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, 1996
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.
8,601,217 Shares of Beneficial Interest,
$3 par value, outstanding on February 10, 1997
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, 1996 September 30, 1996
(Unaudited) (Unaudited)
Assets
Real estate loans - Note 3:
Earning interest $29,989 $32,813
Not earning interest 5,519 5,905
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35,508 38,718
Less allowance for possible losses 7,473 7,773
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28,035 30,945
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Real estate owned:
Foreclosed properties held for sale 48,959 48,438
Less valuation allowance 2,128 2,128
----- -----
46,831 46,310
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Cash and cash equivalents 7,886 6,209
Investment in U.S. Government obligations and securities 2,036 1,977
Interest receivable 332 354
Other assets 3,699 3,818
----- -----
Total Assets $88,819 $89,613
======= =======
Liabilities and Shareholders' Equity
Liabilities:
Notes payable, Gould Investors L.P. (a related party) - $1,030
Loans and mortgages payable, non-recourse 25,160 25,391
Accounts payable and accrued liabilities, including deposits of $1,324
and $1,524 1,997 2,300
----- -----
Total Liabilities 27,157 28,721
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Shareholders' Equity - Note 2: Preferred shares - $1 par value:
Authorized 10,000 shares issued - none - -
Shares of beneficial interest, $3 par value:
Authorized number of shares - unlimited, issued - 8,969 shares 26,906 26,906
Additional paid-in capital net of distributions of $5,171 81,857 81,857
Net unrealized gain on available-for-sale securities 74 17
Accumulated deficit (43,786) (45,249)
-------- --------
65,051 63,531
Cost of 368 and 244 treasury shares of beneficial interest (3,389) (2,639)
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Total Shareholders' Equity 61,662 60,892
------ ------
Total Liabilities and Shareholders' Equity $88,819 $89,613
======= =======
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
(In Thousands except for Per Share Data)
Three Months Ended
December 31,
1996 1995
Revenues:
Interest and fees on real estate loans $1,354 $1,311
Operating income on real estate owned 2,159 2,046
Reversal of previously provided allowances 300 -
Other, primarily investment income 123 83
---- ---
Total revenues 3,936 3,440
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Expenses:
Interest-notes payable and loans payable 10 494
Advisor's fee 131 165
General and administrative 540 596
Operating expenses relating to real estate owned, including interest on mortgages of $507
and $446 respectively 1,658 1,681
Depreciation and amortization 134 141
--- ---
Total expenses 2,473 3,077
----- -----
Income before gain on sale of foreclosed properties held for sale 1,463 363
Gain on sale of foreclosed properties held for sale - 227
- ---
Net income $1,463 $590
====== ====
Calculation of net income applicable to common shareholders:
Net income $1,463 $590
Less: distribution on preferred stock - 67
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Net income applicable to common shareholders $1,463 $523
====== ====
Earnings per share of Beneficial Interest - Note 2:
Primary
Income before gain on sale of foreclosed properties held for sale applicable to common
shareholders $0.17 $0.04
Gain on sale of foreclosed properties held for sale - 0.03
------ ----
Net income applicable to common shareholders $0.17 $0.07
===== =====
Fully Diluted $0.17 $0.07
===== =====
Weighted average number of common shares outstanding - Note 2:
Primary 8,685,652 7,346,624
========= =========
Fully Diluted 8,685,652 8,457,944
========= =========
STATEMENT OF ACCUMULATED DEFICIT
Accumulated deficit, beginning of period ($45,249) ($47,495)
Net Income 1,463 590
----- ---
Accumulated deficit, end of period ($43,786) ($46,905)
========= =========
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,
1996 1995
Cash flow from operating activities:
Net income $1,463 $590
Adjustments to reconcile net income to cash provided by operating activities:
Reversal of previously provided allowances (300) -
Amortization and depreciation 134 141
Gain on sale of foreclosed properties - (227)
Decrease (increase) in interest receivable 22 (106)
(Increase) decrease in prepaid expenses (32) 256
Decrease in accounts payable and accrued liabilities (118) (122)
Decrease (increase) in rent and other receivables 82 (21)
Decrease in escrow deposits 231 118
Increase in deferred costs (262) (395)
Other 2 (7)
----- ---
Net cash provided by operating activities 1,222 227
----- ---
Cash flows from investing activities:
Collections from real estate loans 3,995 1,190
Proceeds from participating lenders - 125
Additions to real estate loans (785) (73)
Net costs capitalized to real estate owned (864) (547)
Proceeds from sale of real estate owned 316 934
Decrease in deposits payable (200) (451)
Increase in investment in U.S. Government obligations (2) -
Other 7 46
---- ------
Net cash provided by investing activities 2,467 1,224
----- -----
Cash flow from financing activities:
Bank repayments - (7,125)
Payoff/paydown of loan and mortgages payable (1,262) (186)
Proceeds from mortgages payables - 4,800
Repurchase of shares of beneficial interest (750) -
Decrease in restricted cash - 183
Other - (66)
------ ----
Net cash used in financing activities (2,012) (2,394)
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Net increase (decrease) in cash and cash eqivalents 1,677 (943)
Cash and cash equivalents at beginning of period 6,209 7,385
----- -----
Cash and cash equivalents at end of period $7,886 $6,442
====== ======
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,
1996 1995
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expenses $376 $1,038
==== ======
Supplemental schedule of non-cash investing and financing activities:
Recognition of allowance for previously provided loan losses $ - $1,286
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, 1996 and for the three months ended December 31, 1996 and 1995
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, 1996
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. For financial statement and economic purposes, the
majority-owned real estate entity is wholly-owned and presented accordingly.
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 included in the Trust's Annual
Report on Form 10-K for the year ended September 30, 1996.
Note 2 - Shareholders' Equity
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 purpose of computing primary
earnings per share. The preferred stock was converted to shares of beneficial
interest on a one for one basis on July 1, 1996. 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, 1996 and 1995, 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 during each period and the conversion of
preferred stock to shares of beneficial interest at the period end market price.
The fully diluted per share computation for the three months ended December 31,
1995 is dilutive with the addition of 1,030,000 shares upon conversion of the
preferred stock and 81,320 shares, upon exercise of the common share options.
The fully diluted computation is not materially dilutive for the three months
ended December 31, 1996 and therefore not presented.
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, 1996 and 1995,
interest income would have increased by approximately $97,000 and $175,000,
respectively.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
The Trust engages 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 $18,172,000 are due during the twelve months ending
December 31, 1997, including $8,103,000 which is due on demand. There presently
exists a favorable environment for obtaining mortgage financing secured by real
property and for selling real estate. Accordingly, prior to or at maturity,
borrowers in many cases are able to refinance and repay the indebtedness due to
the Trust. However, the Trust 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.
Effective September 23, 1992, the Trust entered into an Amended and
Restated Credit Agreement (the "Restated Credit Agreement") with five banks. On
August 2, 1996, the Trust repaid in full its remaining debt obligation due under
the Restated Credit Agreement. In October, 1996 the Trust entered into a
$25,000,000 credit facility with CS First Boston Mortgage Capital Corp. ("First
Boston"). The facility, a revolving credit facility, which permits the Trust to
borrow, repay and reborrow, provides for an interest rate, adjusted monthly, of
prime plus 1% or Libor plus 3%, whichever is lower, and matures on October 17,
1998. The Trust has the right to extend for two additional six month periods for
a fee of .25% with each extension. Borrowings under the credit facility are
secured by specific receivables and real estate owned by the Trust, and the
credit agreement provides that the loan amount will never exceed 75% of the
agreed value of the collateral. As of February 10, 1997, the Trust has not drawn
down any funds under the credit facility.
During the three months ended December 31, 1996, the Trust had an increase
in cash provided by investing activities, primarily as a result of collections
from real estate loans of $3,995,000. The $2,467,000 provided by investing
activities and the $1,222,000 provided by operating activities was used to pay
in full a note payable to Gould Investors LP, a related party, of approximately
$1,030,000, and to purchase 123,355 shares of beneficial interest of the Trust
at an approximate aggregate cost of $750,000.
On July 2, 1996, the Trust's Board of Trustees authorized the purchase from
time to time of up to 250,000 shares of beneficial interest of the Trust, of
which 176,107 shares have been purchased through February 10, 1997 at an
approximate aggregate cost of $1,054,000.
The Trust intends to satisfy its liquidity needs from cash and liquid
investments on hand, the credit facility with First Boston, interest received on
outstanding real estate loans and net cash flow generated from the operation of
real estate owned.
Results of Operations
- ----------------------
The Trust's loan portfolio at December 31, 1996, before giving effect to
the allowance for possible losses, was $35,508,000, of which $5,519,000 (16% of
total real estate loans) is categorized as non-earning, as compared to
$38,718,000 at September 30, 1996, of which $5,905,000 (15% of total real estate
loans) is categorized as non-earning. The $3,210,000 decrease in the loan
portfolio since September 30, 1996 was primarily due to the payoff of real
estate loans aggregating approximately $3,420,000. Interest and fees on real
estate loans increased to $1,354,000 for the quarter ended December 31, 1996 as
compared to $1,311,000 for the quarter ended December 31, 1995. This increase of
$43,000 was due to a combination of the receipt of additional interest of
approximately $394,000 upon the payoff of an earning loan, offset by a decrease
in earning real estate loans as a result of payoffs and paydowns.
Operating income on real estate owned increased by $113,000 to $2,159,000
for the three months ended December 31, 1996 as compared to $2,046,000 for the
comparable period in the prior fiscal year. This increase was principally the
result of a full quarter of income generated from an office building in Fairway,
Kansas, acquired in October, 1995 (with only two months of operations during the
quarter ended December 31, 1995) and an increase in rental income at the Dover,
Delaware property, as a result of improved occupancy directly attributable to
the conversion of this property from a regional shopping mall to an office park,
offset in part by the sale of properties.
During the quarter ended December 31, 1996 the Trust reversed a previously
provided allowance of $300,000 upon the payoff in full of a real estate loan.
There was no comparable reversal during the quarter ended December 31, 1995.
Interest expense decreased by $484,000 to $10,000 for the quarter ended
December 31, 1996 from $494,000 for the prior year comparable period due to the
continuing reduction and the eventual payoff of the outstanding debt from the
Restated Credit Agreement, in August 1996.
The Advisor's fee decreased to $131,000 for the three months ended December
31, 1996 from $165,000 for the comparable three month period in the prior year,
a decrease of $34,000. 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 by $56,000 from $596,000 for
the quarter ended December 31, 1995 to $540,000 for the quarter ended December
31, 1996. This decrease is primarily the result of a decrease in the Trust's
professional fees and general overhead expenses.
Operating expenses relating to real estate owned decreased by $23,000 from
$1,681,000 for the three months ended December 31, 1995 to $1,658,000 for the
current year comparable period. This decrease was primarily due to the sale of
real estate owned offset by an increase in interest on mortgages secured by real
estate owned to $507,000 for the quarter ended December 31, 1996 from $446,000
for the quarter ended December 31, 1995 and a full quarter of operations of an
office building in Fairway, Kansas, acquired in October, 1995.
Gain on sale of foreclosed properties for the quarter ended December 31,
1995 was $227,000, with no comparable gain for the quarter ended December 31,
1996. 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.
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, 1996.
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
02/13/97 /s/ Jeffrey Gould
- ----------- -------------------------------------
Date Jeffrey Gould, President
02/13/97 /s/ David W. Kalish
- ----------- ------------------------------------
Date David W. Kalish, Vice President and
Chief Financial Officer