statements of Revenues and Certain Expenses | 3 | |
| (b) | Unaudited Pro Forma Consolidated Financial Statements. | ||
| (i) | Pro Forma Consolidated Balance Sheet as of June 30, 2012 | ||
| (ii) | Pro Forma consolidated Statements of Income: | 5 | |
| For the nine months ended June 30, 2012 | |||
| For the year ended September 30, 2011 | |||
| (iii) | Notes to Pro Forma Consolidated Financial Statements | 8 | |
| (c) | Exhibits | ||
| Exhibit No. | Title of Exhibit | ||
| 23.1 | Consent of BDO USA, LLP dated November 27, 2012 |
Independent Auditors’ Report
To the Board of Trustees and Stockholders of
BRT Realty Trust and Subsidiaries
We have audited the accompanying statement of revenues and certain expenses of 8439 Dorchester Road (“Silvana Oaks Apartments”) for the year ended December 31, 2011. The statement of revenues and certain expenses is the responsibility of the BRT Realty Trust’s management. Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes 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 Silvana Oaks Apartments’ 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 statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a Form 8-K/A of BRT Realty Trust. As described in Note 2, material amounts that would not be comparable to those resulting from the proposed future operations of Silvana Oaks Apartments are excluded from the statement of revenues and certain expenses and the statement of revenues and certain expenses is not intended to be a complete presentation of Silvana Oaks Apartments’ revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Silvana Oaks Apartments for the year ended December 31, 2011, on the basis of accounting described in Note 2.
/s/BDO USA, LLP
New York, New York
November 27, 2012
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8439 Dorchester Road
Statements of Revenues and Certain Expenses
Six Months Ended June 30, 2012 (unaudited) | Year Ended December 31, 2011 | |||||||
| Revenues: | ||||||||
Rental and other income | $ | 1,160,000 | $ | 2,238,000 | ||||
| Certain Expenses: | ||||||||
Real estate taxes | 146,000 | 198,000 | ||||||
Management fees | 46,000 | 90,000 | ||||||
Utilities | 61,000 | 116,000 | ||||||
Payroll | 89,000 | 179,000 | ||||||
Other real estate operating expenses | 90,000 | 260,000 | ||||||
| Total certain expenses | 432,000 | 843,000 | ||||||
| Revenues in excess of certain expenses | $ | 728,000 | $ | 1,395,000 | ||||
See Independent Auditors report and accompanying notes.
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8439 Dorchester Road
Notes to Statements of Revenues and Certain Expenses
1. Organization
8439 Dorchester Road (“Silvana Oaks Apartments”) is a 208 unit multi-family garden apartment complex located in North Charleston, South Carolina.
BRT Realty Trust and subsidiaries (collectively, the “Trust”) is a real estate investment trust. The Trust originates and holds for investment senior mortgage loans secured by commercial and multi-family real estate properties and participates as an equity investor in joint ventures which acquire multi-family residential or other real estate assets.
On October 4, 2012, a consolidated joint venture comprised of TRB Silvana LLC, the Trust’s wholly owned subsidiary and an unaffiliated joint venture partner, acquired Silvana Oaks Apartments for a net purchase price of $21.5 million, including $17.7 million of mortgage debt.
2. Basis of Presentation and Significant Accounting Policies
The accompanying statements of revenues and certain expenses of Silvana Oaks Apartments have been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for inclusion in the Trust’s Current Report on Form 8-K/A. Accordingly, the statements of revenues and certain expenses exclude certain expenses that may not be comparable to those expected to be incurred in the future operations of the aforementioned property. Items excluded consist of interest expense, depreciation, amortization, corporate expenses, and other costs not directly related to future operations.
In assessing Silvana Oak Apartments, the Trust considered the sources of revenue including, but not limited to, competitive factors present in the local market for residential rentals, the demographics of the area, the overall credit quality of the tenants and the local economic conditions and outlook. We also considered Silvana Oaks Apartments' expenses including, but not limited to, utility costs, tax rates and maintenance expenses.
Use of Estimates
The preparation of the statements of revenues and certain expenses in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the statements of revenues and certain expenses and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Rental revenue is recognized on an accrual basis. Generally leases are for a one year term and have no renewal options.
Income Taxes
Silvana Oaks Apartments was organized as a limited liability company and is not directly subject to federal and state income taxes.
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BRT REALTY TRUST
Pro Forma Consolidated Financial Statements
(Unaudited)
On October 4, 2012, a consolidated joint venture composed of TRB Silvana LLC, a wholly owned subsidiary of the Trust, and an unaffiliated joint venture partner, acquired Silvana Oaks Apartments, a 208 unit, multi-family garden apartment complex located in North Charleston, South Carolina. The net purchase price was $21.5 million and included $17.7 million of mortgage debt.
On June 20, 2012, a consolidated joint venture comprised of TRB Schilling LLC, a wholly owned subsidiary of the Trust and an unaffiliated joint venture partner, acquired Madison at Schilling Farms, a 325-unit, multi-family garden apartment complex located in Collierville, Tennessee. The net purchase price was $32.1 million and included $25.7 million of mortgage debt.
On March 22, 2012, a consolidated joint venture comprised of TRB Union Palm, LLC, a wholly owned subsidiary of the Trust, and an unaffiliated joint venture partner, acquired Union Square, a 542-unit, multi-family garden apartment complex located in Palm Beach Gardens, Florida. The net purchase price was $59.4 million and included $45.2 million of mortgage debt.
The following unaudited pro forma consolidated balance sheet of the Trust as of June 30, 2012, has been prepared as if the acquisitions had been completed on June 30, 2012. The unaudited pro forma consolidated statements of income for the year ended September 30, 2011 are presented as if the acquisitions had been completed on October 1, 2010. The unaudited pro forma consolidated statements of income for the nine months ended June 30, 2012 are presented as if the acquisition had been completed on October 1, 2011.
The pro forma statement of income for the nine months ended June 30, 2012 has been adjusted to reflect the income and expense items of Union Square that have been reported in the Trust historical column as the property was purchased in March 2012.
These pro forma consolidated financial statements are presented for informational purposes only and should be read in conjunction with (a) the Trust’s 2011 Annual Report on Form 10-K and (b) the Trust’s Quarterly Report on Form 10-Q for the nine months ended June 30, 2012.
The unaudited pro forma consolidated financial statements are based on assumptions and estimates considered appropriate by the Trust’s management; however, such statements do not purport to represent what the Trust’s financial position and results of operations would have been assuming the completion of the acquisition on October 1, 2010, nor do they purport to project the Trust’s financial position and results of operations at any future date or for any future period.
In the opinion of the Trust’s management, all adjustments necessary to reflect the effects of the transactions described above have been included in the pro forma consolidated financial statements.
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BRT REALTY TRUST AND SUBSIDIARIES
PRO FORMA - CONSOLIDATED BALANCE SHEET
As of June 30, 2012 (Unaudited)
(Amounts in thousands, except per share data)
The Trust Historical | Purchase of Silvana Oaks Apartments | The Trust Pro Forma As Adjusted | ||||||||||
| ASSETS | ||||||||||||
| Real estate loans, all earning interest | $ | 65,780 | - | $ | 65,780 | |||||||
| Deferred fee income | (927 | ) | - | (927 | ) | |||||||
| 64,853 | - | 64,853 | ||||||||||
| Real estate properties, net of accumulated depreciation of $3,940 | 166,786 | $ | 21,500 | 188,286 | ||||||||
| Investment in unconsolidated ventures | 3,914 | - | 3,914 | |||||||||
| Cash and cash equivalents | 42,969 | (4,160 | ) | 38,809 | ||||||||
| Restricted cash – construction holdbacks | 30,276 | - | 30,276 | |||||||||
| Available-for-sale securities at market | 1,849 | - | 1,849 | |||||||||
| Deferred costs | 9,055 | 233 | 9,288 | |||||||||
| Other assets | 10,051 | 948 | 10,999 | |||||||||
| Total Assets | $ | 329,753 | $ | 18,521 | $ | 348,274 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Liabilities: | ||||||||||||
| Mortgages payable | $ | 125,702 | $ | 17,716 | $ | 143,418 | ||||||
| Junior subordinated notes | 37,400 | - | 37,400 | |||||||||
| Accounts payable and accrued liabilities | 2,868 | 315 | 3,183 | |||||||||
| Deposits payable | 2,724 | - | 2,724 | |||||||||
| Deferred income | 16,080 | - | 16,080 | |||||||||
| Total Liabilities | 184,774 | 18,031 | 202,805 | |||||||||
| Commitments and contingencies | - | - | - | |||||||||
| Equity: | ||||||||||||
| BRT Realty Trust shareholders’ equity: | ||||||||||||
| Preferred shares, $1 par value: | ||||||||||||
| Authorized 10,000 shares, none issued | - | - | - | |||||||||
| Shares of beneficial interest, $3 par value: | ||||||||||||
| Authorized number of shares, unlimited, 13,924 issued | 41,772 | - | 41,772 | |||||||||
| Additional paid-in capital | 167,227 | - | 167,227 | |||||||||
| Accumulated other comprehensive income—net unrealized gain on available-for-sale securities | 436 | - | 436 | |||||||||
| Accumulated deficit | (74,311 | ) | - | (74,311 | ) | |||||||
| Cost of 451 treasury shares of beneficial interest | (3,505 | ) | - | (3,505 | ) | |||||||
| Total BRT Realty Trust shareholders’ equity | 131,619 | 131,619 | ||||||||||
| Non-controlling interests | 13,360 | 490 | 13,850 | |||||||||
| Total Equity | 144,979 | 490 | 145,469 | |||||||||
| Total Liabilities and Equity | $ | 329,753 | $ | 18,521 | $ | 348,274 | ||||||
See accompanying notes to the unaudited pro forma consolidated financial statements
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BRT REALTY TRUST AND SUBSIDIARIES
PRO FORMA - CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended June 30, 2012
(Unaudited)
(Amounts in thousands, except share data)
The Trust Historical | Purchase of Union Square and Madison at Shilling Farms | Purchase of Silvana Oaks Apartments | The Trust Pro Forma As Adjusted | |||||||||||||
| Revenues: | ||||||||||||||||
| Interest on real estate loans | $ | 5,628 | - | - | $ | 5,628 | ||||||||||
| Loan fee income | 1,388 | - | - | 1,388 | ||||||||||||
| Rental revenue from real estate properties | 4,455 | $ | 8,960 | $ | 1,841 | 15,256 | ||||||||||
| Recovery of previously provided allowances | 19 | - | - | 19 | ||||||||||||
| Other, primarily investment income | 906 | - | - | 906 | ||||||||||||
| Total revenues | 12,396 | 8,960 | 1,841 | 23,197 | ||||||||||||
| Expenses: | ||||||||||||||||
| Interest on borrowed funds | 2,758 | 2,349 | (a) | 523 | (e) | 5,630 | ||||||||||
| Advisor’s fees, related party | 777 | 361 | (b) | 76 | (b) | 1,214 | ||||||||||
| Property acquisition costs | 2,264 | - | - | 2,264 | ||||||||||||
| General and administrative—including $481 to related party | 5,414 | - | - | 5,414 | ||||||||||||
| Operating expenses relating to real estate properties | 3,478 | 3,897 | 746 | 8,121 | ||||||||||||
| Amortization and depreciation | 1,441 | 2,054 | (c) | 497 | (c) | 3,992 | ||||||||||
| Total expenses | 16,132 | 8,661 | 1,842 | 26,635 | ||||||||||||
| Total revenues less total expenses | (3,736 | ) | 299 | (1 | ) | (3,438 | ) | |||||||||
| Equity in loss of unconsolidated ventures | (95 | ) | - | - | (95 | ) | ||||||||||
| Gain on sale of available-for-sale securities | 420 | - | - | 420 | ||||||||||||
| Gain on sale of loan | 3,192 | - | - | 3,192 | ||||||||||||
| Income (loss) from continuing operations | (219 | ) | 299 | (1 | ) | 79 | ||||||||||
| Discontinued operations: | ||||||||||||||||
| Gain on sale of real estate assets | 792 | - | - | 792 | ||||||||||||
| Net income | 573 | 299 | (1 | ) | 871 | |||||||||||
| Plus: net loss (income) attributable to non controlling interests | 2,131 | (132 | )(d) | (8 | )(f) | 1,991 | ||||||||||
| Net income attributable to common shareholders | $ | 2,704 | $ | 167 | $ | (9 | ) | $ | 2,862 | |||||||
| Basic and diluted per share amounts attributable to common shareholders: | ||||||||||||||||
| Income from continuing operations | $ | .13 | $ | .02 | $ | - | $ | .15 | ||||||||
| Discontinued operations | .06 | - | - | .06 | ||||||||||||
| Basic and diluted income per share | $ | .19 | $ | .02 | $ | - | $ | .21 | ||||||||
| Amounts attributable to BRT Realty Trust: | ||||||||||||||||
| Income from continuing operations | $ | 1,912 | $ | 167 | $ | (9 | ) | $ | 2,070 | |||||||
| Discontinued operations | 792 | - | - | 792 | ||||||||||||
| Net income | $ | 2,704 | $ | 167 | $ | (9 | ) | $ | 2,862 | |||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 14,029,364 | 14,029,364 | 14,029,364 | 14,029,364 | ||||||||||||
See accompanying notes to the unaudited pro forma consolidated financial statements
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BRT REALTY TRUST AND SUBSIDIARIES
PRO FORMA - CONSOLIDATED STATEMENT OF INCOME
For The Year Ended September 30, 2011
(Dollars in thousands, except share data)
The Trust Historical (Audited) | Purchase of Union Square and Madison at Schilling Farms (Unaudited) | Purchase of Silvana Oaks Apartments (Unaudited) | The Trust Pro Forma as Adjusted | |||||||||||||
| Revenues: | ||||||||||||||||
| Interest on real estate loans an purchase money mortgage | $ | 8,500 | - | - | $ | 8,500 | ||||||||||
| Loan fee income | 1,828 | - | - | 1,828 | ||||||||||||
| Rental revenue from real estate properties | 3,456 | $ | 10,307 | $ | 2,455 | 16,218 | ||||||||||
| Recovery of previously provided allowances | 3,595 | - | - | 3,595 | ||||||||||||
| Other, primarily investment income | 502 | - | - | 502 | ||||||||||||
| Total revenues | 17,881 | 10,307 | 2,455 | 30,643 | ||||||||||||
| Expenses: | ||||||||||||||||
| Interest on borrowed funds | 2,112 | 2,725 | (a) | 697 | (e) | 5,534 | ||||||||||
| Advisor’s fees, related party | 916 | 549 | (b) | 118 | (b) | 1,583 | ||||||||||
| Foreclosure related professional fees | 579 | - | 579 | |||||||||||||
| General and administrative—including $847 to related party | 6,149 | - | 6,149 | |||||||||||||
| Operating expenses relating to real estate properties | 3,340 | 4,626 | 995 | 8,961 | ||||||||||||
| Amortization and depreciation | 738 | 2,764 | (c) | 663 | (c) | 4,165 | ||||||||||
| Total expenses | 13,834 | 10,664 | 2,473 | 26,971 | ||||||||||||
| Total revenues less total expenses | 4,047 | (357 | ) | (18 | ) | 3,672 | ||||||||||
| Equity in earnings of unconsolidated ventures | 350 | - | - | 350 | ||||||||||||
| Gain on sale of available-for-sale securities | 1,319 | - | - | 1,319 | ||||||||||||
| Loss on extinguishment of debt | (2,138 | ) | - | - | (2,138 | ) | ||||||||||
| Income (loss) from continuing operations | 3,578 | (357 | ) | (18 | ) | 3,203 | ||||||||||
| Discontinued operations: | ||||||||||||||||
| Gain on sale of real estate assets | 1,346 | - | - | 1,346 | ||||||||||||
| Net income (loss) | 4,924 | (357 | ) | (18 | ) | 4,549 | ||||||||||
| Plus: net loss (income) attributable to non controlling interests | 1,450 | (38 | )(d) | (10 | )(f) | 1,402 | ||||||||||
| Net income (loss) attributable to common shareholders | $ | 6,374 | $ | (395 | ) | $ | (28 | ) | $ | 5,951 | ||||||
| Basic and diluted per share amounts attributable to common shareholders: | ||||||||||||||||
| Income (loss) from continuing operations | $ | .35 | $ | (.03 | ) | $ | - | $ | . 32 | |||||||
| Discontinued operations | .10 | - | - | .10 | ||||||||||||
| Basic and diluted income (loss) per share | $ | .45 | $ | (.03 | ) | $ | - | $ | .42 | |||||||
| Amounts attributable to BRT Realty Trust: | ||||||||||||||||
| Income (loss) from continuing operations | $ | 5,028 | $ | (395 | ) | $ | (28 | ) | $ | 4,605 | ||||||
| Discontinued operations | 1,346 | - | - | 1,346 | ||||||||||||
| Net income (loss) | $ | 6,374 | $ | (395 | ) | $ | (28 | ) | $ | 5,951 | ||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 14,041,509 | 14,041,509 | 14,041,509 | 14,041,509 | ||||||||||||
See accompanying notes to the unaudited pro forma consolidated financial statements.
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BRT REALTY TRUST AND SUBSIDIARIES
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
Basis of Pro Forma Presentation
| 1. | The consolidated financial statements include the consolidated accounts of the Trust and its investments in limited liability companies in which the Trust is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”). Investments in entities for which the Trust has the ability to exercise significant influence but does not have financial or operating control, are accounted for under the equity method of accounting. Accordingly, the Trust’s share of the net earnings (or losses) of entities accounted for under the equity method are included in consolidated net income under the caption Equity in Earnings (Losses) of Unconsolidated Ventures. Investments in entities for which the Trust does not have the ability to exercise any influence are accounted for under the cost method of accounting. |
In March 2012, the Trust, entered into a joint venture, and the joint venture acquired 4205 Union Square Blvd. (“Union Square”) for $59.4 million, funded with cash and a mortgage loan in the amount of $45.2 million.
In June 2012 the Trust, entered into a joint venture, and the joint venture acquired 160 Madison Farms Lane (“Madison at Schilling Farms”) for $32.1 million, funded with cash and a mortgage loan in the amount of $25.7 million.
In October 2012, the Trust entered into a joint venture and the venture acquired 8439 Dorchester Road (“Silvana Oaks Apartments”) for $21.5 million, funded with cash and mortgage debt of $17.7 million.
| 2. | Notes to the pro forma consolidated statements of income for both the nine months ended June 30, 2012 and the year ended September 30, 2011. |
| a) | To reflect the interest expense resulting from the mortgages securing Union Square and Madison at Schilling Farms properties. Interest expense is calculated using an interest rate of 3.72% and 3.91%, respectively, and also includes amortization of loan related fees. |
| b) | To reflect the advisory fee to be paid by the Trust pursuant the Amended and Restated Advisory Agreement, as amended. |
| c) | To reflect depreciation on the estimated useful life of 30 years of the building and the estimated useful life of 10 years for the furniture and fixtures. |
| d) | To reflect the non-controlling interest share of income from these properties for its 20% equity interest in these joint ventures. |
| e) | To reflect the interest expense resulting from the mortgage that is securing Silvana Oaks Apartments. Interest expense is calculated using an interest rate of 3.79% and also includes amortization of loan fees. |
| f) | To reflect the non-controlling interest share of income from the property for its 10% equity interest in the joint venture. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BRT REALTY TRUST | |
November 27, 2012 Great Neck, NY | By: /s/ George Zweier George Zweier Vice President and Chief Financial Officer |
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