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 March 31, 2000
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
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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 May 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 except for Per Share Data)
March 31, September 30,
2000 1999
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(Unaudited) (Audited)
ASSETS
Real estate loans - Note 3:
Earning interest $ 39,540 $ 44,682
Not earning interest 2,835 -
Less allowance for possible losses 1,381 1,381
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40,994 43,301
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Real estate assets:
Foreclosed properties held for sale 3,013 3,057
Investment in unconsolidated entities 4,231 3,708
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7,244 6,765
Less valuation allowance 349 349
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6,895 6,416
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Cash and cash equivalents 19,285 28,757
Securities available-for-sale at market - Note 4 18,203 -
Due from venture - 4,620
Other assets 1,549 1,515
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Total Assets $ 86,926 $ 84,609
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable - Credit facility $ 128 $ 331
Loans and mortgages payable - 841
Accounts payable and accrued liabilities,
including deposits of $1,411 and $1,465 2,185 2,813
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Total Liabilities 2,313 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 187 -
Accumulated deficit (8,880) (12,682)
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99,493 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 84,613 80,624
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Total Liabilities and Shareholders' Equity $ 86,926 $ 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)
(Amounts in Thousands except for Per Share Data)
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Interest and fees on real estate loans $ 1,462 $ 1,927 $ 2,983 $ 4,026
Operating income on real estate owned 230 913 418 1,852
Equity in earnings in unconsolidated entities 159 - 273 -
Other, primarily investment income 928 162 1,430 317
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Total Revenues 2,779 3,002 5,104 6,195
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Expenses:
Interest-notes payable and loans payable 18 135 40 279
Advisor's fee 140 162 272 316
General and administrative 879 873 1,696 1,559
Other taxes 46 - 81 -
Operating expenses relating to real estate
owned including interest on mortgages
of $-0- and $172 for the three-month periods 78 564 205 1,181
and $15 and $327 for the six-month periods,
respectively
Amortization and depreciation 97 83 194 168
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Total Expenses 1,258 1,817 2,488 3,503
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Income before gain on sale of real estate
loans and foreclosed properties and
available-for-sale securities 1,521 1,185 2,616 2,692
Net gain on payoff of real estate loans - - - 900
Net gain on sale of foreclosed properties held
for sale 360 791 1,092 877
Net realized gain on sale of available-for
- -sale securities 94 207 94 640
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Net Income $ 1,975 $ 2,183 $ 3,802 $ 5,109
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Income per share of Beneficial Interest:
Basic earnings per share $ .28 $ .30 $ .53 $ .71
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Diluted earnings per share $ .27 $ .30 $ .52 $ .71
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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 - - - 3,802 - 3,802
Other comprehensive income -
net unrealized gain on
available-for-sale securities - - 187 - - 187
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Comprehensive income - - - - - 3,989
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Balances, March 31, 2000 $26,665 $81,521 $ 187 $(8,880) $(14,880) $84,613
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See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
Six Months Ended
March 31,
2000 1999
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Cash flow from operating activities:
Net income $ 3,802 $ 5,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 194 168
Net gain on payoff of real estate loans - (900)
Net gain on sale of foreclosed properties held for sale (1,092) (877)
Net gain on sale of available-for-sale securities (94) (640)
Equity in earnings of unconsolidated entities (273) -
Increase in interest and dividends receivable (413) (73)
Decrease in prepaid expenses 24 18
(Decrease) Increase in accounts payable
and accrued liabilities (704) 284
Increase in deferred revenues 72 21
(Decrease) Increase in escrow deposits (79) 321
Increase in deferred costs (18) (108)
Decrease in due from venture 4,620 -
Net change in other assets 245 623
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Net cash provided by operating activities 6,284 3,946
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Cash flows from investing activities:
Collections from real estate loans 23,724 11,762
Additions to real estate loans (21,416) (17,450)
Net costs capitalized to real estate owned (162) (203)
Proceeds from sale of real estate owned 1,230 1,913
Increase (Decrease) in deposits payable 84 (187)
Purchase of marketable securities (18,899) -
Sales of marketable securities 977 2,089
Capital contributions to unconsolidated entities (250) -
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Net cash used in investing activities (14,712) (2,076)
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Cash flow from financing activities:
Payoff/paydown of loan and mortgages payable (841) (439)
Repayment of note payable - credit facility (203) -
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Net cash used in financing activities (1,044) (439)
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Net (decrease) increase in cash and cash equivalents (9,472) 1,431
Cash and cash equivalents at beginning of period 28,757 13,949
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Cash and cash equivalents at end of period $ 19,285 $ 15,380
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $ 68 $ 616
======== ========
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of and for the Three and Six Months ended March 31, 2000 and 1999
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements as of March
31, 2000 and for the three and six months ended March 31, 2000 and 1999 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 and six months ended March 31, 2000 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 which the trust does
not control but has the ability to exercise significant influence over its
operating and financial policies 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 and six month periods ended March
31, 2000 and 1999. Diluted earnings per share reflects the potential dilution
that could occur if 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 and six months ended March 31, 2000 and
1999 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 BRT's outstanding options using the
treasury stock method, which aggregated 7,253,541 and 7,251,627 and 7,202,494
and 7,188,374, respectively.
Note 3 - Real Estate Loans
If all loans classified as not-earning were earning interest at their
contractual rates for the three and six months ended March 31, 2000, interest
income would have increased by approximately $59,000 and $98,000, respectively.
During the three and six month period ended March 31, 1999 there were no
non-interest earning loans.
Note 4 - Available-For-Sale Securities
On March 13, 2000 BRT filed a Schedule 13D reporting that it had acquired
939,600 or approximately 6.27%, of the common shares of Entertainment Properties
Trust, a real estate investment trust that specializes in the acquisition and
ownership of entertainment related properties. These shares were purchased at an
aggregate cost of $12,603,000. The funds used to make these purchases came from
BRT's working capital.
On March 20, 2000 BRT filed an amendment to the Schedule 13D reporting that it
had increased its holdings of Entertainment Properties Trust to 1,125,400
shares, or approximately 7.51%, of the common shares outstanding. As of March
31, 2000 BRT holds 1,225,000 shares of Entertainment Properties Trust
representing 8.17% of the common shares outstanding. These shares, acquired as
an investment, have a cost basis of $16,080,000 and a market value as of March
31,2000 of $16,155,000.
Note 5 - 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 and six months ended March 31, 2000, accumulated
other comprehensive income, which is solely composed of the net unrealized gain
on available-for-sale securities, increased $91,000 to $187,000 from $96,000 and
increased $187,000 from $-0- to $187,000, respectively. During the three and six
months ended March 31, 1999 comprehensive income decreased $616,000 from
$840,000 to $224,000 and decreased $545,000 from $769,000 to $224,000,
respectively.
Note 6 - 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 No. 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 the 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 $23,824,000 are due during the twelve months ending March 31,
2001, including $6,302,000 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.
BRT has invested a portion of its available cash in securities of other real
estate investment trusts. The Management and Board of Trustees of BRT decided to
make these investments because in their opinion (i) many publicly traded real
estate investment trusts are significantly undervalued, (ii) the yields on real
estate investment trusts is significantly greater than yields on other
investments without a substantial increase in risk, and (iii) investments in
real estate investment trusts are qualifying investments for REIT qualification
purposes. At March 31, 2000 BRT had invested $18,016,000 in the securities of
other real estate investment trusts (of which $16,078,000 is represented by
shares of Entertainment Properties Trust) representing approximately 21% of
total assets.
On May 18, 1999 BRT entered into a 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 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 March 31, 2000 BRT had provided collateral to Transamerica
which would permit BRT to borrow up to $2,800,000 of a total potential
availability of $45,000,000 under this 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 March 31, 2000 was 9.50%. 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 May 10, 2000 was $133,000.
During the six months ended March 31, 2000, the Trust generated cash of
$1,230,000 from the sale of real estate owned, $23,724,000 from collections from
real estate loans and $4,620,000 from the payment of a receivable due from a
venture. These funds, in addition to cash on hand, were used primarily to fund
real estate loan originations of $21,416,000, to paydown a mortgage payable of
$841,000, to purchase securities at a cost of $18,899,000 and to paydown the
credit facility by $203,000. BRT's cash and cash equivalents were $19,285,000 at
March 31, 2000.
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, net cash flow generated from the operation and sale of real
estate assets and cash distributions from investments in the securities of other
real estate investment trusts.
Results of Operations
- ---------------------
Interest on real estate loans decreased by $465,000 to $1,462,000 for the three
month period ended March 31, 2000, as compared to $ 1,927,000 for the
corresponding period in 1999. A decrease in the average balance of loans
outstanding in the current quarter of approximately $7,400,000 resulted in a
reduction of interest and fee income of $291,000. In the three month period
ended March 31, 1999 BRT recognized income of $170,000 from the payoff of a loan
previously deemed uncollectable. There was no comparable income item in the
quarter ended March 31, 2000. In addition, interest income declined by $110,000,
as a result of the sale of loan participations in the amount of $7,859,000 in
the second half of the prior fiscal year. During the current quarter a non
accruing loan caused a decrease in interest income of $60,000. These decreases
were partially offset by increased commitment and extension fees of $108,000
recognized during the quarter from the early payoff of loans and from a $58,000
increase due to an increase in interest rates.
For the six months ended March 31, 2000 interest and fees on loans declined
$1,043,000 to $2,983,000 from $4,026,000. A decline in the average balance of
loans outstanding of approximately $5,500,000 caused interest and fee income to
decline by $465,000. Interest income also declined by $240,000 as a result of
loan participations sold in the second half of the prior year. The prior year
also contained interest income of $470,000 from the payoff in full of two loans
previously deemed uncollectable. There was no comparable income item in the six
months ended March 31, 2000. In the current fiscal year a loan with a balance of
$2,835,000 was placed on non accrual status, further reducing interest income by
$98,000. These declines were partially offset by $125,000 of increased fee
income received in the current quarter from the early payoffs of loans and
$105,000 received due to an increase in interest rates.
Operating income on real estate owned, which is composed primarily of rental
income, declined to $230,000 from $913,000 for the three months ended March 31,
2000 as compared to the three months ended March 31, 1999. For the six months
ended March 31, 2000 operating income on real estate owned declined $1,434,000
from $1,852,000 to $ 418,000. The decrease in both periods is due to the
contribution in September 1999 of an office property to a limited liability
company in which BRT retained a 50% interest. BRT accounts for the operations of
the limited liability company using the equity method of accounting.
Income from unconsolidated entities increased for the three months ended March
31, 2000 from -0- in the quarter ended March 31, 1999 to $ 159,000 in the
current quarter. For the six months ended March 31, 2000 income from
unconsolidated entities increased from -0- in the prior period to $273,000 in
the current period. The increase in both periods is the result of the
recognition of income from BRT's 50% interest in the limited liability company.
Other revenues, which is primarily composed of investment income, increased by
$766,000 from $162,000 to $928,000 for the three months ended March 31, 2000.
The average balance of investment assets increased by $20,368,000 accounting for
$315,000 of the increase in investment income. The remaining $451,000 was
primarily the result of the investment of funds in higher yielding real estate
investment trust securities. For the six months ended March 31, 2000 other
income increased by $1,113,000 from $ 317,000 to $1,430,000. Average earning
assets increased by $17,733,000 resulting in increased interest income of
$456,000. The investment of funds in higher yielding securities accounted for
the remaining $657,000 of the increase.
Interest expense on notes and loans payable decreased by $117,000 to $18,000
for the three month period ended March 31, 2000 as compared to $135,000 for the
same period in 1999. During the six month period ended March 31, 2000 interest
expense decreased by $239,000 from $279,000 to $40,000. The decline in both
periods is the result of lower outstanding balances on the credit facility with
Transamerica.
The Advisor's fee decreased $22,000 to $ 140,000 for the three months ended
March 31, 2000 from $162,000 in the corresponding period in 1999. For the six
months ended March 31, 2000 the Advisor's fee decreased by $44,000 to $272,000
from $316,000. These declines were the result of a decrease in total invested
assets, the basis on which the fee is calculated.
General and administrative expenses increased slightly to $879,000 for the
three months ended March 31, 2000 as compared to $873,000 for the corresponding
period in 1999. For the six months ended March 31, 2000 this category increased
$137,000 to $1,696,000 from $1,559,000 in the corresponding period in the prior
year. The increase in general and administrative expenses in the six month
period ended March 31, 2000 is due to professional expenses incurred in
connection with a litigation in which BRT is involved as a defendant.
Operating expenses relating to real estate assets decreased by $486,000 to
$78,000 for the three months ended March 31, 2000 as compared to $564,000 for
the corresponding period in 1999. Operating expenses decreased by $976,000 to
$205,000 for the six months ended March 31, 2000 as compared to $1,181,000 for
the corresponding period in 1999. The decrease for both periods is due to the
contribution in September 1999 of an office property to a limited liability
company in which BRT retained a 50% interest. BRT now accounts for the
operations of this property using the equity method of accounting.
Gain on the sale of real estate and foreclosed properties held for sale
declined $431,000 to $360,000 for the three months ended March 31, 2000 from $
791,000 in the comparable period in 1999. In the current period BRT sold five
cooperative apartment units, previously acquired through foreclosure. For the
six months ended March 31, 2000 this category declined $685,000 from $1,777,000
to $ $1,092,000. During this period BRT sold thirteen cooperative units,
previously acquired through foreclosure. It is the policy of BRT to offer for
sale foreclosed property at prices that management believes represents fair
value and the decrease year over year reflects a decrease in the inventory of
real estate assets available-for-sale.
During the three month period ended March 31, 2000 gains on the sale of
available-for-sale securities was $94,000 or a decline of $113,000 from $207,000
in the corresponding period of 1999. For the six months ended March 31, 2000
this category declined $546,000 to $94,000 from $640,000 in the corresponding
period in 1999. During the three and six months ended March 31, 2000 BRT sold
$977,000 worth of securities with a carrying value of $883,000.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
On March 13, 2000 BRT filed an 8-K reporting its acquisition of an aggregate of
939,000 common shares of beneficial interest of Entertainment Properties Trust,
representing 6.27% of the outstanding shares of Entertainment Properties Trust.
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
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Registrant
May 11, 2000 /s/ Jeffrey Gould
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Date Jeffrey Gould, President
May 11, 2000 /s/ George Zweier
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Date George Zweier, Vice President
and Chief Financial Officer