SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 1-7172
BRT REALTY TRUST
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(Exact name of registrant as specified in its charter)
Massachusetts 13-2755856
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Cutter Mill Road, Great Neck, NY 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 466-3100
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
7,165,263 Shares of Beneficial Interest,
$3 par value, outstanding on February 10, 2000
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
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Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts In Thousands)
December 31, September 30,
1999 1999
(Unaudited) (Audited)
ASSETS
Real estate loans - Note 3:
Earning interest $ 43,739 $ 44,682
Not earning interest 2,835 -
Less allowance for possible losses 1,381 1,381
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45,193 43,301
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Real estate assets:
Foreclosed properties held for sale 3,048 3,057
Investment in real estate venture 4,072 3,708
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7,120 6,765
Less valuation allowance 349 349
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6,771 6,416
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Cash and cash equivalents 26,888 28,757
Securities available-for-sale at market 4,714 -
Due from venture - 4,620
Other assets 1,260 1,515
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Total Assets $ 84,826 $ 84,609
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable - Credit facility $ 210 $ 331
Loans and mortgages payable - 841
Accounts payable and accrued liabilities,
including deposits of $1,178 and $1,465 2,069 2,813
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Total Liabilities 2,279 3,985
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Shareholders' Equity - Note 2:
Preferred shares, $1 par value:
Authorized 10,000 shares, none issued - -
Shares of beneficial interest, $3 par value:
Authorized number of shares - unlimited,
issued - 8,888 shares at each date 26,665 26,665
Additional paid-in capital, net of
distributions of $5,171 81,521 81,521
Accumulated other comprehensive income - net
unrealized gain on available-for-sale securities 96 -
Accumulated deficit (10,855) (12,682)
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97,427 95,504
Cost of 1,723 treasury shares of
beneficial interest at each date (14,880) (14,880)
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Total Shareholders' Equity 82,547 80,624
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Total Liabilities and Shareholders' Equity $ 84,826 $ 84,609
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See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND ACCUMULATED DEFICIT
(Unaudited)
(In Thousands except for Per Share Data)
Three Months Ended
December 31,
1999 1998
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Revenues:
Interest and fees on real estate loans $ 1,521 $ 2,099
Operating income on real estate owned 188 939
Income from joint ventures 114 -
Other, primarily investment income 502 155
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Total Revenues 2,325 3,193
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Expenses:
Interest-notes payable and loans payable 22 144
Advisor's fee 132 154
General and administrative 817 686
Other taxes 35 -
Operating expenses relating to real estate
owned including interest on mortgages
of $15 and $155 127 617
Amortization and depreciation 97 85
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Total Expenses 1,230 1,686
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Income before gain on sale of real estate
loans and foreclosed properties and
available-for-sale securities 1,095 1,507
Net gain on sale of real estate loans and
foreclosed properties held for sale 732 986
Net realized gain on available-for-sale securities - 433
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Net Income $ 1,827 $ 2,926
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Income per share of Beneficial Interest:
Basic and diluted earnings per share $ .25 $ .41
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See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Amounts In Thousands)
Accumulated
Shares of Additional Other Accum-
Beneficial Paid-In Comprehensive ulated Treasury
Interest Capital Income Deficit Shares Total
-------- ------- ------ ------- ------ -----
Balances, September 30, 1999 $26,665 $81,521 $ - $(12,682) $(14,880) $80,624
Net income - - - 1,827 - 1,827
Other comprehensive income -
net unrealized gain on
available-for-sale securities - - 96 - - 96
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Comprehensive income - - - - - 1,923
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Balances, December 31, 1999 $26,665 $81,521 $ 96 $(10,855) $(14,880) $82,547
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See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
December 31,
1999 1998
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Cash flow from operating activities:
Net income $ 1,827 $ 2,926
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 97 85
Gain on sale of real estate and foreclosed properties (732) (986)
Gain on sale of available-for-sale securities - (433)
Equity in earnings of unconsolidated entities (114) -
Increase in interest and dividends receivable (10) (6)
Increase in prepaid expenses (3) (37)
(Decrease) Increase in accounts payable
and accrued liabilities (465) 102
Increase (Decrease) in deferred revenues 46 (53)
(Decrease) Increase in escrow deposits (272) 55
Increase in deferred costs (14) (34)
Decrease in receivable from venture partner 4,620 -
Net change in other assets 215 668
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Net cash provided by operating activities 5,195 2,287
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Cash flows from investing activities:
Collections from real estate loans 5,926 9,787
Additions to real estate loans (7,818) (11,612)
Net costs capitalized to real estate owned (104) (162)
Proceeds from sale of real estate owned 814 607
Decrease in deposits payable (52) (93)
Purchase of marketable securities (4,618) -
Sales of marketable securities - 1,124
Capital contributions to unconsolidated entities (250) -
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Net cash used in investing activities (6,102) (349)
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Cash flow from financing activities:
Payoff/paydown of loan and mortgages payable (841) (217)
Repayment of note payable - credit facility (121) -
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Net cash used in financing activities (962) (217)
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Net (decrease) increase in cash and cash equivalents (1,869) 1,721
Cash and cash equivalents at beginning of period 28,757 13,949
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Cash and cash equivalents at end of period $ 26,888 $ 15,670
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $ 29 $ 314
========= =========
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements as of
December 31, 1999 and for the three months ended December 31, 1999 and 1998
reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair statement of the results for such interim
periods. The results of operations for the three months ended December 31, 1999
are not necessarily indicative of the results for the full year.
Certain items on the consolidated financial statements for the preceding periods
have been reclassified to conform with the current consolidated financial
statements.
The consolidated financial statements include the accounts of BRT Realty Trust,
its wholly owned subsidiaries, and its majority-owned or controlled real estate
entities. Investments in less than majority-owned entities have been accounted
for using the equity method. Material intercompany items and transactions have
been eliminated. BRT Realty Trust and its subsidiaries are hereinafter referred
to as "BRT" or the "Trust".
These statements should be read in conjunction with the consolidated financial
statements and related notes which are included in BRT's Annual Report on Form
10-K for the year ended September 30, 1999.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates.
Note 2 - Shareholders' Equity
Per Share Data
Basic earnings per share were determined by dividing net income for the period
by the weighted average number of shares of common stock outstanding during each
period which was 7,165,263 for both the three month periods ended December 31,
1999 and 1998. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of BRT. For the three months ended
December 31, 1999 and 1998 diluted earnings per share was determined by dividing
net income for the period by the total of the weighted average number of shares
of common stock outstanding plus the dilutive effect of the BRT's outstanding
options using the treasury stock method which aggregated 7,249,712 and
7,178,668, respectively.
Note 3 - Real Estate Loans
If all loans classified as non-earning were earning interest at their
contractual rates for the three months ended December 31, 1999, interest income
would have increased by approximately $39,000. During the three month period
ended December 31, 1998 there were no non-interest earning loans.
Note 4 - Comprehensive Income
Statement No. 130 establishes standards for reporting comprehensive income and
its components in a full set of general-purpose financial statements and
requires that all components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. During the three months ended December 31, 1999 and December 31,
1998, accumulated other comprehensive income, which is solely composed of the
net unrealized gain on available-for-sale securities, increased to $96,000 from
$0 and increased $71,000 from $769,000 to $840,000, respectively.
Note 5 - Segment Reporting
Effective October 1, 1998, the Trust adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related Information. Statement 131 superseded FASB
Statement No. 14 Financial Reporting for Segments of a Business Enterprise.
Statement No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. Statement No. 131 also
establishes standards for related disclosures about products and services,
geographical areas, and major customers. The adoption of Statement No. 131 did
not affect results of operations or financial position. As the Trust operates
predominantly in one industry segment, it has determined that it has one
reportable segment and operates primarily in one geographic location. Management
believes it is in compliance with the standards established by Statement No.
131.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
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BRT engages in the business of originating and holding for investment senior
real estate mortgages, secured by income producing property and to a lesser
extent junior real estate mortgage loans secured by income producing property
and senior mortgage loans secured by unimproved real property. Its investment
policy emphasizes short-term mortgage loans. Repayments of real estate loans in
the amount of $32,551,000 are due during the twelve months ending December 31,
2000, including $1,324,000 due on demand. The availability of mortgage financing
secured by real property and the market for selling real estate is cyclical.
Accordingly, BRT cannot project the portion of loans maturing during the next
twelve months which will be paid or the portion of loans which will be extended
for a fixed term or on a month to month basis.
On May 18, 1999 BRT entered into a $45,000,000 revolving credit facility with
TransAmerica Business Credit Corporation ("TransAmerica"). The TransAmerica
agreement is a revolving facility, which can be used for specific business
purposes, the primary of which is lending. Borrowings under the facility are
secured by specific receivables of BRT and its subsidiary, BRT Funding and the
agreement provides that the amount borrowed will not exceed 80% of the value of
the collateral. The revolving credit agreement sets forth certain parameters
with respect to acceptable and unacceptable collateral. As of December 31, 1999
BRT had acceptable collateral which would permit BRT to borrow up to $11,600,000
under the facility. Interest is charged on the outstanding balance at prime plus
1/2% or under certain circumstances at LIBOR + 3 1/4%. The interest rate at
December 31, 1999 was 9.00%. Unused line fees are calculated at 1/8% on the
difference between $45,000,000 (the maximum principal debt) and the average
amount outstanding. The facility matures on May 17, 2002. The outstanding
balance at February 10, 2000 was $116,000.
During the three months ended December 31, 1999, the Trust generated cash of
$814,000 from the sale of real estate owned, $5,926,000 from collections from
real estate loans and $4,620,000 from the payment of a receivable due from a
venture partner. These funds in addition to cash on hand, were used primarily to
fund real estate loan originations of $7,818,000, to paydown a mortgage payable
of $841,000 to purchase securities of $4,618,000 and to paydown the credit
facility by $121,000. BRT's cash and cash equivalents were $26,888,000 at
December 31, 1999.
The Trust will satisfy its liquidity needs from cash and liquid investments on
hand, the credit facility with TransAmerica, interest received on outstanding
real estate loans and net cash flow generated from the operation and sale of
real estate assets.
Results of Operations
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Interest and fees on real estate loans decreased by $578,000 to $1,521,000 for
the three months ended December 31, 1999 as compared to $2,099,000 for the
corresponding period in 1998. The decrease was primarily due to a lower average
balance of earning real estate loans and the payoff in full in the prior year
quarter (principal and interest) of a loan that was previously deemed
uncollectible. Real estate loan originations decreased in the latter part of
1999 primarily because of increased competition in the major market served by
the Trust.
Operating income on real estate owned decreased by $751,000 to $188,000 for the
three months ended December 31, 1999 as compared to $939,000 for the
corresponding period in 1998. The decrease is primarily due to reduced rental
income resulting from the contribution in September 1999 of an office property
to an LLC. BRT retained a 50% interest in this property and now accounts for
this property using the equity method of accounting.
Income from joint ventures increased from $0 in the three months ended December
31, 1998 to $114,000 for the three months ended December 31, 1999. This increase
is primarily the result of the recognition of income from BRT's 50% interest in
a joint venture.
Other revenues, primarily investment income increased by $347,000 to $502,000
for the three months ended December 31, 1999, as compared to $155,000 for the
corresponding period in 1998. The increase is the result of increased interest
on higher average balances of cash and short-term government securities and
dividends on available-for-sale securities.
Interest expense on notes and loans payable decreased by $122,000 to $22,000 for
the three months ended December 31, 1999 as compared to $144,000 for the
corresponding period in 1998. The decrease was due to a lower average
outstanding balance under the credit facility with TransAmerica and a decrease
in mortgages payable.
The Advisor's fee decreased by $22,000 to $132,000 for the three-month period
ended December 31, 1999 as compared to $154,000 for the corresponding period in
1998. The decrease was the result of a decrease in total invested assets,
primarily real estate loans and real estate assets, the basis on which the fee
is calculated.
General and administrative expenses increased by $131,000 to $817,000 for the
three months ended December 31, 1999 as compared to $686,000 for the
corresponding period in 1998. The increase was, primarily rent and costs
associated with the Trust's expanded marketing efforts in order to generate new
business and increased legal fees during the current quarter.
Operating expenses relating to real estate assets decreased by $490,000 to
$127,000 for the three months ended December 31, 1999 as compared to $617,000
for the corresponding period in 1998. The decrease was primarily the result of
the contribution of a significant property to an LLC in September 1999. BRT
retained a 50% interest in the LLC and now accounts for this investment under
the equity method of accounting.
Gain on sale of real foreclosed properties and available-for-sale investments
was $732,000 for the three months ended December 31, 1999 as compared to
$1,419,000 for the comparable period in 1998. In the prior year quarter BRT
recorded gains on the sale of securities of $433,000. There were no comparable
sales this quarter. It is the policy of BRT to offer for sale foreclosed
property at prices that management believes represent fair value.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
On October 13, 1999 BRT filed an 8-K reporting the termination, by mutual
agreement, on October 6, 1999 of a non binding Letter of Intent to acquire a
controlling interest in Reliance Bank, an independent bank located in
Westchester County.
On November 1, 1999 BRT filed an 8-K reporting the entering into an agreement on
October 15, 1999, effective September 1, 1999, by a subsidiary of BRT with a
subsidiary of KIMCO Realty Corporation to form a joint venture to own, operate
and develop a corporate mall and retail center located in Dover, Delaware.
SIGNATURES
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 thereunto duly authorized.
BRT REALTY TRUST
Registrant
February 10, 2000 /s/ Jeffrey Gould
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Date Jeffrey Gould, President
February 10, 2000 /s/ George Zweier
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Date George Zweier, Vice President
and Chief Financial Officer