UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-15465
BANYAN STRATEGIC REALTY TRUST
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Massachusetts 36-3375345
- ----------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, IL 60606
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (312) 553-9800
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [ X ]. NO [ ].
Shares of beneficial interest outstanding
as of May 10, 2000: 14,166,333
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
MARCH 31, DECEMBER 31,
2000 1999
---------- -----------
ASSETS
- ------
Investment in Real Estate, at cost:
Land . . . . . . . . . . . . . . . $ 36,445 $ 36,445
Building . . . . . . . . . . . . . 148,608 148,608
Building Improvements. . . . . . . 15,312 14,211
---------- ----------
200,365 199,264
Less: Accumulated Depreciation . . (16,853) (15,420)
---------- ----------
183,512 183,844
---------- ----------
Cash and Cash Equivalents. . . . . . 4,907 13,097
Restricted Cash -
Capital Improvements . . . . . . . 1,344 1,497
Restricted Cash - Other. . . . . . . 1,681 1,171
Interest and Accounts Receivable . . 1,115 1,186
Deferred Financing Costs
(Net of Accumulated Amortization
of $1,392 and $1,512,
respectively). . . . . . . . . . . 1,288 1,568
Other Assets . . . . . . . . . . . . 4,348 4,284
---------- ----------
Total Assets . . . . . . . . . . . . $ 198,195 $ 206,647
========== ==========
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheets - CONTINUED
MARCH 31, DECEMBER 31,
2000 1999
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities
Mortgage Loans Payable . . . . . . . $ 114,398 $ 120,781
Bonds Payable. . . . . . . . . . . . 4,500 4,500
Unsecured Loan Payable . . . . . . . -- 7,400
Accounts Payable and
Accrued Expenses . . . . . . . . . 1,987 2,767
Accrued Real Estate Taxes Payable. . 1,487 908
Accrued Interest Payable . . . . . . 547 615
Unearned Revenue . . . . . . . . . . 842 922
Security Deposits. . . . . . . . . . 1,301 1,203
---------- ----------
Total Liabilities. . . . . . . . . . 125,062 139,096
---------- ----------
Minority Interest in
Consolidated Partnerships. . . . . 2,316 2,256
Shareholders' Equity
Series A Convertible Preferred
Shares, No Par Value,
200,000 Shares Authorized,
61,572 Shares Issued and
Outstanding. . . . . . . . . . . . 6,157 --
Shares of Beneficial Interest,
No Par Value, Unlimited
Authorization; 15,688,284
and 15,073,917 Shares Issued,
respectively . . . . . . . . . . . 123,941 120,707
Accumulated Deficit. . . . . . . . . (48,722) (48,046)
Employees' Notes . . . . . . . . . . (3,193) --
Treasury Shares at Cost,
1,522,649 Shares . . . . . . . . . (7,366) (7,366)
---------- ----------
Total Shareholders' Equity . . . . . 70,817 65,295
---------- ----------
Total Liabilities and
Shareholders' Equity . . . . . . . $ 198,195 $ 206,647
========== ==========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Operations
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except per share data)
2000 1999
-------- --------
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . $ 8,135 $ 9,196
Operating Cost Reimbursement . . . . . . . . . . 869 998
Miscellaneous Tenant Income. . . . . . . . . . . 71 188
Income on Investments and Other Income . . . . . 275 46
-------- --------
Total Revenue. . . . . . . . . . . . . . . . . . . 9,350 10,428
-------- --------
EXPENSES
Property Operating . . . . . . . . . . . . . . . 1,110 1,326
Repairs and Maintenance. . . . . . . . . . . . . 894 1,146
Real Estate Taxes. . . . . . . . . . . . . . . . 734 775
Interest . . . . . . . . . . . . . . . . . . . . 2,367 2,890
Ground Lease . . . . . . . . . . . . . . . . . . 229 235
Depreciation and Amortization. . . . . . . . . . 1,630 1,584
General and Administrative . . . . . . . . . . . 1,012 1,055
Amortization of Deferred Financing Costs . . . . 64 65
-------- --------
Total Expenses . . . . . . . . . . . . . . . . . . 8,040 9,076
Income Before Minority Interest and
Extraordinary Item . . . . . . . . . . . . . . . 1,310 1,352
Minority Interest in Consolidated
Partnerships . . . . . . . . . . . . . . . . . . (126) (114)
-------- --------
Income Before Extraordinary Item . . . . . . . . . 1,184 1,238
Extraordinary Item . . . . . . . . . . . . . . . . (42) --
-------- -------
Net Income . . . . . . . . . . . . . . . . . . . . 1,142 1,238
Less Income Attributable to Preferred Shares . . . (123) --
-------- --------
Net Income Available to Common Shares. . . . . . . $ 1,019 $ 1,238
======== ========
Basic and Diluted Earnings Available to
Common Shares per weighted-average
Common Share:
Income Before Extraordinary Item . . . . . . . . $ 0.07 $ 0.09
======== ========
Net Income . . . . . . . . . . . . . . . . . . . $ 0.07 $ 0.09
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 2000
(Unaudited)
(Dollars in thousands)
Series A Convertible Shares of
Preferred Shares Beneficial Interest Accumu-
--------------------- --------------------- lated Employees' Treasury
Shares Amount Shares Amount Deficit Notes Shares Total
---------- -------- ---------- --------- --------- ---------- -------- --------
Shareholders'
Equity,
January 1,
2000. . . . . . . . -- $ -- 15,073,917 $120,707 $(48,046) $ -- $ (7,366) $ 65,295
Issuance of
Shares,
net of issuance
costs . . . . . . . 61,572 6,157 614,367 3,234 -- -- -- 9,391
Employees' Notes,
net of repay-
ments . . . . . . . -- -- -- -- -- (3,193) -- (3,193)
Net Income . . . . . -- -- -- -- 1,142 -- -- 1,142
Common Distri-
butions Paid. . . . -- -- -- -- (1,695) -- -- (1,695)
Preferred Distri-
bution Paid . . . . -- -- -- -- (123) -- -- (123)
------ -------- ---------- -------- -------- -------- -------- --------
Shareholders'
Equity,
March 31,
2000. . . . . . . . 61,572 $ 6,157 15,688,284 $123,941 $(48,722) $ (3,193) $ (7,366) $ 70,817
====== ======== ========== ======== ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands)
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 1,142 $ 1,238
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Extraordinary Item . . . . . . . . . . . . . . . 42 --
Depreciation and Amortization. . . . . . . . . . 1,694 1,649
Minority Interest in Consolidated
Partnerships. . . . . . . . . . . . . . . . . . 126 114
Net Change In:
Restricted Cash - Other. . . . . . . . . . . . (510) (557)
Interest and Accounts Receivable . . . . . . . 71 --
Other Assets . . . . . . . . . . . . . . . . . (261) (311)
Accounts Payable and Accrued Expenses. . . . . (780) (593)
Accrued Interest Payable . . . . . . . . . . . (68) 38
Accrued Real Estate Taxes Payable. . . . . . . 579 577
Unearned Revenue . . . . . . . . . . . . . . . (80) 276
Security Deposits. . . . . . . . . . . . . . . 98 (13)
-------- --------
Net Cash Provided By Operating Activities. . . . . 2,053 2,418
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Investment in Real Estate . . . . (1,101) (1,547)
Earnest Money Deposits . . . . . . . . . . . . -- (25)
Restricted Cash - Capital Improvements . . . . 153 (305)
-------- --------
Net Cash Used In Investing Activities . . . . . . (948) (1,877)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Minority Partners . . . . . . . (66) (71)
Deferred Financing Costs . . . . . . . . . . . . -- (52)
Payment of Preferred Shares Issuance Costs . . . (30) --
Repayment of Employees' Notes. . . . . . . . . . 45 --
Principal Payments on Mortgage Loans,
Bonds Payable and Unsecured Loan Payable . . . (7,626) (417)
Distributions Paid to Shareholders . . . . . . . (1,695) (1,608)
Payment of Preferred Distributions . . . . . . . (123) --
Prepayment Penalties on Early Extinguishment
of Debt. . . . . . . . . . . . . . . . . . . . (6) --
Shares Issued, Net of Issuance Costs . . . . . . 206 208
-------- --------
Net Cash Used In Financing Activities. . . . . . . (9,295) (1,940)
-------- --------
Net Decrease In Cash and Cash Equivalents. . . . . (8,190) (1,399)
Cash and Cash Equivalents at
Beginning of Period. . . . . . . . . . . . . . . 13,097 3,731
-------- --------
Cash and Cash Equivalents at End of Period . . . . $ 4,907 $ 2,332
======== ========
Supplemental Information:
Interest Paid During the Period. . . . . . . . . $ 2,435 $ 2,852
======== ========
Non-Cash Financing Activities:
Preferred Share Debt Conversion. . . . . . . . . $ 6,157 $ --
======== ========
Employees' Notes . . . . . . . . . . . . . . . . $ 3,238 $ --
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
(Dollars in thousands, except per share data)
1. FINANCIAL STATEMENT PRESENTATION
Readers of this quarterly report should refer to Banyan Strategic
Realty Trust's (the "Trust") audited consolidated financial statements for
the year ended December 31, 1999 which are included in the Trust's 1999
Form 10-K, as certain footnote disclosures which would substantially
duplicate those contained in such audited statements have been omitted from
this report.
RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported
1999 consolidated financial statements in order to provide comparability
with the 2000 consolidated financial statements. These reclassifications
have not changed the 1999 results. In the opinion of management, all
adjustments necessary for a fair presentation have been made to the
accompanying consolidated financial statements as of March 31, 2000. All
adjustments made to the financial statements, as presented, are of a normal
recurring nature to the Trust.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended March 31, 2000 and 1999:
Three Months Ended
------------------------
3/31/00 3/31/99
---------- ----------
Numerator:
Income Available to Common
Shares Before Extraordinary
Item . . . . . . . . . . . . . . . . . . $ 1,061 $ 1,238
Extraordinary Item . . . . . . . . . . . . (42) --
---------- ----------
Net Income Available to
Common Shares . . . . . . . . . . . $ 1,019 $ 1,238
========== ==========
Denominator:
Denominator for basic earnings per
weighted-average shares. . . . . . . . . 14,073,785 13,407,319
Effect of dilutive securities -
Employee stock options . . . . . . . . . 5,447 5,556
---------- ----------
Denominator for diluted earnings
per share-adjusted weighted-average
shares and assumed conversions . . . . 14,079,232 13,412,875
========== ==========
Basic and Diluted Earnings Available
to Common Shares Per weighted-
average Common Share:
Income Before Extraordinary Item . . . . . $ 0.07 $ 0.09
Extraordinary Item . . . . . . . . . . . . -- --
---------- ----------
Net Income . . . . . . . . . . . . . . $ 0.07 $ 0.09
========== ==========
3. BUSINESS SEGMENTS
The Trust owns and operates real estate properties located
principally in the Midwest and Southeast United States. The Trust has
three operating segments corresponding to the three property types
comprising its real estate assets: flex/industrial, office and retail. As
of March 31, 2000, the flex/industrial segment was comprised of twelve
complexes with long-term leases to approximately 170 tenants; the office
segment was comprised of fourteen office sites with long-term leases to
approximately 270 tenants; and the retail segment was comprised of one
retail center with long-term leases to approximately 50 tenants. As of
March 31, 1999, the flex/industrial segment was comprised of thirteen
complexes, the office segment was comprised of fourteen office sites and
the retail segment was comprised of one retail center. Prior to the sale
of the Oklahoma Apartment Portfolio in December 1999, a fourth segment -
the residential segment - was comprised of four apartment complexes with
864 units. The Trust's long-term tenants are in a variety of businesses
and no individual tenant is significant to the Trust's business when
considered as a whole.
Information by business segments is set forth below:
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
Revenue
Flex/Industrial. . . . . . . . . . . . . . . . . $ 2,805 $ 2,736
Office . . . . . . . . . . . . . . . . . . . . . 5,149 5,344
Residential. . . . . . . . . . . . . . . . . . . -- 1,055
Retail . . . . . . . . . . . . . . . . . . . . . 1,124 1,271
Corporate/Other. . . . . . . . . . . . . . . . . 272 22
-------- --------
$ 9,350 $ 10,428
======== ========
Income (Loss) Before
Extraordinary Item
Flex/Industrial. . . . . . . . . . . . . . . . . $ 696 $ 528
Office . . . . . . . . . . . . . . . . . . . . . 1,102 1,321
Residential. . . . . . . . . . . . . . . . . . . -- 202
Retail . . . . . . . . . . . . . . . . . . . . . 130 250
Corporate/Other. . . . . . . . . . . . . . . . . (744) (1,063)
-------- --------
$ 1,184 $ 1,238
======== ========
As of
As of Decem-
March 31, ber 31,
2000 1999
-------- --------
Total Assets
Flex/Industrial. . . . . . . . . . . . . . . . . $ 68,756 $ 74,581
Office . . . . . . . . . . . . . . . . . . . . . 106,458 105,991
Residential. . . . . . . . . . . . . . . . . . . -- 20,917
Retail . . . . . . . . . . . . . . . . . . . . . 18,246 18,303
Corporate/Other. . . . . . . . . . . . . . . . . 4,735 2,547
-------- --------
$198,195 $222,339
======== ========
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
Depreciation and
Amortization
Flex/Industrial. . . . . . . . . . . . . . . . . $ 572 $ 544
Office . . . . . . . . . . . . . . . . . . . . . 914 766
Residential. . . . . . . . . . . . . . . . . . . -- 141
Retail . . . . . . . . . . . . . . . . . . . . . 144 133
-------- --------
$ 1,630 $ 1,584
======== ========
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
Interest Expense
Flex/Industrial. . . . . . . . . . . . . . . . . $ 754 $ 885
Office . . . . . . . . . . . . . . . . . . . . . 1,284 1,374
Residential. . . . . . . . . . . . . . . . . . . -- 298
Retail . . . . . . . . . . . . . . . . . . . . . 329 333
-------- --------
$ 2,367 $ 2,890
======== ========
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
Additions to Investment
in Real Estate
Flex/Industrial. . . . . . . . . . . . . . . . . $ 308 $ 406
Office . . . . . . . . . . . . . . . . . . . . . 792 1,058
Residential. . . . . . . . . . . . . . . . . . . -- 78
Retail . . . . . . . . . . . . . . . . . . . . . 1 5
-------- --------
$ 1,101 $ 1,547
======== ========
4. SUBSEQUENT EVENTS
DISTRIBUTIONS
On April 5, 2000, the Trust declared a cash distribution for the
quarter ended March 31, 2000 of $0.12 per share payable May 22, 2000 to
shareholders of record on April 21, 2000.
FINANCING
On May 1, 2000, the Trust entered into a loan agreement with LaSalle
Bank National Association which provides for a loan in the amount of
$12,100, which can be drawn in four installments. The amount of $8,500 was
drawn on May 1, 2000. The loan, which is collateralized by the Trust's
Johns Creek Office and Industrial Park and Technology Park properties,
bears interest at a variable rate equal to LIBOR plus 2.2% and is payable
monthly. The loan principal is pre-payable without penalty and matures in
one year. The proceeds from the first draw were utilized primarily to
repay the amounts outstanding on a line of credit which came due on May 1,
2000 and which was previously collateralized by Johns Creek Office and
Industrial Park and Technology Park, and secondarily for transaction costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Certain statements in this quarterly report that are not historical in
fact constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are
based on our current expectations, estimates and projections. These
statements are not a guaranty of future performance. Without limiting the
foregoing, words such as "believes," "intends," "anticipates," "expects,"
and similar expressions are intended to identify forward-looking statements
which are subject to a number of risks and uncertainties, including, among
other things:
. general real estate investment risks;
. potential inability to raise capital by either equity or debt;
. potential inability to repay or refinance indebtedness at
maturity;
. increases in interest rates;
. adverse consequences of failure to qualify as a REIT; and
. possible environmental liabilities.
Actual results could differ materially from those projected in these
forward-looking statements. See "Managements's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors" in the annual
report on Form 10-K for the year ended December 31, 1999 for a more
complete discussion.
We are a self-administered infinite life real estate investment trust
("REIT"), organized as a Massachusetts business trust, which owns and
operates primarily office and flex/industrial properties. We operate
principally through BSRT UPREIT Limited Partnership, referred to as the
Operating Partnership, and its subsidiaries. BSRT UPREIT Corp., a wholly-
owned subsidiary, is the General Partner of the Operating Partnership. As
of March 31, 2000, we were the sole limited partner of BSRT UPREIT Limited
Partnership.
Our Board of Trustees has recently formed a committee comprised
entirely of our independent trustees to begin the process of evaluating
strategic alternatives. The results of this review may significantly
change our future business plan compared to the strategies that we have
pursued over the last several years. Further, pending this review, we have
not acquired any new properties and have not taken any specific steps to
increase the amount of capital available for acquisitions.
RESULTS OF OPERATIONS
As of March 31, 2000, we owned individually, or, in some cases through
joint ventures, twenty-seven properties consisting of:
. fourteen office properties totaling 1.5 million rentable square
feet;
. twelve flex/industrial properties totaling 1.7 million rentable
square feet;
. one retail property which contains 321,600 rentable square
feet.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED
MARCH 31, 1999
During the three months ended March 31, 2000 and 1999 our income
before minority interest and extraordinary item totaled approximately $1.3
million and approximately $1.4 million, respectively. The approximate $0.1
million decrease resulted from a reduction in total revenue of
approximately $1.1 million offset by a decrease in total expenses of
approximately $1.0 million. In particular, our total revenues decreased by
approximately $1.1 million or 10.6% to approximately $9.3 million from
approximately $10.4 million, due to a decrease in the number of properties
that we own. On a "same-store" basis (comparing the results of operations
of the properties owned during the entire three months ended March 31, 2000
with the results of the same properties owned during the entire three
months ended March 31, 1999), total revenues decreased by approximately
$0.1 million. This decrease was caused by lower occupancy at two of our
properties, the Colonial Penn Building and Airways Plaza Office Center.
These properties were 72% and 10% occupied at March 31, 2000, respectively,
compared to 100% and 91% occupancy levels at March 31, 1999. The occupancy
at these two properties was lower than our historical levels as a result of
the termination of several leases during 1999. Our ability to achieve
"same-store" growth in revenue in the future will be dependent on the time
it takes to re-lease this and future vacant space and the rental rates at
which we obtain new tenants.
Our total operating expenses, which include property operating,
repairs and maintenance, real estate taxes, and ground lease decreased by
approximately $0.5 million to approximately $3.0 million from approximately
$3.5 million in 1999. We attribute all of this decrease to the fact that
we own fewer properties. Interest expense decreased by approximately $0.5
million to approximately $2.4 million from approximately $2.9 million
primarily due to a reduction in the amounts borrowed as a result of 1999
dispositions.
LIQUIDITY AND CAPITAL RESOURCES
We expect to fund our short-term liquidity needs, including recurring
capital expenditures, from our working capital (including the restricted
cash which is available for capital expenditures, real estate taxes and
insurance), and from income derived primarily from our property operations.
We anticipate using these monies to fund periodic tenant-related capital
expenditures and other capital improvements. Assuming that our Board of
Trustees continues to authorize the payment of distributions consistent
with historical per share amounts, we believe that our Funds Available for
Distribution (as defined below) will be sufficient for the twelve months
after the date of this report to pay quarterly distributions of $0.12 per
common share.
We expect to fund our long-term liquidity needs, including funds
necessary for non-recurring capital improvements and funds required if we
decide to acquire and develop property, from long-term and short-term
secured debt. If we require additional liquidity to fund a portion of the
cost of improving properties in the future, we expect to borrow under our
credit facility or to mortgage our Avalon Ridge Business Park which is our
only unencumbered property.
At March 31, 2000, our assets totaled approximately $198.2 million, a
decrease of approximately $8.4 million from total assets at December 31,
1999 of approximately $206.6 million. Our liabilities totaled
approximately $125.1 million at March 31, 2000, a decrease of
approximately $14.0 million from a total of approximately $139.1 million at
December 31, 1999. Our shareholders equity increased by approximately $5.5
million to approximately $70.8 million at March 31, 2000 from approximately
$65.3 million at December 31, 1999.
Cash and cash equivalents consist of cash and short-term investments.
Our cash and cash equivalents balance was approximately $4.9 million at
March 31, 2000 and approximately $13.1 million at December 31, 1999. The
decrease in total cash and cash equivalents resulted from using
approximately $0.9 million in investing activities and approximately $9.3
million in financing activities, while receiving approximately $2.0 million
from operating activities.
Cash Flows From Operating Activities: Net cash provided by operating
activities decreased by approximately $0.4 million for the three months
ended March 31, 2000 to approximately $2.0 million from approximately $2.4
million in 1999. This decrease is primarily due to period to period
changes in certain assets and liabilities including restricted cash, other
assets, accounts payable and other assets and liabilities effecting
operating activities. Net income adjusted for depreciation and
amortization and minority interest remained the same at approximately $3.0
million for the three months ended March 31, 2000 and 1999. See Results of
Operations above for further discussion of the operations of our real
estate assets.
Due to certain unique operating characteristics of real estate
companies, the National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a standard known as
"Funds from Operations", or "FFO" for short, which it believes more
accurately reflects the operating property performance of a REIT such as
our company. As defined by NAREIT, FFO means net income computed in
accordance with generally accepted accounting principles ("GAAP"), less
extraordinary items, excluding gains (or losses) from debt restructuring
and sales of property plus depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. We have
adopted the NAREIT definition for computing FFO because we believe that,
subject to the following limitations, FFO provides a basis for comparing
the performance and operations of a REIT such as our company. The
calculation of FFO may vary from entity to entity in that capitalization
and expense policies may vary from entity to entity. Items which are
capitalized do not decrease FFO whereas items that are expensed decrease
FFO. As such, our presentation of FFO may not be comparable to other
similarly titled measures presented by other REIT's. We do not intend for
FFO to be an alternative to Net Income as an indication of our performance
nor an alternative to Cash Flows from Operating Activities (as calculated
in accordance with GAAP) as a measure of our capacity to pay distributions.
For the three months ended March 31, 2000 and 1999, our properties
generated FFO of approximately $2.6 million and $2.8 million, respectively.
FFO decreased on a year to year basis due primarily to a decrease in the
number of properties owned from period to period.
FFO for the three months ended March 31, 2000 and 1999 is calculated
as follows:
2000 1999
---- ----
(Dollars in thousands)
Net Income Attributable to
Common Shares . . . . . . . . . . . . . . . $1,019 $1,238
Plus:
Depreciation and Amortization Expense . . . 1,630 1,584
Less:
Minority Interest Share of
Depreciation and Amortization
Expense . . . . . . . . . . . . . . . . . (82) (56)
Extraordinary Item . . . . . . . . . . . . 42 --
------ ------
Funds From Operations. . . . . . . . . . . . $2,609 $2,766
====== ======
Cash Flows Provided By (Used For):
Operating Activities . . . . . . . . . . . $ 2,053 $ 2,418
Investing Activities . . . . . . . . . . . $ (948) $(1,877)
Financing Activities . . . . . . . . . . . $(9,295) $(1,940)
Our ability to pay any distribution is influenced by the amount of
money that we have available to distribute known as Funds Available for
Distribution or "FAD" for short. FAD is calculated by increasing or
decreasing FFO to give effect to items such as the impact of straight-
lining rents, lease commissions paid and normalized reserves for capital
improvements. We reserve approximately $0.075 per square foot for
flex/industrial properties, $0.10 per square foot for office properties,
$0.15 per square foot for retail property and $200 per residential unit.
The ability to make future distributions to our shareholders is
dependent upon, among other things:
. the strategic course determined by our Board of Trustees as a
result of their strategic review;
. sustaining the operating performance of our existing real
estate investments through scheduled increases in base rents under existing
leases and through general improvement in the real estate markets where our
properties are located; and
. our level of operating expenses.
FAD for the three months ended March 31, 2000 and 1999 is calculated
as follows:
2000 1999
---- ----
(Dollars in thousands)
Funds From Operations. . . . . . . . . . . . . . $2,609 $2,766
Straight-line Rents. . . . . . . . . . . . . . . (25) (25)
Lease Commissions. . . . . . . . . . . . . . . . (409) (307)
Capital Reserve. . . . . . . . . . . . . . . . . (82) (128)
----- ------
Funds Available for Distribution . . . . . . . . $2,093 $2,306
====== ======
Cash Flows From Investing Activities: During the three months ended
March 31, 2000, we used approximately $0.9 million in investing activities
compared to approximately $1.9 million in the same period in 1999. Cash
flow was primarily used during the three months ended March 31, 2000 to
make capital improvements at our various properties in the amount of
approximately $1.1 million. In comparison, during the same period in 1999,
we made capital improvements in the amount of approximately $1.5 million.
Cash Flows From Financing Activities: During the three months ended
March 31, 2000, financing activities used approximately $9.3 million
compared to approximately $1.9 million in the same period in 1999. During
the three months ended March 31, 2000, we used cash primarily to make
principal payments on mortgage loans, and on an unsecured loan payable of
approximately $7.6 million and to pay distributions to shareholders of
approximately $1.7 million. The cash flows used by financing activities
for the three months ended March 31, 1999 resulted primarily from
distributions paid to shareholders of approximately $1.6 million and
principal payments on mortgage loans and bonds payable of approximately
$0.4 million.
OTHER INFORMATION
As of March 31, 2000, we owned interests, directly or indirectly
through our wholly owned subsidiaries, in the properties set forth in the
table below:
BANYAN STRATEGIC REALTY TRUST
Portfolio Summary
March 31, 2000
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 2000 2001 2002 2002
-------- ------- -------- ---- ---- ---- -----
FLEX/INDUSTRIAL
- ---------------
Milwaukee Industrial Properties
Milwaukee, WI. . . . . . . . . 4/30/93 235,800 85% 11% 16% 32% 26%
Elmhurst Metro Court
Elmhurst, IL . . . . . . . . . 11/30/93 140,800 66% 6% 37% 12% 11%
Willowbrook Industrial Court
Willowbrook, IL. . . . . . . . 6/16/95 84,300 89% 21% 19% 31% 18%
Lexington Business Center
Lexington, KY. . . . . . . . . 12/05/95 308,800 70% 18% 9% 5% 38%
Newtown Business Center
Lexington, KY. . . . . . . . . 12/05/95 87,100 99% 4% 37% 16% 42%
6901 Riverport Drive
Louisville, KY . . . . . . . . 11/19/96 322,100 100% 45% 0% 0% 55%
Avalon Ridge Business Park
Norcross, GA . . . . . . . . . 4/24/98 57,400 100% 0% 0% 0% 100%
Tower Lane Business Park
Bensenville, IL. . . . . . . . 4/27/98 95,900 100% 37% 15% 30% 18%
Metric Plaza
Winter Park, FL. . . . . . . . 4/30/98 32,000 100% 0% 0% 69% 31%
Park Center
Orlando, FL. . . . . . . . . . 4/30/98 47,400 80% 9% 25% 24% 22%
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 2000 2001 2002 2002
-------- ------- -------- ---- ---- ---- -----
University Corporate Center
Winter Park, FL. . . . . . . . 4/30/98 127,800 77% 9% 33% 21% 14%
Johns Creek Office and
Industrial Park
Duluth and Suwanee, GA . . . . 8/14/98 119,300 100% 0% 50% 50% 0%
---------- ----- ----- ----- ----- -----
Sub-total. . . . . . . . . . 1,658,700 86% 19% 18% 18% 31%
---------- ----- ----- ----- ----- -----
OFFICE
- ------
Colonial Penn Building
Tampa, FL. . . . . . . . . . . 3/22/94 79,200 72% 0% 0% 0% 72%
Commerce Center
Sarasota, FL . . . . . . . . . 3/22/94 81,100 100% 0% 11% 5% 84%
Woodcrest Office Park
Tallahassee, FL. . . . . . . . 12/19/95 264,900 94% 18% 17% 19% 40%
Midwest Office Center
Oakbrook Terrace, IL . . . . . 4/18/96 77,000 92% 32% 19% 31% 10%
Phoenix Business Park
Atlanta, GA. . . . . . . . . . 1/15/97 110,600 69% 2% 13% 18% 36%
Butterfield Office Plaza
Oak Brook, IL. . . . . . . . . 4/30/97 200,800 95% 21% 20% 38% 16%
Southlake Corporate Center
Morrow, GA . . . . . . . . . . 7/30/97 56,200 87% 6% 35% 35% 11%
University Square Business Center
Huntsville, AL . . . . . . . . 8/26/97 184,700 96% 25% 25% 25% 21%
Technology Center
Huntsville, AL . . . . . . . . 8/26/97 48,500 65% 0% 0% 0% 65%
Airways Plaza Office Center
Memphis, TN. . . . . . . . . . 12/10/97 87,800 10% 0% 4% 3% 3%
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 2000 2001 2001
-------- ------- -------- ---- ---- ---- -----
Peachtree Pointe Office Park
Norcross, GA . . . . . . . . . 1/20/98 71,700 91% 27% 13% 16% 35%
Avalon Center Office Park
Norcross, GA . . . . . . . . . 3/20/98 53,300 100% 0% 0% 0% 100%
Sand Lake Tech Center
Orlando, FL. . . . . . . . . . 4/30/98 84,100 100% 0% 0% 3% 97%
Technology Park
Norcross, GA . . . . . . . . . 8/14/98 145,700 100% 13% 28% 4% 55%
---------- ----- ----- ----- ----- -----
Sub-total. . . . . . . . . 1,545,600 87% 13% 16% 17% 41%
---------- ----- ----- ----- ----- -----
RETAIL
- ------
Northlake Tower Shopping Center
Atlanta, GA. . . . . . . . . . 7/28/95 321,600 98% 8% 2% 7% 81%
---------- ----- ----- ----- ----- -----
Total. . . . . . . . . . . . . 3,525,900 88% 15% 15% 17% 41%
---------- ----- ----- ----- ----- -----
BANYAN STRATEGIC REALTY TRUST
Comparison of Average Rents
Average Average
"In Place" Market
Square Net Rents Net Rents
Property Type Footage (1) (2)
- ------------- --------- ---------- ---------
Flex/Industrial. . . . . . 1,658,700 $5.55 $5.59
Office . . . . . . . . . . 1,545,600 9.18 10.27
Retail . . . . . . . . . . 321,600 11.81 12.00
---------- ------ ------
Total. . . . . . . . . 3,525,900 $ 7.71 $ 8.23
========== ====== ======
- --------------------
(1) Average "In Place" Net Rents represent net operating income per
square foot.
(2) Average Market Net Rents represent our good faith estimate of current
market rents, assuming standard tenant improvements.
SUBSEQUENT EVENT
On May 1, 2000, we entered into a loan agreement with LaSalle Bank
National Association which provides for a loan in the amount of $12.1
million, which we can draw in four installments. The amount of $8.5
million was drawn on May 1, 2000. The loan which is collateralized by the
Trust's Johns Creek Office and Industrial Park and Technology Park
properties, bears interest at a variable rate equal to LIBOR plus 2.2% and
is payable monthly. The loan principal is pre-payable without penalty and
matures in one year. We utilized the proceeds from the first draw
primarily to repay the amounts outstanding on a line of credit which was
due on May 1, 2000 and which was previously collateralized by Johns Creek
Office and Industrial Park and Technology Park, and secondarily for
transaction costs.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not engage in any hedge transaction nor in the ownership of any
derivative financial instruments. To mitigate the impact of fluctuations
in interest rates, we generally have maintained over 70% of our debt as
fixed rate in nature by borrowing on a long-term basis.
As of March 31, 2000, we had approximately $118.9 million of
outstanding long-term debt, of which $20.6 million bears interest at
variable rates that are adjusted on a monthly basis. As of March 31, 2000,
the weighted-average interest rate on this variable rate debt was 7.47%.
If interest rates on this variable rate debt increased by one percentage
point (1%), interest expense would increase by $206,000 on an annual basis.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (see Exhibit Index included elsewhere herein).
(b) Report on form 8-K dated December 16, 1999 was filed on
January 3, 2000 to provide information required by Item 2 of Form 8-K and a
pro forma information required by Item 7 of Form 8-K in connection with the
Trust's disposition of the property in the Oklahoma apartment portfolio.
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on our behalf
and in the capacities and on the dates indicated.
BANYAN STRATEGIC REALTY TRUST
By: /s/ Leonard G. Levine Date: May 11, 2000
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: May 11, 2000
Joel L. Teglia, Vice President
and Chief Financial Officer
EXHIBIT
INDEX
- -------
3.1 Third Amended and Restated Declaration of Trust dated as of
August 8, 1986, as amended on March 8, 1991, May 1, 1993, August 12, 1998
and December 13, 1999, including Certificate of designations, preferences
and rights of Series A convertible preferred shares. (1)
3.2 First Amendment of Third Amended and Restated Declaration of
Trust effective December 13, 1999. (*)
3.3 By-Laws dated March 13, 1996. (2)
3.4 BSRT UPREIT Limited Partnership Limited Partnership Agreement (3)
4.1 Convertible Term Loan Agreement dated as of October 10, 1997
among Banyan Strategic Realty Trust, as Borrower, and the Entities listed
therein, as Lenders. (4)
4.2 First Amendment to Convertible Term Loan Agreement dated as of
March 30, 1998 made by and among Banyan Strategic Realty Trust and the
Entities listed therein, as Lenders. (5)
4.3 Second Amendment to Convertible Term Loan Agreement dated as of
June 26, 1998 made by and among Banyan Strategic Realty Trust and the
Entities listed therein, as Lenders. (6)
4.4 Revolving Credit Agreement dated April 30, 1998 among Banyan
Strategic Realty Trust, as Borrower and the Capital Company of America, as
Lender. (7)
4.5 Loan Agreement dated May 22, 1998 among BSRT Fountain Square
L.L.C., BSRT Phoenix Business Park L.L.C., BSRT Newtown Trust, BSRT
Southlake L.L.C., BSRT Technology Center L.L.C., BSRT Airways Plaza L.L.C.,
BSRT Peachtree Pointe L.L.C., BSRT Avalon Center L.L.C., BSRT Sand Lake
Tech Center L.L.C., BSRT Park Center L.L.C., BSRT Metric Plaza L.L.C., and
BSRT University Corporate Center L.L.C., as Borrower, and the Capital
Company of America, as Lender. (6)
4.6 First Amendment to Loan Agreement dated September 11, 1998 among
BSRT Fountain Square L.L.C., BSRT Phoenix Business Park L.L.C., BSRT Newton
Trust, BSRT Southlake L.L.C., BSRT Technology Center L.L.C., BSRT Airways
Plaza L.L.C., BSRT Peachtree Pointe L.L.C., BSRT Avalon Center L.L.C., BSRT
Sand Lake Tech Center L.L.C., BSRT Park Center L.L.C., BSRT Metric Plaza
L.L.C., and BSRT University Corporate Center L.L.C., as Borrower, and the
Capital Company of America LLC, as Lender. (8)
4.7 Loan Agreement dated June 22, 1998 between Banyan/Morgan
Wisconsin L.L.C., and Banyan/Morgan Elmhurst L.L.C., as Borrower and the
Capital Company of America, as Lender. (6)
4.8 First Amendment to Loan Agreement dated September 11, 1998
between Banyan/Morgan Wisconsin L.L.C., and Banyan/Morgan Elmhurst L.L.C.,
as Borrower and the Capital Company of America LLC, as Lender. (8)
10.1 Employment Agreement of Leonard G. Levine as of December 14,
1999. (1)
10.2 Employment Agreement of Leonard G. Levine as of October 1, 1997.
(9)
10.3 Employment Agreement of Joel L. Teglia dated December 31, 1998.
(3)
10.4 Employment Agreement of Neil Hansen dated December 31, 1998. (3)
10.5 Employment Agreement of Jay Schmidt dated December 31, 1998. (3)
EXHIBIT
INDEX
- -------
10.6 1997 Omnibus Stock and Incentive Plan dated July 9, 1997. (10)
10.7 Share Purchase Agreement by and among Banyan Strategic Realty
Trust and the Purchasers listed on the signature page attached thereto
dated as of October 10, 1997. (4)
10.8 Registration Rights Agreement dated as of October 10, 1997
between Banyan Strategic Realty Trust and the Purchasers listed on the
Signature Pages attached thereto. (4)
10.9 Registration Rights Agreement dated as of October 1, 1997 between
Banyan Strategic Realty Trust and Leonard G. Levine. (3)
21 Subsidiaries of Banyan Strategic Realty Trust (1)
27 Financial Data Schedule (*)
99.15 Press Release dated April 5, 2000 (*)
99.16 Press Release dated May 10, 2000 (*)
- --------------------
(*) Filed herewith.
(1) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 1999.
(2) Incorporated by reference from the Trust's Registration
Statement on Form S-11 (file number 33-4169).
(3) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 1998.
(4) Incorporated by reference from the Trust's Form 8-K dated
October 14, 1997.
(5) Incorporated by reference from the Trust's Form 10-K/A
for the year ended December 31, 1997.
(6) Incorporated by reference from the Trust's Form 8-K dated
May 22, 1998.
(7) Incorporated by reference from the Trust's Form 10-Q
dated March 31, 1998.
(8) Incorporated by reference from the Trust's Form 8-K/A-1
dated August 14, 1998.
(9) Incorporated by reference from the Trust's Form 10-K
dated December 31, 1997.
(10) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended June 30, 1997.