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, 1997
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.
8,384,801 Shares of Beneficial Interest,
$3 par value, outstanding on August 4, 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)
June 30, September, 30
1997 1996
(Unaudited) (Audited)
Assets:
Real estate loans - Note 3:
Earning interest $ 37,055 $ 32,813
Not earning interest 4,326 5,905
-------- --------
41,381 38,718
Less allowance for possible losses 6,447 7,773
-------- --------
34,934 30,945
-------- --------
Real estate assets:
Foreclosed properties held for sale 47,081 48,438
Investment in real estate venture 1,533 -
-------- --------
48,614 48,438
Less valuation allowance 2,128 2,128
----- -----
46,486 46,310
-------- -------
Cash and cash equivalents 2,990 6,209
Investment in U.S. Government obigations and securities 2,045 1,977
Interest receivable 399 354
Other assets 3,737 3,818
-------- --------
Total Assets $90,591 $89,613
======= =======
Liabilities and Shareholders' Equity
Liabilities:
Notes payable, Gould Investors L.P. (a related party) $ - $ 1,030
Loans and mortgages payable, nonrecourse 24,677 25,391
Accounts payable and accrued liabilities,
including deposits of $1,586 and $1,524 2,657 2,300
-------- --------
Total Liabilities 27,334 28,721
-------- --------
Shareholders' Equity - Note 2:
Preferred shares - $1 par value:
Authorized 10,000 shares, - none - -
Shares of beneficial interest, $3 par value:
Authorized number of shares - unlimited,
issued - 8,932 and 8,969 shares 26,795 26,906
Additional paid-in capital net of distribution of $5,171 81,717 81,857
Net unrealized gain on available-for-sale securities 405 17
Accumulated deficit (41,007) (45,249)
-------- --------
67,910 63,531
Cost of 546 and 244 treasury shares of beneficial interest (4,653) (2,639)
-------- --------
Total Shareholders' Equity 63,257 60,892
-------- --------
Total Liabilities and Shareholders' Equity $90,591 $89,613
======= =======
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 Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
------------------------ ----------------------
Revenues:
Interest and fees on real estate loans $1,148 $1,022 $3,567 $3,511
Operating income on real estate assets 2,282 2,248 6,777 6,475
Reversal of previously provided allowances - - 1,300 -
Other, primarily investment income 32 77 231 233
----- ----- ----- -----
Total Revenues 3,462 3,347 11,875 10,219
----- ----- ------ ------
Expenses:
Interest-notes payable and loans payable 85 240 97 1,080
Advisor's fee 151 148 425 477
General and administrative 541 646 1,707 2,098
Operating expenses relating to real estate
assets including interest on mortgages
of $501 and $503 for the three month
periods, and $1,506 and $1,459 for the
nine month periods, respectively 1,552 1,643 4,992 5,241
Depreciation and amortization 138 70 412 270
------ ------- ------ -----
Total Expenses 2,467 2,747 7,633 9,166
----- ----- ----- -----
Income before gain on sale of foreclosed
properties held for sale 995 600 4,242 1,053
Gain on sale of foreclosed properties held for sale - - - 227
-------- ------- ---- -------
Net Income $ 995 $ 600 $ 4,242 $1,280
======== ======= ======= ======
Calculation of net income applicable to common shareholders:
Net income $ 995 $ 600 $4,242 $1,280
Less: distribution on preferred stock - 68 - 203
-------- ------ ------ ------
Net income applicable to common shareholders $ 995 $ 532 $4,242 $1,077
======== ====== ====== ======
Earnings per share of Beneficial Interest - Note 2:
Primary
Income before gain on sale of foreclosed properties
held for sale applicable to common shareholders $0.12 $0.07 $0.50 $0.11
Gain on sale of foreclosed properties held for sale - - - 0.03
----- ----- --------- -----
Net income applicable to common shareholders $0.12 $0.07 $0.50 $0.14
===== ===== ===== =====
Fully Diluted $0.12 $0.07 $0.50 $0.14
===== ===== ===== =====
Weighted average number of common shares outstanding - Note 2:
Primary 8,461,477 7,734,577 8,573,111 7,512,329
========= ========= ========= =========
Fully Diluted 8,461,477 8,773,432 8,573,111 7,512,329
========= ========= ========= =========
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
STATEMENT OF ACCUMULATED DEFICIT
(Unaudited)
(In Thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
----------------------- ---------------------
Accumulated deficit, beginning of period ($42,002) ($46,815) ($45,249) ($47,495)
Net income 995 600 4,242 1,280
-------- -------- --------- ---------
Accumulated deficit, end of period ($41,007) ($46,215) ($41,007) ($46,215)
======== ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months Ended
June 30
1997 1996
---- ----
Cash flow from operating activities:
Net income $4,242 $1,280
Adjustments to reconcile net income to net cash
provided by operating activities:
Reversal of prevously provided allowances (1,300) -
Depreciation and amortization 412 270
Gain on sale of foreclosed properties - (227)
(Increase) decrease in interest receivable (45) 203
(Increase) decrease in prepaid expenses (150) 229
Increase (decrease) in accounts payable and accrued liabilities 199 (312)
Decrease (increase) in rent and other receivables 38 (46)
Decrease in escrow deposits 201 74
Increase in deferred costs (274) (417)
Other 33 125
----- ---
Net cash provided by operating activities 3,356 1,179
----- -----
Cash flows from investing activities:
Collections from real estate loans 10,355 8,075
Proceeds from participating lenders - 125
Additions to real estate loans (11,981) (405)
Repayments to participating lenders (1,000) -
Net costs capitalized to real estate owned (786) (1,259)
Proceeds from sale of foreclosed properties 518 2,962
Increase (decrease) in deposits payable 62 (473)
Decrease in investment in U.S. Government obligations 986 -
Purchase of marketable securities (667) -
Other (25) 72
------- --
Net cash provided by (used in) investing activities (2,538) 9,097
------- -----
Cash flow from financing activities:
Bank repayments - (16,900)
Payoff/paydown of loan and mortgages payable (1,744) (599)
Proceeds from mortgages payables - 4,800
Exercise of stock options - 1,408
Repurchase of shares of beneficial interest, a portion of
which were cancelled (2,265) -
Decrease in restricted cash - 419
Other (28) (221)
--- ----
Net cash used in financing activities (4,037) (11,093)
------- --------
Net decrease in cash and cash equivalents (3,219) (817)
Cash and cash equivalents at beginning of period 6,209 7,385
----- -----
Cash and cash equivalents at end of period $2,990 $6,568
====== ======
See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months Ended
June 30,
1997 1996
---- ----
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $1,123 $2,789
====== ======
Supplemental schedule of noncash investing and financing activities:
Transfer of a nonearning real estate loan to
foreclosed properties at fair value $ 13 $ 34
Recognition of allowance for previously
provided losses 25 1,286
Transfer of foreclosed property to an
investment in a real estate venture 1,552 -
Recognition of valuation allowance
upon sale of foreclosed properties - 332
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 June 30, 1997 and for the three and nine months ended June 30, 1997 and
1996 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,
1997 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.
Investments in less than majority-owned entities have been accounted for using
the equity method. 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 and nine
months ended June 30, 1997 and 1996, 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 higher of the period end
or average market price. The fully diluted per share computation for the three
months ended June 30, 1996 is dilutive with the addition of 1,030,000 shares
upon conversion of preferred stock and 8,855 shares, upon exercise of the common
share options. The fully diluted computation is not materially dilutive for the
three and nine months ended June 30, 1997, as well as the nine months ended June
30, 1996, and therefore not presented.
Note 2 - Shareholders' Equity (Continued)
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("FASB 128"), Earnings Per Share, which is required to be
adopted on December 31, 1997. At that time, the Trust will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of FASB 128 on
the calculation of primary and fully diluted earnings per share is not expected
to be material.
Note 3 - Real Estate Loans
If all loans classified as non-earning were earning interest at
their contractual rates for the three and nine months ended June 30,1997 and
1996, interest income would have increased by approximately $182,000 and
$499,000 in the respective periods in 1997, and approximately $190,000 and
$564,000 in the respective periods in 1996.
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 $24,493,000 are due during the twelve months
ending June 30, 1998, including $7,517,000 of 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 should be 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, permits the Trust to
borrow, repay and re-borrow, 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 the facility 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 assets held
by the Trust, and the credit agreement provides that the loan amount will never
exceed 75% of the agreed value of the collateral.
Repayment in full of the debt due under the Restated Credit
Agreement terminated the prohibition on the Trust's ability to engage in
mortgage lending activities, and therefore during the fiscal year ended
September 30, 1997 ("Fiscal 1997") the Trust became active in making short term
real estate loans. From the beginning of Fiscal 1997 through August 4, 1997, the
Trust has funded new real estate loans of approximately $13,200,000 with
available cash on hand and borrowings from First Boston of approximately
$1,800,000. Commencing with the third quarter Fiscal 1997, the Trust realized
the positive effects of these loans.
During the nine months ended June 30, 1997, the Trust generated cash
of $3,356,000 from operating activities and $9,355,000 from collections from
real estate loans (net of repayments to participating lenders of $1,000,000).
These funds in addition to cash on hand, were used primarily to fund real estate
loans of $11,981,000, payoff a note payable to Gould Investors LP, a related
party, of approximately $1,030,000, and purchase 339,139 shares of beneficial
interest of the Trust at an approximate aggregate cost of $2,265,000.
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, and approved the purchase of an additional 250,000 shares on January 3,
1997. As of August 4, 1997, 392,522 shares have been purchased at an approximate
aggregate cost of $2,574,000.
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 and sale of real estate assets.
Results of Operations
Interest and fees on real estate loans increased to $3,567,000 and
$1,148,000 for the nine and three months ended June 30, 1997 as compared to
$3,511,000 and $1,022,000 for the nine and three months ended June 30, 1996.
These increases of $56,000 and $126,000, respectively, were a result of interest
earned on the origination of new loans, a majority of which was recognized
during the three months ended June 30, 1997 and the receipt of additional
interest during the first half of Fiscal 1997 of approximately $486,000 upon the
payoff of two loans, one of which was non-earning. Payoffs and pay-downs of
various earning real estate loans offset these increases.
Operating income on real estate assets increased by $302,000 and
$34,000 to $6,777,000 and $2,282,000 for the nine and three months ended June
30, 1997 from $6,475,000 and $2,248,000 for the comparable periods in the prior
fiscal year. These increases were the result of an increase in occupancy and
rental rates at various properties. Also, during the quarter ended March 31,
1997, the Trust received a real estate tax refund of approximately $106,000 as a
result of a successful tax appeal. These increases were offset in part by the
loss of rental income upon the sale of properties.
During the nine months ended June 30, 1997 the Trust reversed
previously provided allowances of $1,300,000, upon the payoff in full of two
real estate loans. There were no comparable reversals during the nine-month
period in Fiscal 1996.
Interest expense on notes and loans payable decreased by $983,000
from $1,080,000 for the nine months ended June 30, 1996 to $97,000 for the
comparable period in Fiscal 1997 and by $155,000 from $240,000 for the three
months ended June 30, 1996 to $85,000 for the comparable prior year period.
These decreases were a direct result of the continued reduction and the eventual
payoff in August 1996 of the outstanding debt under the Restated Credit
Agreement.
The Advisor's fee decreased to $425,000 for the nine months ended
June 30, 1997 from $477,000 for the comparable nine-month period in the prior
fiscal year, a decrease of $52,000. 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 $391,000 from
$2,098,000 for the nine months ended June 30, 1996 to $1,707,000 for the nine
months ended June 30, 1997, and by $105,000 from $646,000 for the third quarter
of Fiscal 1996 to $541,000 for the third quarter of Fiscal 1997. These decreases
are primarily the result of the recognition during March 31, 1996 of
approximately $187,000 of additional legal, accounting and investment-banking
expenses incurred in connection with a potential transaction, which did not
proceed beyond the negotiation stage. There has also been a reduction in the
Trust's general overhead expenses.
Operating expenses relating to real estate assets decreased by
$249,000 and $91,000 from $5,241,000 and $1,643,000 for the nine and three
months ended June 30, 1996 to $4,992,000 and $1,552,000 for the nine and three
months ended June 30, 1997. These decreases were primarily due to the sale of
foreclosed properties offset in part by a full period of operations of an office
building in Fairway, Kansas, acquired during Fiscal 1996.
Depreciation and amortization increased by $142,000 for the first
nine months of Fiscal 1997 and $68,000 for the third quarter of Fiscal 1997.
These increases were a result of the amortization of the deferred mortgage costs
associated with the financing of real estate assets and the First Boston credit
facility. The nine month increase was offset in part by the reclassification,
effective January 1996, of a mixed use property located in Philadelphia,
Pennsylvania from an asset held for the production of income to an asset held
for sale, thereby no longer being depreciated.
Gain on sale of foreclosed properties for the nine months ended June
30, 1996 was $227,000, with no comparable gain in the nine months ended June 30,
1997. It is the policy of the Trust to offer for sale all foreclosed property 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 June 30,
1997.
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
08/13/97 /s/ Jeffrey Gould
Date Jeffrey Gould, President
08/13/97 /s/ David W. Kalish
Date David W. Kalish, Vice President and
Chief Financial Officer