SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2003 Commission File Number 0-7716
CENTURY REALTY TRUST
(Exact name of Registrant as specified in its charter)
INDIANA 35-1284316
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
823 Chamber of Commerce Building 46204
Indianapolis, Indiana (ZipCode)
(Address of principal executive offices)
Registrant's telephone number, including area code (317)632-5467
Indicate by check mark whether this 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 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 __.
Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES __ NO X .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
Shares of Beneficial Interest, no par value 1,774,024
Part 1. Financial Information
Century Realty Trust and Subsidiaries
Consolidated Balance Sheets
March December
31, 2003 31, 2002
___________ ___________
Unaudited See Note 1
Assets
Real estate investments:
Land $3,776,383 $3,776,383
Buildings 53,393,600 53,328,753
Equipment 1,179,034 1,159,609
Allowances for depreciation (16,406,139) (15,984,984)
___________ ___________
41,942,878 42,279,761
Net investment in direct financing leases 136,311 148,698
___________ ___________
42,079,189 42,428,459
Cash and cash equivalents 1,759,990 1,751,051
Restricted cash 1,899,804 1,592,035
Accounts and accrued income receivable 245,685 321,571
Unamortized management contracts 303,497 319,756
Unamortized mortgage costs 330,018 341,875
Undeveloped land 99,675 99,675
Other assets 161,688 104,004
___________ ___________
$46,879,546 $46,958,426
___________ ___________
___________ ___________
Liabilities and shareholders' equity
Liabilities:
Mortgage notes payable $33,941,808 34,101,623
Accounts payable and accrued liabilities 300,707 393,467
Interest 185,698 196,098
State income and property taxes 1,806,840 1,454,716
Tenants' security deposits and unearned rent 564,122 573,299
___________ ___________
36,799,175 36,719,203
Minority interest in operating partnerships 540,252 569,021
Shareholders' equity:
Shares of Beneficial Interest, no par
value - authorized 5,000,000 shares,
issued 1,782,531 shares (1,780,908 shares
at December 31, 2002), including 14,207
shares in 2003 and and 19,207 shares in
2002, in treasury 9,485,561 9,472,832
Overdistributed income other
than from gain on the sale of real estate (1,114,774) (920,316)
Undistributed net realized gain from the
sale of real estate 1,316,078 1,316,078
Cost of treasury shares (146,746) (198,392)
___________ ___________
9,540,119 9,670,202
___________ ___________
$46,879,546 $46,958,426
___________ ___________
___________ ___________
See accompanying notes.
Century Realty Trust and Subsidiaries
Consolidated Statements of Income
Unaudited
Three Months
Ended March 31
2003 2002
__________ __________
Income:
Real estate operations:
Rental Income $2,946,447 $3,161,394
Income from direct financing leases 4,137 5,712
Other income 67,921 71,558
__________ __________
3,018,505 3,238,664
Less:
Real estate operating expenses 1,423,311 1,348,618
Depreciation 439,364 462,054
Real estate taxes 365,050 361,851
__________ __________
2,227,725 2,172,523
__________ __________
790,780 1,066,141
Interest income 3,962 5,424
__________ __________
794,742 1,071,565
Expenses:
Interest 595,307 650,104
State income taxes - 4,556
General and administrative 158,732 180,052
__________ __________
754,039 834,712
Income before minority interest
in operating partnerships 40,703 236,853
Minority interest in operating
partnerships 10,873 (3,093)
__________ __________
Net income $51,576 $233,760
__________ __________
__________ __________
Earnings per share:
Basic earnings per share $0.03 $0.13
Diluted earnings per share $0.03 $0.13
See accompanying notes.
Century Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
Three Months
Ended March 31
2003 2002
__________ __________
Operating Activities
Net income $51,576 $233,760
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 451,221 475,252
Minority interest (10,873) 3,093
Changes in operating assets
and liabilities:
Restricted cash (307,769) (173,586)
Accounts and accrued income receivable 75,886 (1,306)
Other assets (59,634) 17,620
Accounts payable and accrued liabilities 248,964 355,767
Tenants' security deposits and
unearned rent (9,177) 33,997
__________ __________
Net cash provided by operations 440,194 944,597
Investing Activities:
Purchase of property and improvements (84,272) (111,768)
Lease principal payments received 12,387 10,813
__________ __________
Net cash used in investing activities (71,885) (100,955)
Financing Activities:
Net short-term bank loan repayments - (92,406)
Principal payments on mortgage notes payable (159,815) (143,351)
Shares purchased for treasury - -
Treasury shares sold 51,250 -
Dividends paid to shareholders (246,034) (244,265)
Distributions to minority interest (4,771) (3,088)
__________ __________
Net cash used in financing activities (359,370) (483,110)
__________ __________
Net increase in cash and cash equivalents 8,939 360,532
Balance at beginning of period 1,751,051 1,316,299
__________ __________
Balance at end of period $1,759,990 $1,676,831
__________ __________
__________ __________
Supplemental Data:
Selected noncash activities related to
investing and financing activities were
as follows:
Issued 1,197 shares in 2003 and 2,669
shares in 2002 in exchange for like
numbers of operating partnership units
of controlled partnerships $13,125 $31,575
__________ __________
__________ __________
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CENTURY REALTY TRUST
March 31, 2003
Unaudited
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results
for the three months ended March 31, 2003 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 2003.
The balance sheet at December 31, 2002 has been derived from
the audited financial statements at that date but does not
include all of the information and footnotes required for
complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Trust's annual report on Form 10-K for the year
ended December 31, 2002.
NOTE 2 - INTEREST IN OPERATING PARTNERSHIPS
The Trust, through its wholly-owned subsidiary, CR Management,
Inc., is the general partner in five limited partnerships each
of which owns, as its principal asset, a single apartment
property. CR Management, Inc. owns 2,972 partnership units.
Effective January 1, 2000, the Trust granted to each of the
beneficial owners of the remaining 286,908 partnership units the
right to exchange their units for an equal number of shares of
the Trust. Exchanges are exercised effective on the first day
of each calendar quarter. At December 31, 2002 the Trust owned,
in the aggregate 227,380, or 79.3%, of the limited partnership
interests.
During the three months ended March 31, 2003, the Trust issued
1,197 shares of beneficial interest in exchange for partnership
units. As of April 1, 2003, holders of 426 units elected to
exchange units for shares. Including the exchanges exercised
April 1, 2003, the Trust owns 229,003, or 79.8%, of the 286,908
limited partnership units. The equity interest that the Trust
does not own is described in the consolidated financial
statements as the minority interest in operating partnerships.
NOTE 3 - MORTGAGE NOTES PAYABLE
Nine of the fifteen properties owned by the Trust are
encumbered by mortgage loans that are payable in monthly
installments totaling approximately $179,500, including interest
at rates ranging from 3.8% to 9% per annum, and which mature
from October 3, 2004 to February 1, 2012. Scheduled payments
during the three month period ended March 31, 2003 decreased
mortgage loan balances, in the aggregate, by $131,709.
The five apartment properties owned by the operating
partnerships controlled by the Trust have long-term mortgage
loans that are payable in monthly installments totaling
approximately $70,000. The loans have interest rates ranging
from 6.625% to 8.31%, and mature from June 1, 2006 to July 31,
2037. The total monthly installments, range of interest rates,
and maturity dates represent new terms following modification in
July, 2002 of three of the five mortgage loans. Scheduled
payments during the three months ended March 31, 2003 decreased
mortgage loan balances, in the aggregate, by $28,106.
NOTE 5 - FEDERAL INCOME TAXES
The Trust intends to continue as a real estate investment trust
as defined in the Internal Revenue Code and to distribute its
taxable income. Assuming compliance with other requirements of
the Code, income distributed will not be taxable to the Trust.
Accordingly, no provision for federal income taxes is made in
the financial statements. Distributions, however, to the extent
that such payments are from earnings and profits of the Trust,
are taxable to the shareholder recipients as dividend income.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
Contained in this discussion are forward-looking statements
which management believe to be reasonable and informative. Such
statements are based on assumptions which may not prove to be
correct for reasons management cannot predict. Consequently,
the inclusion of forward-looking statements should not be
considered as representations by the Trust or its management
that expected results will be achieved or that stated objectives
will be attained.
At March 31, 2003 and 2002, and throughout the quarters then
ended, the Trust owned or controlled fifteen apartment
communities containing 2,136 apartment units, three multi-tenant
commercial properties containing 89,000 rentable square feet,
and two restaurant properties leased to operators under net
leases. Five of the fifteen apartment communities containing a
total of 586 units are owned by partnerships in which the Trust
has a majority financial interest and over which it has
exclusive control. A detailed listing of the investment real
estate is contained on Page 2 of the Trust's 2002 annual report.
At March 31, 2003 and 2002 the Trust's net investment in real
estate consisted of apartment properties (94%), commercial
properties (5%) and net-leased restaurant properties (1%).
Except for one restaurant property in Orlando, Florida, the
Trusts' real estate investments are located in Indiana.
The apartment communities, which comprise 94% of the Trust's
investment property, also account for most of the rental income
and expenses reported. Management expects the real estate
portfolio will be unchanged during the second quarter of 2003.
In view of lower average apartment occupancy rates, rental
discounts offered to new tenants at certain locations, and
higher operating expenses to retain and attract residents,
management expects that net operating income from apartment
operations for the first half of 2003 will be less than that
reported for the first half of 2002. Lower interest costs
related to certain mortgage loans, however, are expected to
mitigate the impact of apartment operations on net income
through the second quarter of 2003.
Critical Accounting Policies
Amortization of Management Contracts. In November, 1997, the
Trust paid $650,350 for the general partner interest and
absolute management control over five partnerships, each of
which owns one apartment property as its principal asset. The
accounts of the partnerships are included in the consolidated financial
statements of the Trust. The Trust granted to the limited
partners in those partnerships options to exchange their
interests for shares of beneficial interest of the Trust. Those
options will expire in November 2007 at which time the Trust
will have the option to issue shares in exchange for any
outstanding limited partnership interests. The Trust elected in
1997 to amortize, on a straight line basis, its cost to acquire
its position over the ten-year option period that it granted to
the limited partners; consequently, depreciation expense each
year includes $65,035 ($16,260 each quarter) of acquisition cost
amortization.
Carpet Replacement Policy. From its inception in 1973, the
Trust has consistently followed the practice of charging the
cost to replace carpets in its apartment units, as incurred, to
real estate operating expense. The costs to replace carpets
amounted to $58,210 and $45,735 in the first quarters of 2003
and 2002, respectively. An acceptable alternative method of
accounting would be the capitalization of costs as incurred,
followed by charges for depreciation over the estimated useful
life of the carpet. Management believes that, due to the
relatively short useful life of apartment carpets, the annual
expense for replacements is not materially greater than would be
the annual charges for depreciation had the carpets been
capitalized when purchased.
RESULTS OF OPERATIONS
For the first quarter of 2003, the Trust reported a $220,159 or
6.8%, decrease in gross income from real estate operations from
the comparable 2002 period. Gross income from apartment
operations decreased by $197,031, or 6.5%, from the prior year
quarter. Higher average rental rates in 2003, up .7%, were more
than offset by lower economic occupancy rates. Economic
occupancy for the first quarter of 2003 was 83.3%, down from
89.6% during the prior year quarter.
Rental properties other than apartments accounted for 4.8% of
total income from rental operations in the first quarter of
2003. Gross income from non-apartment properties decreased
$23,100 due to lower occupancy rates. Occupancy rates for
commercial properties, exclusive of net-leased restaurant
properties, averaged 84% and 93% during the first quarters of
2003 and 2002, respectively.
Operating expenses, excluding interest and depreciation, for
all of the apartment properties amounted to 50.8% of gross
possible income for the first quarter of 2003, up from 49.1%
for the prior year period, and amounted to an increase of
$72,600, or 4.3%, in total operating expenses. A severe winter
season following a moderate winter a year ago resulted in higher
utility expenses and snow and ice removal costs during the 2003
quarter. Higher rates for heating fuel and an increase in the
number of vacant units contributed to a 21% increase in the cost
of utilities. Costs for snow and ice removal incresed by
approximately $50,000 in the 2003 quarter over the same quarter
a year ago.
Real estate taxes on Indiana property are assessed on March 1
each year and are payable in two installments in the following
calendar year. Real estate tax expense for the first quarter
represents one-fourth of the estimated real estate taxes payable
during the next calendar year. Estimates are based on actual
tax payments during the preceding year with allowances for
anticipated rate increases comparable with past experience. A
state-wide reassessment of real property is to be effective for
taxes payable in 2003. At the date of this writing, no real
estate tax bills have been received.
Interest expense, all of which is applicable to loans
outstanding during the quarters ended March 31, 2003 and 2002,
decreased by $54,800. Five of those mortgage loans were
refinanced during 2002 toward the objective of reducing future
interest expense. The aggregate interest expense in the first
quarter of 2003 for the new loans at the new rates was $23,900
less than the expense would have been for the old loans at the
old rates.
Three loans contain provisions to reset rates, based on
lender-determined benchmarks, at intervals of two years or less.
Two of the loans, with unpaid balances that totaled $1.3
million at March 31, 2003, provide for interest rates to be
reset February 1 each year. The current interest rates
applicable to those loans is 4.12%. The third adjustable rate
loan, with a current interest rate of 3.91%, had an unpaid
balance at March 31, 2003 of $4.8 million. The next interest
rate reset date for that loan is October 1, 2004. All three of
those loans had lower effective rates during the first quarter
of 2003 than the prior year quarter. In the aggregate, interest
expense applicable to those loans was $13,100 less in the first
quarter of 2003 than in the prior year quarter.
The remainder of the decrease in interest expense,
approximately $18,000, resulted from scheculed amortization of
mortgage loan balances.
FINANCIAL CONDITION AND LIQUIDITY
On April 10, 2003, the Trust declared a $.12 per share cash
distribution payable May 19, 2003 to shareholders of record
April 25, 2003. With 1,774,024 shares outstanding, that
distribution will require $212,883.
Other than the requirement for declared, but unpaid,
distributions management is not aware of any significant
transactions or events which would require material expenditures
in the second quarter of 2003.
The Trust has no obligations, nor has it made any commitments,
which will require expenditures in excess of funds anticipated
to be provided by operations during the remainder of 2003.
Other than the impact of real estate taxes that might increase
significantly from a statewide (Indiana) reassessment of real
estate, and casualty insurance premiums that may increase
significantly effective July 1, 2003, the amounts of which
increases cannot be estimated at this time, no transactions or
events have occurred to indicate that funds provided by
operations during the balance of 2003 will differ
disproportionately from the first quarter of the year. At March
31, 2003, the Trust held cash and cash equivalents of
approximately $1,497,000 in its own accounts and $263,000 in
partnership accounts which management believes is sufficient to
meet anticipated working capital requirements.
INFLATION
Management believes that the direct effects of inflation on the
Trust's quarterly operations have been insignificant during 2003
and 2002.
PART II
Item 6(b). No events occurred during the three months
ended March 31, 2003, which would have necessitated the filing
of a report on Form 8K.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. The Chief
Executive Officer serves as the principal operating officer and
in such capacity supervises, directly or indirectly, the daily
operation of the Trust and its investment properties. The
Controller serves as the chief financial officer and principal
accounting officer and in such capacity supervises, directly or
indirectly, the accounting and financial operations of the Trust
and its subsidiaries. The centralized and compact management
structure of the registrant provides adequate and effective
disclosure control.
Changes in internal controls. There have been no changes in
internal controls or in other factors within the past ninety
days that could significantly affect internal controls.
Management has discovered no significant deficiencies or
material weaknesses in internal controls that would warrant
corrective actions.
MANAGEMENT REPRESENTATIONS
The information furnished in this report, while not
audited, includes all adjustments, in the opinion of management,
necessary for a fair representation of the financial position of
Century Realty Trust at March 31, 2003, and December 31, 2002,
and the results of its operations and its cash flow for the
three months ended March 31, 2003, and March 31, 2002, in
accordance with accounting principles generally accepted in the
United States consistently applied. The interim results
reported are not necessarily indicative of expected results for
the full year, and should be considered in conjunction with the
audited financial statements contained in the Trust's 2002
annual report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CENTURY REALTY TRUST
Date 5/8/03 By /S/ John I. Bradshaw, Jr.
_________________________
John I. Bradshaw, Jr.
President and Treasurer
Date 5/8/03 By /S/ David F. White
__________________________
David F. White
Controller
CERTIFICATION
I, John I. Bradshaw, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Century
Realty Trust;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of trustees (or other persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: 5/8/03 /S/ John I. Bradshaw, Jr.
___________________________
Chief Executive Officer
President and Treasurer
CERTIFICATION
I, David F. White, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Century
Realty Trust;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of trustees (or other persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identifiedfor the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this quarterly report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: 5/8/03 /S/ David F. White
___________________________
David F. White
Controller (chief financial officer
and principal accounting officer)
EXHIBIT 99.1--CERTIFICATION
In connection with the accompanying Quarterly Report of the
Trust on Form 10-Q for the period ending March 31, 2003, I, John
I. Bradshaw, Jr., Chief Executive Officer, President and
Treasurer of the Trust, certify, pursuant to 18 U.S.C Sec. 1350,
as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of
2002, that:
1) The Report fully complies with the requirements of section
13(a)of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Trust.
/S/ John I. Bradshaw, Jr.
_____________________________________
Chief Executive Officer, President
and Treasurer
EXHIBIT 99.2--CERTIFICATION
In connection with the accompanying Quarterly Report of the
Trust on Form 10-Q for the period ending March 31, 2003, I,
David F. White, Controller of the Trust, certify, pursuant to 18
U.S.C Sec. 1350, as adopted pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002, that:
1) The Report fully complies with the requirements of section
13(a) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Trust.
/S/ David F. White
_____________________________________
Controller (chief financial officer
and principal accounting officer)