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 June 30, 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
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 August 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)
June 30, September 30,
2000 1999
---- ----
(Unaudited) (Audited)
ASSETS
Real estate loans - Note 3:
Earning interest including $950 and $-0-
to BRT joint ventures $ 40,527 $ 44,682
Not earning interest 2,835 -
Less allowance for possible losses 1,381 1,381
-------- --------
41,981 43,301
-------- --------
Real estate assets:
Foreclosed properties held for sale 2,979 3,057
Investment in unconsolidated entities 5,194 3,708
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8,173 6,765
Less valuation allowance 349 349
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7,824 6,416
-------- --------
Cash and cash equivalents 17,806 28,757
Securities available-for-sale at market - Note 4 20,554 -
Due from venture - 4,620
Other assets 1,887 1,515
-------- --------
Total Assets $ 90,052 $ 84,609
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable - Credit facility $ 145 $ 331
Loans and mortgages payable - 841
Accounts payable and accrued liabilities,
including deposits of $1,241 and $1,465 2,263 2,813
-------- --------
Total Liabilities 2,408 3,985
-------- --------
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 1,106 -
Accumulated deficit (6,768) (12,682)
-------- --------
102,524 95,504
Cost of 1,723 treasury shares of
beneficial interest at each date (14,880) (14,880)
-------- --------
Total Shareholders' Equity 87,644 80,624
-------- --------
Total Liabilities and Shareholders' Equity $ 90,052 $ 84,609
======== ========
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 Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Interest and fees on real estate loans $ 1,565 $ 1,744 $ 4,548 $ 5,770
Operating income on real estate owned 283 943 701 2,795
Equity in earnings in unconsolidated entities 141 - 414 -
Other, primarily investment income 868 237 2,298 554
-------- -------- ------- --------
Total Revenues 2,857 2,924 7,961 9,119
Expenses:
Interest-notes payable and loans payable 19 112 59 391
Advisor's fee 147 134 419 450
General and administrative 967 722 2,663 2,281
Other taxes 50 114 131 114
Operating expenses relating to real estate
owned including interest on mortgages
of $-0- and $161 for the three-month periods 88 526 293 1,707
and $15 and $488 for the nine-month periods,
respectively
Amortization and depreciation 97 98 291 266
------- -------- ------- -------
Total Expenses 1,368 1,706 3,856 5,209
------- -------- ------- ------
Income before gain on sale of real estate
loans and foreclosed properties and
available-for-sale securities 1,489 1,218 4,105 3,910
Net gain on payoff of real estate loans - - - 900
Net gain on sale of foreclosed properties held
for sale 590 326 1,682 1,203
Net realized gain on sale of available-for
- -sale securities 33 229 127 869
------- ------- ------- -------
Net Income $ 2,112 $ 1,773 $ 5,914 $ 6,882
======= ======= ======= =======
Income per share of Beneficial Interest:
Basic earnings per share $ .29 $ .25 $ .82 $ .96
======= ======= ======= =======
Diluted earnings per share $ .29 $ .24 $ .81 $ .95
======= ======= ======= =======
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 - - - 5,914 - 5,914
Other comprehensive income -
net unrealized gain on
available-for-sale securities - - 1,106 - - 1,106
--------
Comprehensive income - - - - - 7,020
--------------------------------------------------------------------------------
Balances, June 30, 2000 $26,665 $81,521 $ 1,106 $(6,768) $(14,880) $87,644
================================================================================
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
Nine Months Ended
June 30,
2000 1999
---- ----
Cash flow from operating activities:
Net income $ 5,914 $ 6,882
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 291 266
Net gain on payoff of real estate loans - (900)
Net gain on sale of foreclosed properties held for sale (1,682) (1,203)
Net gain on sale of available-for-sale securities (127) (869)
Equity in earnings of unconsolidated entities (414) -
(Increase) Decrease in interest and dividends receivable (566) 118
Decrease in prepaid expenses 10 66
(Decrease) Increase in accounts payable
and accrued liabilities (311) 312
Increase (Decrease) in deferred revenues 92 (9)
(Decrease) Increase in escrow deposits (318) 25
Increase in deferred costs (18) (661)
Decrease in due from venture 4,620 -
Net change in other assets 14 731
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Net cash provided by operating activities 7,505 4,758
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Cash flows from investing activities:
Collections from real estate loans 28,538 19,066
Sale of Senior Participating interest in loans - 7,860
Additions to real estate loans (26,268) (22,649)
Additions to real estate loans - BRT joint ventures (950) -
Net costs capitalized to real estate owned (168) (311)
Proceeds from sale of real estate owned 1,827 3,024
Decrease in deposits payable (13) (305)
Purchase of marketable securities (20,531) -
Sales of marketable securities 1,209 3,463
Capital contributions to unconsolidated entities (1,083) -
Distributions from unconsolidated ventures 10 -
-------- --------
Net cash (used in) provided by investing activities (17,429) 10,148
-------- --------
Cash flow from financing activities:
Payoff/paydown of loan and mortgages payable (841) (665)
Repayment of note payable - credit facility (186) (3,135)
-------- --------
Net cash used in financing activities (1,027) (3,800)
--------- ---------
Net (decrease) increase in cash and cash equivalents (10,951) 11,106
Cash and cash equivalents at beginning of period 28,757 13,949
--------- ---------
Cash and cash equivalents at end of period $ 17,806 $ 25,055
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $ 86 $ 840
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial
Statements As of and for the Three and Nine
Months ended June 30, 2000 and 1999
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements as of June
30, 2000 and for the three and nine months ended June 30, 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 nine months ended June 30, 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 beneficial shares outstanding during each
period, which was 7,165,263 for both the three and nine month periods ended June
30, 2000 and 1999. Diluted earnings per share reflects the potential dilution
that could occur if contracts to issue beneficial shares were exercised or
converted into beneficial shares or resulted in the issuance of beneficial
shares that then shared in the earnings of BRT. For the three and nine months
ended June 30, 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 beneficial shares outstanding plus the dilutive effect of BRT's outstanding
options using the treasury stock method, which aggregated 7,247,240 and
7,250,164 and 7,241,882 and 7,202,132, respectively.
Note 3 - Real Estate Loans
If all loans classified as not-earning were earning interest at their
contractual rates for the three and nine months ended June 30, 2000, interest
income would have increased by approximately $59,000 and $156,000, respectively.
During the three and nine month period ended June 30, 1999 there were no
non-interest earning loans. Note 3 - Real Estate Loans - Continued
In the quarter ended June 30, 2000, BRT entered into two separate joint venture
agreements in which BRT and an unaffiliated person each have a 50% interest. As
part of these agreements BRT, in addition to making capital contributions, also
made loans to these entities. At June 30, 2000 these loans totaled $950,000. For
the three and nine months ended June 30, 2000 interest on these loans was
immaterial.
Note 4 - Available-For-Sale Securities
On May 31, 2000 BRT filed an Amendment to Schedule 13D, initially filed on March
31, 2000, reporting its willingness to make a more significant investment in
Entertainment Properties Trust ("EPR") and to seek Board representation, should
such an investment be made. Prior to making this investment, BRT would require
that EPR exempt BRT from the provisions of its Declaration of Trust, which
limits acquisition by any person (which would include BRT) of in excess of 9.8%
of the outstanding shares of EPR.
On June 6, 2000 an additional amendment to Schedule 13D was filed to report the
sending of a letter dated May 31, 2000 to the Board of Trustees of EPR,
requesting that the Board of Trustees exempt BRT (and the members of the group)
from the ownership limitations contained in EPR's Amended and Restated
Declaration of Trust.
As of June 30, 2000 BRT holds 1,347,800 shares of EPR representing 8.96% of the
common shares outstanding. Other persons who may be deemed part of the Trust's
group own .28% making the total 9.24%. These shares have a cost basis of
$17,711,326 and a market value as of June 30,2000 of $18,617,161.
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 nine months ended June 30, 2000, accumulated
other comprehensive income, which is solely composed of the net unrealized gain
on available-for-sale securities, increased $919,000 to $1,106,000 from $187,000
and increased $1,106,000 from $-0- to $1,106,000, respectively. During the three
and nine months ended June 30, 1999 comprehensive income decreased $224,000 from
$224,000 to $-0- and decreased $769,000 from $769,000 to $-0-, 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 of the Trust. 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
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 $20,938,000 are due during the twelve months ending June 30, 2001,
including $4,559,000 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 June 30, 2000 BRT had invested $19,448,000 in the securities of
other real estate investment trusts (of which $17,711,000 is represented by an
investment in the shares of Entertainment Properties Trust) representing
approximately 22% 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 June 30, 2000 BRT had provided collateral to Transamerica
which would permit BRT to borrow up to $5,300,000 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 June 30, 2000 was 10.00%. 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 August 10, 2000 was $70,000.
During the nine months ended June 30, 2000, the Trust generated cash of
$1,827,000 from the sale of real estate owned, $28,538,000 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 $27,218,000, including $950,000 to BRT joint
ventures, to paydown a mortgage payable of $841,000, to purchase securities at a
cost of $20,531,000, to contribute $1,083,000 to joint ventures and to paydown
the credit facility by $186,000. BRT's cash and cash equivalents were
$17,806,000 at June 30, 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 and fees on real estate loans decreased by $179,000 to $1,565,000 for
the three month period ended June 30, 2000, as compared to $1,744,000 for the
corresponding period in 1999. A decrease in the average balance of loans
outstanding in the current quarter of approximately $6,900,000 resulted in the
reduction of interest income of $215,000. This decrease in the average balance
of loans outstanding also resulted in decreased fee income for the quarter of
$43,000. During the current quarter a non-accruing loan caused a decrease in
interest income of $60,000 as compared to the quarter ended June 30, 1999. In
addition, in the prior year's quarter BRT received income of $20,000 due to the
prepayment of a loan. These declines in interest and fees on real estate loans
in the current quarter were partially offset by an increase of $159,000
attributable to an increase in interest rates earned on the loan portfolio.
For the nine months ended June 30, 2000 interest and fees on real estate loans
decreased $1,222,000 to $4,548,000 from $5,770,000. A decrease in the average
balance of loans outstanding of approximately $5,600,000 caused interest and
income to decline by $706,000. Interest income also declined by $249,000 as a
result of loan participations sold in the second half of the prior year. The
prior year's nine month period also contained interest income of $470,000 from
the payoff in full of two loans previously deemed uncollectable. 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 $156,000. These declines were offset
by increased interest of $361,000, the result of higher interest rates earned on
the portfolio and the receipt of deferred income of $88,000 upon the payoff of a
loan. In addition, fee income in the nine month period declined by $139,000 due
to the reduced level of loans outstanding. This amount was offset by a $49,000
increase in income received due to loan prepayments and extension and loan
servicing fees.
Operating income on real estate owned, which is composed primarily of rental
income, declined to $283,000 from $943,000 for the three months ended June 30,
2000 as compared to the three months ended June 30, 1999. For the nine months
ended June 30, 2000 operating income on real estate owned declined $2,094,000
from $2,795,000 to $701,000. The decrease in both periods is primarily 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 June
30, 2000 from -0- in the quarter ended June 30, 1999 to $141,000 in the current
quarter. For the nine months ended June 30, 2000 income from unconsolidated
entities increased from -0- in the prior period to $414,000 in the current
period. The increase in both periods is primarily 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
$631,000 from $237,000 to $868,000 for the three months ended June 30, 2000. The
average balance of investment assets increased by $15,824,000 accounting for
$279,000 of the increase in investment income. The remaining $352,000 was
primarily the result of the investment of funds in higher yielding real estate
investment trust securities. For the nine months ended June 30, 2000 other
income increased by $1,744,000 from $554,000 to $2,298,000. Average earning
assets increased by $17,096,000 resulting in increased interest income of
$860,000. The investment of funds in higher yielding securities accounted for
the remaining $884,000 of the increase.
Interest expense on notes and loans payable decreased by $93,000 to $19,000 for
the three month period ended June 30, 2000 as compared to $112,000 for the same
period in 1999. During the nine month period ended June 30, 2000 interest
expense decreased by $332,000 from $391,000 to $59,000. The decline in both
periods is the result of lower outstanding balances on the credit facility with
Transamerica.
The Advisor's fee increased $13,000 to $ 147,000 for the three months ended
June 30, 2000 from $134,000 in the corresponding period in 1999. This increase
is the result of an increase in total invested assets, the basis on which the
fee is calculated. For the nine months ended June 30, 2000 the Advisor's fee
decreased by $31,000 to $419,000 from $450,000. This decline was the result of a
decrease in total invested assets.
General and administrative expenses increased $245,000 to $967,000 for the
three months ended June 30, 2000 as compared to $722,000 for the corresponding
period in 1999. For the nine months ended June 30, 2000 this category increased
$382,000 to $2,663,000 from $2,281,000 in the corresponding period in the prior
year. The increase in general and administrative expenses for both the three and
nine month periods ended June 30, 2000 is due to professional expenses incurred
in connection with a litigation relating to a property disposition in which BRT
is involved as a defendant.
Other taxes declined $64,000 from $114,000 for the three months ended June 30,
1999 to $50,000 for the three months ended June 30, 2000. For the nine months
ended June 30, 2000 this category increased $17,000 to $131,000 from $114,000 in
the prior period. This category represents alternative minimum tax which the
Trust is subject to.
Operating expenses relating to real estate assets decreased by $438,000 to
$88,000 for the three months ended June 30, 2000 as compared to $526,000 for the
corresponding period in 1999. Operating expenses decreased by $1,414,000 to
$293,000 for the nine months ended June 30, 2000 as compared to $1,707,000 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.
For the three months ended June 30, 2000 amortization was relatively unchanged
going from $98,000 in the prior period to $97,000 in the current period. For the
nine months ended June 30, 2000 this category increased $25,000 to $291,000 from
$266,000 in the prior period. This increase was caused by the increase in
amortization of the costs incurred in obtaining a credit line with TransAmerica.
For the nine months ended June 30, 2000 net gain on payoff of real estate loans
declined from $900,000 to $-0-. In the prior period a loan previously written
off was paid in full. There was no comparable item in the current period.
Gain on the sale of real estate and foreclosed properties held for sale
increased $264,000 to $590,000 for the three months ended June 30, 2000 from
$326,000 in the comparable period in 1999. In the current period BRT sold six
cooperative apartment units previously acquired through foreclosure. BRT also
recognized a tax refund on a property sold in a prior period. For the nine
months ended June 30, 2000 this category increased $479,000 from $1,203,000 to $
$1,682,000. During this period BRT sold nineteen cooperative units previously
acquired through foreclosure.
During the three month period ended June 30, 2000 gains on the sale of
available-for-sale securities was $33,000 or a decline of $196,000 from $229,000
in the corresponding period of 1999. For the nine months ended June 30, 2000
this category declined $742,000 to $127,000 from $869,000 in the corresponding
period in 1999.
During the three month period ended June 30, 2000 BRT sold securities with a
carrying value of $199,000 for $232,000. For the nine month period securities
with a carrying value of $1,082,000 were sold for $1,209,000.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None
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
August 11, 2000 /s/ Jeffrey Gould
- --------------- -----------------
Date Jeffrey Gould, President
August 11, 2000 /s/ George Zweier
- --------------- -----------------
Date George Zweier, Vice President
and Chief Financial Officer
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
August 11, 2000
- --------------- -------------------------
Date Jeffrey Gould, President
- -------------- -------------------------
Date George Zweier, Vice President
and Chief Financial Officer