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, 1995
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
(Exact name of registrant as specified in its charter)
Massachusetts 13-2755856
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Cutter Mill Road, Great Neck, NY 11021
(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.
7,346,624 Shares of Beneficial Interest,
$3 par value, and 1,030,000 shares of Series A
cumulative convertible preferred stock, $1 par
value outstanding on February 12, 1996
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______
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, September 30,
1995 1995
--------- ---------
(Unaudited) (Audited)
Assets:
Real estate loans - Note 3:
Earning interest,
less unearned income $ 42,988 $ 44,136
Not earning interest 5,869 7,154
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48,857 51,290
Less allowance for possible losses 7,798 9,084
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41,059 42,206
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Real estate owned:
Foreclosed properties held for sale,
(except for $13,824 and $13,915
net of accumulated depreciation,
which is held long term for the
production of income) 51,655 52,029
Less valuation allowance 2,460 2,460
-------- --------
49,195 49,569
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Cash and cash equivalents 6,442 7,385
Restricted cash 375 558
Interest receivable 529 507
Other assets 4,187 4,203
-------- --------
Total assets $101,787 $104,428
======== ========
Liabilities and Shareholders' Equity
Liabilities:
Notes payable $ 15,775 $ 22,900
Loans and mortgages payable,
nonrecourse 25,370 20,756
Accounts payable and accrued
liabilities, including deposits
of $1,516 and $1,967 2,391 3,044
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Total liabilities 43,536 46,700
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Shareholders' Equity - Note 2:
Preferred shares - $1 par value:
Authorized 10,000 shares,
Issued - 1,030 shares 1,030 1,030
Shares of beneficial interest,
$3 par value:
Authorized number of shares -
unlimited
Issued - 7,538 shares 22,614 22,614
Additional paid-in capital net of
distributions of $5,035 and
$4,968 83,847 83,914
Accumulated deficit (46,905) (47,495)
------- -------
60,586 60,063
Cost of 192 treasury shares of
beneficial interest (2,335) (2,335)
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Total shareholders' equity 58,251 57,728
Total liabilities and ------- -------
shareholders' equity $101,787 $104,428
======== ========
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands except for Per Share Data)
Three Months Ended
December 31,
1995 1994
-----------------
Revenues:
Interest and fees on real estate loans $ 1,311 $ 1,644
Operating income on real estate owned 2,046 2,187
Gain on sale of foreclosed
properties held for sale 227 2,527
Other, primarily investment income 83 112
------ ------
Total revenues 3,667 6,470
------ ------
Expenses:
Interest-notes payable and loans payable 494 1,569
Provision for possible loan losses - 1,021
Advisor's fee 165 225
General and administrative 596 724
Operating expenses relating to real estate
owned including interest on mortgages of
$446 and $97 respectively 1,681 1,758
Depreciation and amortization 141 155
------ ------
Total expenses 3,077 5,452
------ ------
Net income $ 590 $ 1,018
====== ======
Calculation of net income applicable
to common shareholders:
Net income $ 590 $ 1,018
Less: distribution on preferred stock 67 67
------ ------
Net income applicable to
common shareholders $ 523 $ 951
====== ======
Income per share of
Beneficial Interest - Note 2:
Primary $ .07 $ .13
====== ======
Fully Diluted $ .07 $ .12
====== ======
Weighted average number of common
shares outstanding - Note 2:
Primary 7,346,624 7,346,624
========= =========
Fully Diluted 8,457,944 8,414,696
========= =========
STATEMENT OF ACCUMULATED DEFICIT
Accumulated deficit, beginning of
period $(47,495) $(50,469)
Net income 590 1,018
------ ------
Accumulated deficit, end of period $(46,905) $(49,451)
====== ======
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,
------------------
1995 1994
---- ----
Cash flow from operating activities:
Net income $ 590 $1,018
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for possible loan losses - 1,021
Amortization and depreciation 141 155
Gain on sale of foreclosed properties ( 227) (2,527)
(Increase) decrease in interest
receivable ( 22) 12
Decrease (increase) in prepaid expenses 256 ( 144)
Increase (decrease) in accounts payable
and accrued liabilities ( 206) 93
Increase in rent and other receivables ( 21) ( 28)
Decrease in escrow deposits 118 346
Increase in deferred costs ( 395) -
Other ( 7) ( 99)
Net cash provided by (used in) ------- -------
operating activities 227 ( 153)
------- -------
Cash flows from investing activities:
Collections from real estate loans 1,192 524
Proceeds from participating lenders 125 -
Additions to real estate loans ( 73) ( 126)
Repayments to participating lenders - ( 8)
Net costs capitalized to real estate owned ( 547) (3,757)
Proceeds from sale of real estate owned 932 6,309
Decrease in deposits payable ( 451) ( 133)
Decrease in investment in U.S.
Government obligations - 716
Other 46 ( 294)
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Net cash provided by investing activities 1,224 3,231
-------- --------
Cash flow from financing activities:
Bank repayments ( 7,125) ( 3,272)
Payoff/paydown of loan and mortgages
payable ( 186) ( 193)
Proceeds from mortgages payable 4,800 -
Decrease in restricted cash 183 3,577
Other ( 66) ( 68)
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Net cash (used in) provided by
financing activities ( 2,394) 44
-------- --------
Net increase (decrease) in cash
and cash equivalents ( 943) 3,122
Cash and cash equivalents at
beginning of period 7,385 1,174
-------- --------
Cash and cash equivalents at end of period $ 6,442 $ 4,296
======== ========
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(In Thousands)
Three Months Ended
December 31,
------------------
1995 1994
---- ----
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest expense $ 1,038 $ 1,715
======= =======
Supplemental schedule of noncash
investing and financing activities:
Transfer of nonearning real estate
loans to foreclosed properties at
fair market value $ - $ 2,310
Recognition of allowance for previously
provided loan losses 1,286 -
Purchase money mortgages from sale of
real estate owned 97 1,352
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, 1995 and for the three months ended
December 31, 1995 and 1994 reflect all normal recurring
adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for such interim periods.
The results of operations for the three months ended December
31, 1995 are not necessarily indicative of the results for the
full year.
Certain items on the consolidated financial statements for
the preceding period 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. Material
intercompany items and transactions have been eliminated. Many
of the wholly-owned subsidiaries were organized to take title to
various properties acquired by BRT Realty Trust. BRT Realty
Trust and its subsidiaries are hereinafter referred to as the
"Trust".
These statements should be read in conjunction with the
consolidated financial statements and related notes which are
incorporated by reference in the Trust's Annual Report on Form
10-K for the year ended September 30, 1995.
Note 2 - Per Share Data
Primary earnings per share of beneficial interest is based
upon the weighted average number of common shares and the assumed
equivalent shares outstanding during each period, after giving
effect to dividends relating to the Trust's preferred stock. The
preferred stock issued on September 14, 1993, is not considered a
common stock equivalent for the purposes of computing primary
earnings per share. The assumed exercise of outstanding share
options, using the treasury stock method, is not materially
dilutive for the primary earnings per share computation for the
three months ended December 31, 1995 and 1994, respectively.
Fully diluted earnings per share of beneficial interest
amounts are based on an increased number of common shares that
would be outstanding assuming the exercise of common share
options and the conversion of preferred stock to shares of
beneficial interest at the average market price. The fully
diluted per share computation for the three months ended December
31, 1995 and 1994 is dilutive with the addition of 1,030,000
shares upon conversion of the preferred stock at each date, and
81,320 and 38,072 shares, respectively, upon exercise of the
common share options.
Note 3 - Real Estate Loans
If all loans classified as not earning were earning interest
at their contractual rates for the three months ended December
31, 1995 and 1994, interest income would have increased by
approximately $175,000 and $239,000, respectively.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Trust was engaged in the business of making and
participating in short term senior and junior real estate
mortgages, secured by income producing property and to a lesser
extent by unimproved real property. Repayments of real estate
loans in the amount of $20,003,000 are due during the twelve
months ending December 31, 1996, including $9,933,000 which is
due on demand. There presently is a more favorable environment
for obtaining mortgage financing secured by real estate and for
selling real estate, but the Trust cannot project the portion of
loans maturing during the fiscal year ending September 30, 1996
which will be paid or the portion which will be extended for a
fixed term or on a month to month basis.
In September, 1992, the Trust entered into an Amended and
Restated Credit Agreement ("Restated Credit Agreement") with five
banks and extended the maturity date to June 30, 1996, with the
right to extend for an additional one year term. The Restated
Credit Agreement precludes the Trust from engaging in any lending
activities except for purchase money mortgages in connection with
the sale of real estate.
Under the Restated Credit Agreement the Trust is required
to apply a minimum of 75% of capital event proceeds (proceeds
from the sale of real property, proceeds from mortgage financing
secured by real estate owned and proceeds from payoffs or
paydowns of mortgages receivable) to reduce the principal balance
due to the banks, and the balance of 25% is deposited in a cash
collateral account maintained with the agent bank. The Trust
maintains its own operating accounts, and to the extent the
operating accounts exceed $500,000 at the end of any month, the
excess is deposited into the cash collateral account. At
December 31, 1995 the Trust maintained approximately $5,898,000
in the cash collateral account, which management deems sufficient
to satisfy the Trust's short term liquidity needs.
During the three months ended December 31, 1995, the Trust
had an increase in cash provided by investing activities, as a
result of collections from real estate loans of $1,192,000 and
proceeds from the sale of real estate owned of $932,000, net of
purchase money mortgages of $97,000. The cash provided by
investing activities and proceeds of $4,800,000 from the
financing of real estate owned was used to reduce bank debt
by $7,125,000. The Trust intends to satisfy its short term
liquidity needs from interest received on outstanding real estate
loans, net cash flow generated from the operation of properties,
cash derived from financing of real estate owned, and from the
funds in the cash collateral account.
Results of Operations
The Trust's loan portfolio at December 31, 1995, before
giving effect to the allowance for possible losses, was
$48,857,000, of which $5,869,000 (12% of total real estate loans)
is categorized as non-earning, as compared to $51,290,000 at
September 30, 1995, of which $7,154,000 (14% of total real
estate loans) is categorized as non-earning. The $2,433,000
decrease in the loan portfolio since September 30, 1995 is
primarily due to the payoff of two real estate loans in the
amount of approximately $941,000 and partial recovery of a fully
reserved mortgage receivable having a book balance of
approximately $1,286,000 prior to allowance for possible losses.
Interest and fees on real estate loans decreased to
$1,311,000 for the three months ended December 31,1995 as
compared to $1,644,000 for the three months ended December 31,
1994. This decrease of $333,000 was a result of a decrease in
earning real estate loans, as a result of payoffs, and a property
securing a real estate loan becoming real estate owned. This
decrease was offset in part by the recognition of interest earned
of approximately $119,000 from a fully reserved mortgage
receivable and interest earned from purchase money mortgages
originated by the Trust in connection with the sale of
properties.
Operating income on real estate owned decreased by
$141,000 to $2,046,000 for the three months ended December 31,
1995 as compared to $2,187,000 for the comparable three month
period in the prior fiscal year. This decrease was principally a
result of the sale of a number of properties offset in part by
the income generated from an office building in Fairway, Kansas
and an increase in rental income at the Dover, Delaware property,
as a result of the process of converting this property from a
regional mall to an office park.
Gain on sale of foreclosed properties for the three months
ended December 31, 1995 was $227,000 as compared to $2,527,000
for the three months ended December 31, 1994. It is the policy
of the Trust to offer for sale all real estate owned at prices
which management believes represents fair value in the geographic
area in which the property is located.
Other income, primarily investment income, decreased by
$29,000, from $112,000 for the three months ended December 31,
1994 to $83,000 for the comparable period in 1995. This decrease
is primarily due to a decrease in cash available to invest,
offset in part by an increase in the average yield on
investments.
Interest expense decreased to $494,000 for the three months
ended December 31, 1995 from $1,569,000 for the three months
ended December 31, 1994 a decrease of $1,075,000, due to a
continuing decrease in the outstanding bank debt, offset in part
by an increase in the average prime interest rate.
The expenses for the three months ended December 31, 1994
include provisions for possible loan losses of $1,021,000 with no
comparable provisions during the three months ended December 31,
1995. This decrease is a result of a more favorable environment
for obtaining financing secured by real property and in selling
real property assets.
The Advisor's fee decreased by $60,000 from $225,000 for
the three months ended December 31, 1994 to $165,000 for the
three months ended December 31, 1995. This decrease was a result
of a decrease in total invested assets, the basis on which the
advisory fee is calculated.
General and administrative expenses decreased to $596,000
for the three months ended December 31, 1995 from $724,000 for
the prior year comparable period, a decrease of $128,000. This
decrease is primarily the result of a decrease in the Trust's
executive compensation and related expenses due to a reduction of
staff and a reduction in professional fees as foreclosure and
bankruptcy proceedings have diminished.
Operating expenses relating to real estate owned decreased
to $1,681,000 for the three months ended December 31, 1995 from
$1,758,000 for the three months ended December 31, 1994. This
decrease was due to a combination of the sale of real estate
owned and the completion of extensive repairs at a mixed use
property during the fiscal year ended September 30, 1995 offset
in part by an increase in interest on mortgages secured by real
estate owned from $97,000 for the three months ended December 31,
1994 to $446,000 for the comparable period in 1995 and the Trust
acquiring an office building by deed-in-lieu of foreclosure.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Trust did not file any reports on Form 8-K during the quarter
ended December 31, 1995.
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
2/14/96 /s/ Jeffrey Gould
- ------- ------------------------------
Date Jeffrey Gould, Executive Vice
President
2/14/96 /s/ David W. Kalish
- ------- -------------------------------
Date David W. Kalish, Vice President
and Chief Financial Officer