U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB/A
AMENDMENT TO FORM 10-QSB
filed Pursuant to
THE SECURITIES EXCHANGE ACT OF 1934
LNH REIT, INC.
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(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
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The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its
Form 10-QSB for the quarter ended March 31, 1995 as set forth in
the pages attached hereto:
Part I
Item 1. Consolidated Fianancial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II
Item 6. Exhibits
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 16, 1995 LNH REIT, INC.
BY: /s/ N. Keith McKey
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N. Keith McKey
Senior Vice President
Chief Financial Officer
and Assistant Secretary
LNH REIT, INC.
FORM 10-QSB
TABLE OF CONTENTS
FOR THE QUARTER ENDED MARCH 31, 1995
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Part I. Financial Information
Pages
Item 1. Consolidated financial statements
Consolidated balance sheets, March 31, 1995
and December 31, 1994
Consolidated statements of operations for the
three months ended March 31, 1995 and 1994
Consolidated statements of cash flow for the
three months ended March 31, 1995 and 1994
Consolidated statements of stockholders'
equity for the three months ended
March 31, 1995 and 1994
Notes to consolidated financial statements
Item 2. Management's discussion and analysis of
financial condition and results of operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Authorized signatures
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1995 1994
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(Unaudited)
Assets
Mortgage loans $ 5,164 $ 5,149
Mortgage loans subject to foreclosure
proceedings 5,963 5,960
Real estate properties:
Earning
Warehouse 4,074 4,073
Shopping center 6,867 6,867
Accumulated depreciation (517) (427)
Non-earning land 2,801 3,067
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24,352 24,689
Less allowance for losses (525) (525)
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23,827 24,164
Marketable equity securities 561 525
Cash and cash equivalents 532 1,660
Accrued interest and other receivables 295 285
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$ 25,215 $ 26,634
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Liabilities
Minority interest payable $ 1,492 $ 1,510
Other liabilities 551 493
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2,043 2,003
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Stockholders' Equity
Common stock, $.50 par value,
15,000,000 shares authorized,
2,200,000 shares issued and
outstanding in 1995 and 1994 1,100 1,100
Paid in capital 25,565 27,215
Deficit (3,885) (4,040)
Unrealized gain on marketable
equity securities 392 356
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23,172 24,631
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$ 25,215 $ 26,634
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See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
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1995 1994
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Revenues
Interest:
Mortgage loans $ 134 $ 339
Cash equivalents and other 19 25
Revenue from real estate properties 379 220
Other income 27 28
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559 612
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Expenses
Management fees 76 88
Real estate expenses:
Operating 130 106
Depreciation 90 46
Professional fees 41 27
General and administrative 41 42
Minority interest expense 26 7
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404 316
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Income from operations 155 296
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Gain on investments
Real estate and mortgage loans - 135
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- 135
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Net Income $ 155 $ 431
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Net Income per share
Income from operations $ .07 $ .14
Income on investments - .06
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Net Income $ .07 $ .20
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Average number of shares outstanding 2,200 2,200
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See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(In thousands)
Three Months Ended
March 31,
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1995 1994
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Operating Activities
Net income $ 155 $ 431
Adjustments to reconcile
net income to net cash provided
by operating activities:
Amortization of deferred financing
fees and discount on mortgage loans (15) (14)
Depreciation 90 46
Gain on investments - (135)
Other (16) -
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Funds from operations 214 328
Net change in receivables, payables
and other assets 43 (328)
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Cash provided by operating activities 257 -
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Investing Activities
Collections on mortgage loans 1 3,990
Improvements to real estate (1) (35)
Proceeds from sale of real estate 265 44
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Cash provided by investing activities 265 3,999
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Financing Activities
Dividends paid (1,650) (308)
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Cash used in financing activities (1,650) (308)
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Net increase (decrease) in cash and
cash equivalents (1,128) 3,691
Cash and cash equivalents at
beginning of year 1,660 1,340
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Cash and cash equivalent at
end of year $ 532 $ 5,031
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See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In thousands)
Three Months Ended
March 31,
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1995 1994
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Common stock, $.50 par value
Balance at beginning and
end of period $ 1,100 $ 1,100
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Paid-in capital
Balance at beginning of period 27,215 31,527
Cash dividends declared and paid (1,650) (308)
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Balance at end of period 25,565 31,219
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Deficit
Balance at beginning of period (4,040) (4,299)
Net income 155 431
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Balance at end of period (3,885) (3,868)
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Unrealized gain on marketable
equity securities
Balance at beginning of period 356 -
Unrealized gain on securities 36 470
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Balance at end of period 392 470
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Total stockholders' equity $ 23,172 $ 28,921
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See notes to consolidated financial statements
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
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. The financial statements should be read in
conjunction with the annual report and the notes thereto.
(2) Reclassifications
Certain reclassifications have been made in the fiscal 1994
financial statements to conform to the fiscal 1995
classifications.
(3) Supplemental Cash Flow Information
Three Months Ended
March 31
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1995 1994
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Loan foreclosures added to
real estate owned $ - $ 6,806
Loans made to facilitate sales
of real estate owned - 200
Change in gain on marketable
equity securities 36 470
(4) Marketable Equity Securities
The Company's investment in marketable equity securities
consists of the following:
March 31, 1995 December 31, 1994
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Quoted Quoted
Ownership Carrying Market Ownership Carrying Market
Interest Value Value Interest Value Value
--------- ------- ------ -------- ------- --------
Liberte'
Investors 2.41% $ 561 $ 561 2.41% $ 525 $ 525
("Liberte'") ======= ====== ======= =====
On January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" and
classified its investments as securities available-for-sale.
Accordingly, investment securities are carried at fair value
with the unrealized gain of $392,000 at March 31, 1995 and
$356,000 at December 31, 1994, presented as a separate component
of stockholders' equity.
LNH REIT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
(Comments are for the balance sheet dated March 31, 1995
compared to December 31, 1994.)
Total assets of the Company at March 31, 1995 were
$25,215,000 compared to $26,634,000 at December 31, 1994. Total
liabilities increased from $2,003,000 at December 31, 1994 to
$2,043,000.
The Company's mortgage loan balance decreased $18,000
during the reporting period. This decrease was primarily due to
the recognition of loan discounts and deferred financing fees of
$15,000. In addition, the Company sold a 2.78 acre and a 12.60
acre tract of the Houston land during the quarter. The Company
received cash of $266,000 (net of closing costs) for these
sales. No gain or loss was recognized on these sales.
The increase in other liabilities is due primarily to the
accrual of property taxes for the REO properties owned by the
Company's subsidiaries.
Stockholders' equity decreased $1,459,000 during the
quarter reflecting net income of $155,000 for the three months
ending March 31, 1995, and dividends declared and paid of
$1,650,000.
RESULTS OF OPERATIONS
(Comments are for the three months ended March 31, 1995,
compared to the three months ended March 31, 1994.)
Net income for the first quarter of 1995 was $155,000 ($.07
per share) compared to $431,000 ($.20 per share) for the first
quarter of 1994.
Interest income on mortgage loans decreased $205,000 during
the first quarter of 1995 compared to the first quarter of 1994,
reflecting primarily the payoff of the Rivercrest Apartments,
the foreclosure of the Liberty Corners Shopping Center, and the
cash flow payments of the Cowesett Corners Shopping Center.
Interest income on these three mortgage loans during the first
quarter of 1994 was $236,000 compared to $3,000 for 1995.
During the first quarter cash from operations of the Cowesett
Corners Shopping Center of $361,000 was collected. The amounts
were placed in escrow accounts and the disposition of the funds
is pending the results of the foreclosure proceedings. The
Company reported no interest income related to this mortgage in
the first quarter of 1995. Interest income on mortgage loans
also increased $28,000 in 1995 compared to 1994 primarily due to
interest received from the Meadowbend land loan and from the
interest rate increase on the Hickory Creek land loan.
Management fees for the first quarter of 1995 decreased
$12,000 due to the decrease in average invested assets from
$28,521,000 in the first quarter of 1994 to $24,308,000 in the
first quarter of 1995.
The foreclosure of the Liberty Corners mortgage loan
accounts for the $159,000 increase in revenue from real estate
owned, the $68,000 increase in REO operating and depreciation
expense and the $19,000 increase in minority interest expense.
Only one month of revenue and expense was included in the first
quarter of 1994 while three months of revenue and expense was
included in the first quarter of 1995.
The increase in Professional Fees is primarily the legal
costs incurred in foreclosure proceedings against the borrowers
of the Cowesett mortgage loan.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds continue to be
monthly principal and interest payments on its mortgage
investments and net operating income from real estate
properties. The Company believes that these funds, along with
cash balances, are sufficient to meet its long and short-term
operating needs as well as to continue the payment of cash
dividends as required for its continued qualification as a real
estate investment trust.
At March 31, 1995, the Company had $532,000 in cash and
cash equivalents available for general corporate use. During
the first quarter of 1995, the Company completed two sales of
Houston acreage. The Company received cash of $48,000 (net of
closing costs) for the sale of a 3 acre portion of one parcel,
and it received cash of $217,000 (net of closing costs) for the
sale of a 12 acre portion of a separate parcel. Also in the
first quarter of 1995, the Board of Directors of the Company
declared a regular dividend of $.09 per share and a special
dividend of $.66 per share, totaling $1,650,000, which was paid
on March 31, 1995.
The Company's portfolio of investments has been impacted
negatively by the generally depressed condition of the national
real estate markets. A number of factors contributed to these
depressed conditions including a surplus of retail real estate
of every type in almost every major market and real estate
acquired through foreclosure by financial institutions, the
Federal Deposit Insurance Corporation and the Resolution Trust
Corporation being placed on the market for sale or lease at
distressed prices. Although the current real estate conditions
have generally improved, borrowers that depend on cash flow from
real estate projects to meet operating expenses and interest
payments may continue to be adversely affected. This, in turn,
will continue to have a negative impact on the operating results
of the Company if its borrowers fail to make scheduled principal
and interest payments. Three of the Company's mortgage loan
investments defaulted under terms of the original notes during
1993. The Liberty Corners mortgage went into default on July 1,
1993 and the Company received a deed in lieu of foreclosure on
the property on February 25, 1994. The Company owns 77.78% of
the investment and records the total assets, liabilities,
revenues and expenses of the center with minority interest
provided for the 22.22% not owned. The loan had a $5,294,000
balance net of allowance for losses and deferred income, and the
Company recorded the asset at $6,806,000, which included the
participant's 22.22% minority interest of $1,512,000.
Subsequent to February 25, 1994, the Company reported $934,000
in revenue (including the 22.22% minority interest) from the
operations of the property. The Cowesett Corners mortgages,
with a total outstanding principal balance of $6,000,000, went
into default on May 1, 1993. The borrower continued making
payments from cash flow under a short-term work out agreement.
However, the Company discontinued the accrual of interest income
from the loan and now records interest income on the cash basis
since the owner of Cowesett Corners filed for bankruptcy in
February of 1995. Also as a result of the bankruptcy
proceedings, LNH recorded a provision for loss of $250,000 at
December 31, 1994 to reduce the net carrying value of the loans
to the estimated fair value of the investment. This loan is
secured by a 135,713 square foot shopping center that is in a
good location in Warwick, Rhode Island and in good physical
condition. The Citrus Center mortgage, with an outstanding
balance of $1,872,000, went into default on December 1, 1993.
Since that time, the borrowers have failed to make five
scheduled payments and, as a result, the Company recorded a
provision for loss of $275,000 at December 31, 1994 to write
down the investment to its estimated fair value. At the current
time, the Company and its 79.01% loan participant are
negotiating with the borrowers to cure this default. The Company
is no longer accruing interest on this loan and only recognizes
interest income as cash is collected. The Company's mortgage
loan portfolio performance in 1995 will be dependent on the
ability of the Citrus Center owners to cure their existing
default and the settlement obtained in the Cowesett Corners
bankruptcy proceedings. While management of the Company does
not believe it will incur additional losses on these
investments, there can be no assurance that the defaults will be
cured at terms as favorable to the Company as the original note
terms.
It is the Company's policy, consistent with its status as a
real estate investment trust, to distribute at least 100% of
taxable income. In the first quarter of 1995, the Company paid
distributions to its stockholders of $1,650,000 ($.75 per
share), which included a special dividend of $1,452,000 ($.66
per share).
On May 1, 1995, the Company sold the largest remaining
parcel of its undeveloped Houston land, the 90 acre Baypointe
tract. The sales price was $2,750,000 consisting of $550,000 in
cash and $2,200,000 in seller financing. The transaction is
expected to generate a gain of approximately $534,000 ($.24 per
share) in the second quarter.
LNH REIT, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 27 - Financial Data Scheduled attached
hereto.
No reports on Form 8-K were filed during the
current reporting period.
SIGNATURE
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.
Dated: May 16, 1995 LNH REIT, Inc.
By: /s/ Sarah P. Clark
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Sarah P. Clark, CPA
Vice-President
/s/ N. Keith McKey
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N.Keith McKey, CPA
Senior Vice President
Chief Financial Officer
and Assisstant Secretary