SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended September 30, 2001
--------------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
AOF 1934
For the transition period from _________ To _________
Commission file number 0-13754
MAXUS REALTY TRUST, INC.
(Exact name of small business issuer as specified in its charter)
Missouri 43-1339136
---------- ------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
104 Armour, North Kansas City, Missouri 64116
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Trust's telephone number, including area code (816) 303-4500
---------------
Indicate by check mark whether the Trust (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 Trust was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]
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INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 16
EXHIBIT INDEX 17
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAXUS REALTY TRUST, INC.
BALANCE SHEETS
September 30, 2001 December 31, 2000
(Unaudited)
ASSETS:
Investment property
Land .................................................. $ 2,794,000 2,322,000
Buildings and improvements ............................ 33,354,000 16,460,000
---------- ----------
36,148,000 18,782,000
Less accumulated depreciation ......................... (6,805,000) (6,324,000)
---------- ----------
29,343,000 12,458,000
Investment property held for sale ..................... -- 3,242,000
---------- ----------
Total investment property ..................... 29,343,000 15,700,000
Cash and cash equivalents ................................ 616,000 817,000
Accounts receivable ...................................... 411,000 367,000
Prepaid expenses and other assets ........................ 212,000 88,000
Deferred expenses, less accumulated amortization ......... 512,000 470,000
---------- ----------
Total assets .................................. $ 31,094,000 17,442,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Mortgage notes payable ................................ $ 19,495,000 6,698,000
Accounts payable and accrued expenses ................. 292,000 387,000
Real estate taxes payable ............................. 295,000 212,000
Refundable tenant deposits ............................ 170,000 96,000
---------- ---------
Total liabilities ............................. 20,252,000 7,393,000
Shareholders' equity:
Common stock, $1 par value: authorized 5,000,000 shares
1,039,624 shares issued and outstanding ............ 1,040,000 1,040,000
Additional paid-in-capital ............................ 15,463,000 15,463,000
Distributions in excess of accumulated earnings ....... (5,661,000) (6,454,000)
---------- ----------
Total shareholders' equity .................... 10,842,000 10,049,000
---------- ----------
$ 31,094,000 17,442,000
========== ==========
See accompanying notes to financial statements
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MAXUS REALTY TRUST, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30 Sept. 30,
2001 2000 2001 2000
Revenues:
Rental ..................................... $ 877,000 743,000 2,505,000 2,071,000
Other ...................................... 98,000 106,000 218,000 231,000
--------- --------- --------- ---------
Total revenues ..................... 975,000 849,000 2,723,000 2,302,000
--------- --------- --------- ---------
Expenses:
Depreciation and amortization .............. 213,000 153,000 609,000 457,000
Repairs and maintenance, including common
area maintenance ........................ 131,000 96,000 418,000 256,000
Real estate taxes .......................... 100,000 112,000 331,000 356,000
Interest ................................... 124,000 120,000 397,000 311,000
Professional fees .......................... 48,000 25,000 136,000 227,000
General and administrative ................. 43,000 84,000 138,000 129,000
Utilities .................................. 100,000 84,000 293,000 222,000
Property management fees - related parties . 33,000 27,000 95,000 76,000
Other operating expenses ................... 18,000 14,000 70,000 61,000
--------- --------- --------- ---------
Total expenses ..................... 810,000 715,000 2,487,000 2,095,000
--------- --------- --------- ---------
Net income before gain on sale ..... $ 165,000 134,000 236,000 207,000
Gain on sale of Franklin Park .............. -- -- 1,138,000 --
--------- --------- --------- ---------
Net income ......................... $ 165,000 134,000 1,374,000 207,000
========= ========= ========= =========
Per share data (basic and diluted):
Net income before gain on sale ............. $ .16 .13 .23 .22
Gain on sale of Franklin Park .............. -- -- 1.09 --
--------- --------- --------- ---------
Total .............................. .16 .13 1.32 .22
--------- --------- --------- ---------
Dividends ................................. $ .20 .16 .56 .32
--------- --------- --------- ---------
Weighted average shares outstanding ........ 1,039,624 1,039,624 1,039,624 956,281
========= ========= ========= =========
See accompanying notes to financial statements.
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MAXUS REALTY TRUST, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
Sept. 30, Sept. 30,
2001 2000
Cash flows from operating activities:
Net income ..................................................... $ 1,374,000 207,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of Franklin Park .............................. (1,138,000) --
Depreciation and amortization .............................. 609,000 457,000
Changes in accounts affecting operations:
Accounts receivable .................................... (44,000) (76,000)
Prepaid expenses, other assets and deferred expenses ... 13,000 (276,000)
Accounts payable and other liabilities ................. (443,000) (82,000)
Refundable tenant deposits ............................. 2,000 --
--------- ---------
Net cash provided by operating activities ......... 373,000 230,000
--------- ---------
Cash flows from investing activities:
Capital expenditures ....................................... (726,000) (112,000)
Proceeds from sale of Franklin Park, net ................... 4,346,000 --
Acquisitions, net of escrows received
Forest Park Apartments ................................... -- (2,677,000)
King's Court Apartments .................................. (1,255,000) --
Chalet I & II Apartments ................................. (1,984,000) --
The Landings ............................................. (1,464,000) --
--------- ---------
Net cash used in investing activities ............. (1,083,000) (2,789,000)
--------- ---------
Cash flows from financing activities:
Proceeds from mortgage notes payable ....................... -- 6,286,000
Principal payments on mortgage notes payable ............... (35,000) (4,538,000)
Proceeds from line of credit ............................... 1,126,000 249,000
Issuance of common stock ................................... -- 1,384,000
Dividends paid ............................................. (582,000) (333,000)
--------- ---------
Net cash provided by financing activities ......... 509,000 3,048,000
--------- ---------
Net increase (decrease) in cash and cash equivalents (201,000) 489,000
Cash and cash equivalents, beginning of period .................... 817,000 208,000
--------- ---------
Cash and cash equivalents, end of period .......................... $ 616,000 697,000
========= =========
Supplemental disclosure of cash flow information - cash paid
during the nine months ended September 30, 2001 for interest ... $ 403,000 311,000
========= =========
See accompanying notes to financial statements.
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MAXUS REALTY TRUST, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
(1) Summary of Significant Accounting Policies
Refer to the financial statements of Maxus Realty Trust, Inc. ("MRTI," the
"Trust," or "Registrant") for the year ended December 31, 2000, which are
contained in the Trust's Annual Report on Form 10-KSB, for a description of the
accounting policies which have been continued without change. Also, refer to the
footnotes to those statements for additional details of the Trust's financial
condition. The details in those notes have not changed except as a result of
normal transactions in the interim. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
September 30, 2001 and for all periods presented have been made. The results for
the three-month and nine month periods ended September 30, 2001 are not
necessarily indicative of the results which may be expected for the entire year.
Certain reclassifications have been made to the prior period amounts to conform
to the current period presentation.
(2) Segment Reporting
SFAS No. 131, Disclosure About Segments of an Enterprise and Related
Information, establishes standards for the way that public business enterprises
report information about operating segments in financial statements, as well as
related disclosures about products and services, geographic areas, and major
customers.
The Trust has two reportable operating segments - apartments and commercial
buildings. The Trust's management evaluates the performance of each segment
based on profit or loss from operations before allocation of the general and
administrative expenses, unusual and extraordinary items, and interest. The
accounting policies of the segments are the same as those of the Trust.
Following is information for each segment for the three months ended September
30, 2001 and 2000:
APARTMENTS COMMERCIAL OTHER TOTAL
September 30, 2001
Revenues ........................... $ 277,000 $ 665,000 $ 33,000 $ 975,000
Interest expense ................... 29,000 95,000 -- 124,000
Depreciation and Amortization ...... 60,000 149,000 4,000 213,000
Segment income (loss) .............. 56,000 117,000 (8,000) 165,000
September 30,2000
Revenues ........................... $ 73,000 $ 772,000 $ 4,000 $ 849,000
Interest expense ................... 21,000 99,000 -- 120,000
Depreciation and Amortization ...... 13,000 136,000 4,000 153,000
Segment income (loss) .............. (3,000) 157,000 (20,000) 134,000
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(2) Segment Reporting - Continued
Following is information for each segment for the nine months ended September
30, 2001 and 2000:
APARTMENTS COMMERCIAL OTHER TOTAL
September 30, 2001
Revenues .............................. $ 581,000 $ 2,091,000 $ 51,000 $ 2,723,000
Interest expense ...................... 102,000 295,000 -- 397,000
Depreciation and Amortization ......... 128,000 469,000 12,000 609,000
Segment income (loss)
before gain on sale ............... (23,000) 342,000 (83,000) 236,000
Identifiable segment assets ........... 20,378,000 10,581,000 135,000 31,094,000
September 30, 2000
Revenues .............................. $ 73,000 $ 2,220,000 $ 9,000 $ 2,302,000
Interest expense ...................... 21,000 290,000 -- 311,000
Depreciation and Amortization ......... 13,000 432,000 12,000 457,000
Segment income (loss) ................. (3,000) 458,000 (248,000) 207,000
Identifiable segment assets ........... 3,006,000 14,305,000 170,000 17,481,000
(3) Property Acquisitions and Dispositions
The Trust acquired three apartment complexes during the third quarter 2001 and
disposed of Franklin Park Distribution Center ("Franklin Park") in May 2001.
(The remainder of this page left blank intentionally)
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Pro Forma Results
The table below presents the pro-forma results of operations with Forest
Park Apartments (formerly North Winn Apartments), King's Court Apartments,
Chalet Apartments (Phase I and Phase II), and The Landings Apartments, and
without Franklin Park for the three and nine months ended September 30, 2001 and
2000. Forest Park Apartments was purchased in August, 2000. King's Court
Apartments was purchased in August 2001. Chalet Apartments and The Landings
Apartments were purchased in September 2001. Franklin Park was sold in May,
2001. These pro forma operating results are not necessarily indicative of what
the actual results would have been had Forest Park Apartments, King's Court
Apartments, Chalet Apartments, and The Landings Apartments been purchased and
Franklin Park been sold at the beginning of the earliest period presented.
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept 30,
2001 2000 2001 2000
Revenues ............................... $1,665,000 1,576,000 4,731,000 4,552,000
Depreciation and amortization .......... 372,000 336,000 1,073,000 1,001,000
Repairs and maintenance, including
common area maintenance ............. 192,000 197,000 614,000 582,000
Interest ............................... 308,000 334,000 984,000 959,000
General and administrative ............. 149,000 198,000 439,000 473,000
Real estates taxes ..................... 143,000 130,000 409,000 391,000
Other .................................. 351,000 305,000 988,000 1,048,000
--------- --------- --------- ---------
Total expenses ..................... 1,515,000 1,500,000 4,507,000 4,454,000
--------- --------- --------- ---------
Net income before gain on sale ......... $ 150,000 76,000 224,000 98,000
========= ========= ========= =========
Net income per share before gain on sale $ .14 .07 .22 .10
========= ========= ========= =========
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
This 10-QSB contains forward-looking information (as defined in the Private
Securities Litigation Reform Act of 1995) that involves risk and uncertainty,
including trends in the real estate investment market, projected leasing and
sales, and future prospects for the Trust. Actual results could differ
materially from those contemplated by such statements.
DESCRIPTION OF BUSINESS
The Trust invests in income-producing real properties, primarily apartments and
commercial buildings. The Trust's portfolio is comprised of Atrium at Alpha
Business Center, a multi-tenant office building located in Bloomington,
Minnesota ("Atrium at Alpha"); Applied Communications, Inc. Office Building, a
single-tenant office building located in Omaha, Nebraska ("ACI Building");
Forest Park Apartments (formerly North Winn Apartments), an apartment complex
located in Kansas City, Missouri ("Forest Park"); King's Court Apartments, an
apartment complex located in Olathe, Kansas ("King's Court"); Chalet Apartments
- - Phase I and II, an apartment complex located in Topeka, Kansas ("Chalet"); and
The Landings Apartments, an apartment complex located in Little Rock, Arkansas
("The Landings"). These properties generated 41%, 36%, 19%, 3%, 1%, and 0% of
total rental revenues, respectively, for the quarter ended September 30, 2001.
Forest Park, The Landings and Chalet are owned by the Registrant's wholly- owned
limited liability companies: North Winn Acquisition, L.L.C., Landings
Acquisition, L.L.C., Chalet I Acquisition, L.L.C. and Chalet II Acquisition,
L.L.C.
-8-
DESCRIPTION OF BUSINESS - Continued
In 2001, the Registrant sold Franklin Park for $4,550,000. The sale closed on
May 2, 2001 and resulted in a net book gain of approximately $1,138,000 and
provided approximately $4,346,000 in net sale proceeds.
King's Court is an 82 unit apartment complex located in Olathe, Kansas. King's
Court was purchased for $3,536,000 on August 17, 2001, from an unrelated third
party, King's Court Investors Limited Partnership. The purchase price included
the assumption of the obligation to repay certain multifamily housing revenue
refunding bonds issued by the City of Olathe, Kansas in an aggregate amount of
$2,209,000, which are due and payable on November 1, 2026.
Chalet is a 234-unit apartment complex located in Topeka, Kansas. Chalet was
purchased for $7,750,000 on September 27, 2001 from unrelated third parties,
Garden Chalet I L.P., a Delaware limited partnership and Chalet II Associates, a
Kansas general partnership. The purchase price included the assumption of the
existing loans and related mortgages and security instruments in favor of
Eichler, Fayne & Associates whose interest has been assigned to Fannie Mae, one
of which has a current outstanding balance of approximately $4,108,000, is due
and payable on October 1, 2008, and bears interest at a rate of 6.59% and the
second of which has a current outstanding balance of approximately $1,550,000,
is due and payable on October 1, 2008, and bears interest at a rate of 6.535%.
The Landings is a 154-unit apartment complex in Little Rock, Arkansas. The
Landings was purchased for $5,400,000 on September 28, 2001, from an unrelated
third party, Waterton Rock, Limited, an Arkansas limited partnership. The
purchase price included the assumption of the existing loan and related mortgage
and security instruments in favor of Berkshire Mortgage Finance Limited
Partnership with a current outstanding balance of approximately $3,839,000,
which is due and payable on September 1, 2007, bears interest at a rate of 7.66%
and is secured by a mortgage.
Maxus Properties, Inc., an affiliate of the Registrant, provides property
management services for each of the Trust's real properties.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents on hand as of September 30, 2001, was $616,000, a
decrease of $201,000 from December 31, 2000. Operating activities provided
$373,000 for the nine months ended September 30, 2001, an increase of $143,000
over the same period in 2000. Investing activities used $1,083,000, primarily
due to the acquisition of King's Court, The Landings and Chalet. This decrease
was partially offset by the proceeds from the sale of Franklin Park. Financing
activities provided $509,000, primarily due to the proceeds from an increase in
borrowings under the line of credit of $1,126,000. This increase was partially
offset by dividends paid March 21, 2001, June 21, 2001 and September 21, 2001 in
the aggregate amount of $582,000 and principal payments on mortgage notes
payable. Management believes the Trust's current cash position and the
properties' ability to provide operating cash flow should enable the Trust to
fund anticipated capital expenditures and service debt in 2001. Expenditures for
leasing capital are dependent on the timing and actual dollars negotiated for
leases.
On September 28, 2001, the Trust modified the line of credit to increase it to
$1,550,000. On the same day, the Trust drew an additional $1,400,000 (for a
total of $1,550,000) on the line of credit. The draws on the line of credit were
used to pay closing costs on the new acquisitions.
-9-
LIQUIDITY AND CAPITAL RESOURCES - Continued
The anticipated capital expenditures by property for 2001 are as follows:
TOTAL
Atrium at Alpha.................................... $240,000
Applied Communications Inc. Bldg................... 550,000
Forest Park........................................ 350,000
King's Court....................................... 35,000
Chalet ....................................... --
The Landings....................................... 55,000
--------
$1,230,000
The anticipated capital expenditures at the Atrium at Alpha Business Center
include tenant alterations and lease commissions for new and renewal tenants as
well as capital funds for window replacements. At the Applied Communications,
Inc. Building, $350,000 had been placed in escrow as of December 31, 2000 for
tenant improvements. $350,000 has been paid out as of September 30, 2001. In
addition, the Partnership anticipates replacing the roof this year at an
anticipated cost of $200,000. At the Forest Park Apartments, King's Court
Apartments and The Landings Apartments, anticipated capital expenditures include
various renovation projects to improve the physical condition of the properties.
A portion of these funds are held in escrow in conjunction wth acquisition
financing of the properties. No major capital expenditures are currently planned
for Chalet in 2001.
RESULTS OF OPERATIONS
The results of operations for the Trust's properties for the three and nine
months ended September 30, 2001 and 2000 are detailed below.
Comparison of Consolidated Results
For the three months ended September 30, 2001, the Trust's consolidated revenues
were $975,000. Revenues increased $126,000 (14.8%) compared to the same period
in 2000. The Trust's consolidated revenues for the nine month period ended
September 30, 2001 were $2,723,000, an increase of $421,000 (18.3%) compared to
the same period in 2000. These increases are primarily a result of the
acquisitions of Forest Park in the third quarter of 2000 and King's Court in the
third quarter of 2001, offset by the sale of Franklin Park in second quarter of
2001.
For the three months ended September 30, 2001, the Trust's consolidated expenses
were $810,000. Expenses increased $95,000 (13.3%) compared to the same period in
2000. The increase in consolidated expenses is due primarily to an increase in
depreciation and amortization of $60,000, repairs and maintenance expense of
$35,000, and professional fees of $23,000. The increases were partially offset
by a decrease in general and administrative expenses of $41,000. The increases
were primarily due to the acquisitions of Forest Park and King's Court. For the
nine months ended September 30, 2001, the Trust's consolidated expenses were
$2,487,000, an increase of $392,000 (18.7%) compared to the same period in 2000.
The increase in expenses is due primarily to an increase in depreciation and
amortization of $152,000, repairs and maintenance of $162,000, interest expenses
of $86,000, and utilities of $71,000, offset by a decrease in professional fees
of $91,000. These increases were primarily due to the acquisitions of Forest
Park and King's Court.
The net income for the quarter ended September 30, 2001 was $165,000 or $.16 per
share. The net income for the quarter ended September 30, 2000 was $134,000 or
$.13 per share.
-10-
Comparison of Consolidated Results - Continued
Cash flow provided by operating activities was $373,000 for the period ended
September 30, 2001 compared to the same period in 2000, in which cash provided
by operating activities was $230,000. Cash flow used in investing activities was
$1,083,000 for the period ended September 30, 2001 compared to $2,789,000 in
2000. The decrease in cash flow used in investing activities was due primarily
to the proceeds from the sale of Franklin Park, offset by the acquisitions of
the following apartments, King's Court, Chalet and The Landings. Cash flow
provided by financing activities was $509,000 for the period ended September 30,
2001 compared to the same period in 2000, in which cash provided by financing
activities was $3,048,000. The primary cause of the decrease in cash flow
provided by financing activities was the $1,384,000 provided by the issuance of
common stock, combined with the $1,986,000 mortgage payable on Forest Park in
2000, compared to $1,126,000 in proceeds from a line of credit offset by
dividends paid of $582,000 in 2001.
Occupancy
The occupancy levels at September 30 were as follows:
OCCUPANCY LEVELS
AT SEPTEMBER 30,
2001 2000
Atrium at Alpha ............. 77% 88%
Franklin Park ............... N/A 57%
ACI Building ................ 100% 100%
Forest Park ................. 96% 87%
King's Court ................ 90% N/A
Chalet ...................... 91% N/A
The Landings ................ 94% N/A
During the quarter ended September 30, 2001, the occupancy level at Atrium at
Alpha decreased from 86% at June 30, 2001 to 77% at September 30, 2001. One new
tenant which occupied 1,814 square feet signed a lease in September of 2001.
Three tenants vacated which occupied 9,553 square feet. The property has one
major tenant occupying 16% of the building. The lease for this tenant expires in
December 2003.
The ACI Building has a single tenant occupying 100% of the building. The lease
expires in August 2008.
Funds from Operations
The white paper on Funds from Operations approved by the board of governors of
NAREIT in March 1999 defines funds from operations as net income (loss)(computed
in accordance with GAAP), excluding gains (or losses) from sales of property,
plus real estate related depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. Adjustment for
unconsolidated partnerships and joint ventures are calculated to reflect funds
from operations on the same basis. In 1999, NAREIT clarified the definition of
Funds from Operations to include non-recurring events, except for those that are
defined as "extraordinary items" under GAAP and gains and losses from sales of
depreciable operating property.
The Trust computes Funds from Operations in accordance with the guidelines
established by the white paper which may differ from the methodology for
calculating Funds from Operations utilized by other equity REITs, and,
accordingly, may not be comparable to such other REITs. Funds from Operations do
not represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations,
-11-
Funds from Operations - Continued
distributions or other commitments and uncertainties. Funds from Operations
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Trust's financial performance or
to cash flows from operating activities (determined in accordance with GAAP) as
a measure of the Trust's liquidity, nor is it indicative of funds available to
fund the Trust's cash needs including its ability to make distributions. The
Trust believes Funds from Operations is helpful to investors as a measure of the
performance of the Trust because, along with cash flows from operating
activities, financing activities and investing activities, it provides investors
with an understanding of the ability of the Trust to incur and service debt and
make capital expenditures. Certain revenues and administrative expenses,
including professional fees, of the Trust are excluded.
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000
Revenue ................................. $ 942,000 845,000 2,672,000 2,293,000
Expenses ................................ 769,000 691,000 2,353,000 1,838,000
------- ------- --------- ---------
Net Income .............................. 173,000 154,000 319,000 455,000
Depreciation and Amortization ........... 209,000 149,000 597,000 445,000
------- ------- --------- ---------
Funds from Operations ................... $ 382,000 303,000 916,000 900,000
======= ======= ========= =========
CONTINGENCIES
The Trust's multi-tenant office building located in Bloomington, Minnesota has
been classified in the Minneapolis Airport Committee's (the "MAC") Safety Zone A
in the future expansion of the Minneapolis Airport. The expansion runway is
anticipated to be completed in 2003. The MAC began buying out impacted buildings
during 1999. Safety Zone A is adjacent to the Federal Aviation Authority's noise
buy out zone. The MAC has not indicated whether or not it will buy out the
Trust's building. The Trust is monitoring whether the increased noise from the
new runway will have an impact on future leasing of the building. If the Trust
determines there is a negative impact, the Trust will petition the MAC to buy
the building. If the building continues to be classified in Safety Zone A, it
will be classified as nonconforming use. Given the preliminary state of the
future expansion, management is unable at this time to determine what impact, if
any, this matter will have on the Trust.
MARKET RISK
The Trust has considered the provision of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments". The Trust had
no holdings of derivative financial or commodity instruments at September 30,
2001.
The Trust does not believe that it has any material exposure to interest rate
risk. The debt on the ACI building ia a fixed rated of 8.63% and matures in
2010; King's Court is at a fixed rate of 5.69% and matures in 2026; the Landings
is at a fixed rate of 7.66% and matures in 2007; and Chalet I and Chalet II are
at fixed rates of 6.590% and 6.535% respectively and mature in 2008. The debt on
Forest Park matures in 2007 and the line of credit matures in 2001. The debt on
Forest Park and the line of credit are each variable. The current interest rates
on Forest Pan the line of credit are 4.91% and 6.0%, respectively. A 100 basis
point increase in the variable rate debt on an annual basis would impact net
income by approximately $35,000.
-12-
INFLATION
The effects of inflation did not have a material impact upon the Trust's
operations in the periods ended September 30, 2001.
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the
Impairment or Disposal of Long-Lived Assets." Among other things, SFAS 144
supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." For long-lived assets to be held and used,
SFAS 144 retained the requirements of SFAS 121 to recognize impairment losses
only if the carrying amount of the asset is not recoverable from its
undiscounted cash flows. SFAS 144 is effective for fiscal years beginning after
December 14, 2001, and will be adopted by the Trust in the first quarter of
2002. Although management is currently evaluating the impact of SFAS 144, it is
not expected to significantly impact the Trust's financial position or results
of operations.
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-13-
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On September 11, 2001, the Board of Trustees approved the sale of
180,376 shares of its common stock, par value $1.00 per share, at
a price of $10.00 per share, solely to accredited investors (as
such term is defined in Rule 501 of Regulation D) pursuant to
a private placement in accordance with Rule 506 of Regulation D.
Each investor will be required to execute a subscription agreement
pursuant to which each investor will represent and warrant that
such investor meets the requirements of an accredited investor. The
shares to be sold pursuant to the private placement will not be
registered under the Securities Act of 1933, as amended, and may not
be offered or sold in the United States absent registration or an
applicable exemption from registration.
The Trust is currently in the process of raising funds in connection
with the private placement; however, at this time, the Trust has not
closed the private placement and has not issued any shares of the
Trust's common stock to subscribers. The Trust has entered into
binding agreements to issue approximately 82,000 shares of the
Trust's common stock upon closing of the private placement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On September 11, 2001, the Board of Trustees of the Trust declared a
cash dividend of $0.20 per share payable to the holders of record on
November 30, 2001 of the Trust's $1.00 par value, common stock. The
Board anticipates that the dividend will be paid on December 21,
2001. The Trust's Board of Trustees has reinstated the quarterly cash
dividend and anticipates declaring a $.20 per share cash dividend
each quarter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibits Index on Page 17
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by the Trust since
August 15, 2001.
On August 21, 2001, the Trust filed a report on Form 8-K (File No.
00-13754) which reported the Trust's purchase on August 17, 2001, of
King's Court Apartments, an 82 unit apartment complex located in
Olathe, Kansas, for the purchase price of $3,535,000. (Item 2)
On September 6, 2001, the Trust filed a report on Form 8-K/A (File
No. 00-13754) amending the Form 8-K filed on August 21, 2001 (the
"August 21 8-K"), which reported that it was impractical to provide
the required audited financial statements relative to the acquired
real estate at that time and that such audited financial statements
would be filed by amendment at a later date. (Item 7)
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - Continued
On September 14, 2001, the Trust filed a report on Form 8-K (File No.
000-13754) which reported the Trust's intent to purchase Landings at
Rock Creek, a 154-unit apartment complex in Little Rock, Arkansas for
$5,400,000; Barrington Hills Apartments, a 232-unit apartment complex
in Little Rock, Arkansas for $7,050,000; and Chalet Apartments, a 234
-unit apartment complex located in Topeka, Kansas, for $7,750,000.The
Form 8-K also reported the Board of Trustee's authorization to sell
shares of the Trust's common stock pursuant to a private placement
and the declaration of a $0.20 per share cash dividend. (Item 5)
On October 12, 2001, the Trust filed a report on Form 8-K (File No.
000-13754) which reported the purchase on September 27, 2001, of
Chalet Apartments by Chalet I Acquisition, L.L.C., and Chalet II
Acquisition, L.L.C., two newly formed, wholly-owned subsidiaries of
the Registrant;and the purchase of Landings at Rock Creek Apartments
on September 28, 2001, by Landings Acquisition, L.L.C., a newly
formed, wholly-owned subsidiary of the Registrant. (Item 2)
On October 31,2001, the Trust filed a report on Form 8-K/A (File No.
000-13754) which reported the Trust's audited financial statements
relative to the purchase on August 17, 2001, of King's Court
Apartments, an 82 unit apartment complex located in Olathe, Kansas,
for the purchase price of $3,536,000. (Item 7)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Trust has duly caused this report to be signed on its behalf by
the undersigned, there unto duly authorized.
MAXUS REALTY TRUST, INC.
Date: November 13, 2001 By: /s/ Daniel W. Pishny
Daniel W. Pishny
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on November 13, 2001, by the following persons on behalf
of the Trust and in the capacities indicated.
/s/ John W. Alvey
John W. Alvey
Vice President
Chief Financial and Accounting Officer
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EXHIBIT INDEX
Exhibit
Number Description
3.1 Articles of Incorporation dated June 12, 1984, as amended, are
incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000, as filed
pursuant to Rule 13a-13 under the Securities Exchange Act of 1934 (File
No. 000-13754).
3.2 Bylaws of the Registrant, as amended, are incorporated by reference to
Exhibit 3.2, to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000, as filed pursuant to Rule 13a-13 under the
Securities Exchange Act of 1934 (File No. 000-13754).
4.1 Deed of Trust, Security Agreement and Assignment of Rents dated July 25,
2000 by and between ACI financing L.L.C., Rullell J. Kreikmeier, as
Trustee, and Principal Commercial Funding, L.L.C. (which was assigned to
and assumed by North Winn Acquisition, L.L.C. on August 10, 2000) is
incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30, as filed
pursuant to Rule 13a-13 under the Securities Exchange Act of 1934
(File No.000-13754).
4.2 Multifamily Deed of Trust, Assignment of Rents and Security Agreement
dated August 10, 2000 by and between North Winn Acquisition, L.L.C.,
Assured Quality Title Company, as Trustee, and Prudential Multifamily
Mortgage, Inc. , is incorporated by reference to Exhibit 4.2 to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
September 30, as filed pursuant to Rule 13a- 13 under the Securities
Exchange Act of 1934 (File No. 000-13754).
4.3 Multifamily Mortgage Assignment of Rents and Security Agreement dated
September 11, 2001 by and between Garden Chalet I L.P. and Eichler and
Fayne & Associates is incorporated by reference to Exhibit 10.8 to the
Registrant's Current Report on Form 8-K filed October 12, 2001 (File No.
000-13754).
4.4 Multifamily Mortgage Assignment of Rents and Security Agreement dated
September 11, 2001 by and between Chalet II Associates and Eichler and
Fayne & Associates is incorporated by reference to Exhibit 10.9 to the
Registrant's Current Report on Form 8-K filed October 12, 2001 (File No.
000-13754).
4.5 Amendment to Multifamily Mortgage, Assignment of Rents and Security
Agreement dated September 27, 2001 by and between Chalet I Acquisition,
L.L.C. and Fannie Mae is incorporated by reference to Exhibit 10.10 to the
Registrant's Current Report on Form 8-K filed October 12, 2001 (File No.
000-13754).
4.6 Amendment to Multifamily Mortgage, Assignment of Rents and Security
Agreement dated September 27, 2001 by and between Chalet II Acquisition,
L.L.C. and Fannie Mae is incorporated by reference to Exhibit 10.11 to the
Registrant's Current Report on Form 8-K filed October 12, 2001 (File No.
000-13754).
4.7 Multifamily Mortgage, Assignment of Rents and Security Agreement dated
August 15, 1997 by and between Waterton Rock, Limited and Berkshire
Mortgage Finance Limited Partnership is incorporated by reference to
Exhibit 10.18 to the Registrant's Current Report on Form 8-K filed October
12, 2001 (File No. 000-13754).
4.8 Leasehold Mortgage and Security Agreement by and between Security Bank,
and King's Court Investors Limited Partnership dated December 1, 1998 is
incorporated by reference to Exhibit 10.2 to the Registrant's Current
Report on Form 8-K filed August 21, 2001 (File No. 000-13754).
10.1 Management Agreement between Maxus Properties, Inc. and North Winn
Acquisition, L.L.C. dated August 16, 2000 is incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 2000, as filed pursuant to Rule 13a-13 under
the Securities Exchange Act of 1934 (File No. 000-13754).
10.2 Agreement for Purchase and Sale dated June 25, 2001 by and among Garden
Chalet I L.P., Chalet II Associates and KelCor, Inc is incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K
filed October 12, 2001 (File No. 000-13754).
10.3 First Amendment to Agreement for Purchase and Sale dated July 27, 2001 by
and among Garden Chalet I L.P., Chalet II Associates and KelCor, Inc. is
incorporated by reference to Exhibit 10.2 to the Registrant's Current
Report on Form 8-K filed October 12, 2001 (File No. 000-13754).
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EXHIBIT INDEX - Continued
10.4 Second Amendment to Agreement for Purchase and Sale dated August 10, 2001
by and among Garden Chalet I L.P., Chalet II Associates and KelCor, Inc.is
incorporated by reference to Exhibit 10.3 to the Registrant's Current
Report on Form 8-K filed October 12, 2001 (File No. 000-13754).
10.5 Third Amendment to Agreement for Purchase and Sale dated August 30,2001 by
and among Garden Chalet I L.P., Chalet II Associates and KelCor, Inc. is
incorporated by reference to Exhibit 10.4 to the Registrant's Current
Report on Form 8-K filed October 12, 2001 (File No. 000-13754).
10.6 Fourth Amendment to Agreement for Purchase and Sale dated September 10,
2001 by and among Garden Chalet I L.P., Chalet II Associates and KelCor,
Inc, as assignor of its right to purchase Chalet I and Chalet II to Chalet
I Acquisition, L.L.C. and Chalet II Acquisition, L.L.C., respectively, is
incorporated by reference to Exhibit 10.5 to the Registrant's Current
Report on Form 8-K filed October 12, 2001 (File No. 000-13754).
10.7 Assumption and Release Agreement dated September 27, 2001 by and among
Garden Chalet I L.P., American Realty Trust, Inc., Chalet I Acquisition,
L.L.C., Maxus Realty Trust, Inc. and Fannie Mae is incorporated by
reference to Exhibit 10.6 to the Registrant's Current Report on Form 8-K
filed October 12, 2001 (File No. 000-13754).
10.8 Assumption and Release Agreement for Chalet II dated September 27, 2001 by
and among Chalet II Associates, National Operating, L.P., Chalet II
Acquisition, L.L.C., Maxus Realty Trust, Inc. and Fannie Mae is
incorporated by reference to Exhibit 10.7 to the Registrant's Current
Report on Form 8-K filed October 12, 2001 (File No. 000-13754).
10.9 Management Agreement for Chalet I and II dated August 13, 2001 by and
between Chalet I Acquisition, L.L.C., Chalet II Acquisition, L.L.C. and
Maxus Properties, Inc., is incorporated by reference to Exhibit 10.12 to
the Registrant's Current Report on Form 8-K filed October 12, 2001 (File
No. 000-13754).
10.10 Purchase Agreement dated July 10, 2001 by and between Waterton Rock,
Limited and KelCor, Inc. is incorporated by reference to Exhibit 10.13 to
the Registrant's Current Report on Form 8-K filed October 12, 2001 (File
No. 000-13754).
10.11 First Amendment to Purchase Agreement dated August 9, 2001 by and between
Waterton Rock, Limited and KelCor, Inc. is incorporated by reference to
Exhibit 10.14 to the Registrant's Current Report on Form 8-K filed October
12, 2001 (File No. 000-13754).
10.12 Second Amendment to Purchase Agreement dated August 28, 2001 by and
between Waterton Rock Limited and KelCor, Inc.is incorporated by reference
to Exhibit 10.15 to the Registrant's Current Report on Form 8-K filed
October 12, 2001 (File No. 000-13754).
10.13 Assignment of Purchase Agreement dated September 21, 2001 by and between
KelCor, Inc.and Landings Acquisition, L.L.C. is incorporated by reference
to Exhibit 10.16 to the Registrant's Current Report on Form 8-K filed
October 12, 2001 (File No. 000-13754).
10.14 Assumption and Release Agreement dated September 28, 2001 by and between
Waterton Rock, Limited, David R. Schwartz, Peter M. Vilim, Landings
Acquisition, L.L.C., Maxus Realty Trust, Inc. and Fannie Mae is
incorporated by reference to Exhibit 10.17 to the Registrant's Current
Report on Form 8-K filed October 12, 2001 (File No. 000-13754).
10.15 Management Agreement for Landings dated September 28, 2001 by and between
Landings Acquisition, L.L.C. and Maxus Properties, Inc. is incorporated by
reference to Exhibit 10.19 to the Registrant's Current Report on Form 8-K
filed October 12, 2001 (File No. 000-13754).
10.16 Assumption Agreement dated August 17, 2001 by and among First UNUM Life
Insurance Company, successor in interest to NY Holdings 1994-1, King's
Court Investors Limited Partnership, Maxus Realty Trust, Inc., David L.
Johnson, and Security Bank of Kansas City, as trustee, is incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K
filed August 21, 2001 (File No. 000-13754).
10.17 Lease Agreement between the City of Olathe, Kansas and King's Court
Investors Limited Partnership dated as of November 1, 1998 is incorporated
by reference to Exhibit 10.3 to the Registrant's Current Report on Form
8-K filed August 21, 2001 (File No. 000-13754).
10.18 Management Agreement for King's Court dated August 17, 2001 by and between
Maxus Realty Trust, Inc., and Maxus Properties, Inc.
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