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, 2001.
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 11, 2001: 15,488,137
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Net Assets in Liquidation
(Liquidation Basis)
March 31, 2001
(Unaudited)
(Dollars in thousands)
ASSETS
- ------
Investment in Real Estate Held for Sale, at cost:
Land . . . . . . . . . . . . . . . . . . . $ 36,445
Building . . . . . . . . . . . . . . . . . 123,219
Building Improvements. . . . . . . . . . . 20,150
----------
179,814
Less: Accumulated Depreciation . . . . . . (19,628)
----------
160,186
----------
Investment in Real Estate, at cost:
Building . . . . . . . . . . . . . . . . . 25,389
Building Improvements. . . . . . . . . . . 1,175
----------
26,564
Less: Accumulated Depreciation. . . . . . (3,499)
----------
23,065
----------
Cash and Cash Equivalents. . . . . . . . . . 3,937
Restricted Cash - Capital Improvements . . . 1,135
Restricted Cash - Other. . . . . . . . . . . 1,687
Interest and Accounts Receivable . . . . . . 1,305
Other Assets . . . . . . . . . . . . . . . . 168
----------
Total Assets . . . . . . . . . . . . . . . . $ 191,483
==========
LIABILITIES
- -----------
Mortgage Loans Payable . . . . . . . . . . . $ 115,047
Bonds Payable. . . . . . . . . . . . . . . . 4,200
Accounts Payable and Accrued Expenses. . . . 3,305
Accrued Real Estate Taxes. . . . . . . . . . 1,441
Accrued Interest Payable . . . . . . . . . . 653
Unearned Revenue . . . . . . . . . . . . . . 772
Security Deposits. . . . . . . . . . . . . . 1,484
----------
Total liabilities. . . . . . . . . . . . . . 126,902
Minority Interest. . . . . . . . . . . . . . 2,360
----------
Net Assets in Liquidation. . . . . . . . . . $ 62,221
==========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Changes in Net Assets in Liquidation
(Liquidation Basis)
March 31, 2001
(Unaudited)
(Dollars in thousands)
Shareholders' Equity at December 31, 2000
(Going concern basis). . . . . . . . . . . . . $ 67,350
Adjustments to Liquidation Basis:
Liquidation and Termination Costs. . . . . . . (810)
Elimination of Intangible Assets . . . . . . . (5,470)
--------
Net Assets in Liquidation at December 31, 2000 . 61,070
Interest Income on Cash and Cash Equivalents . . 67
Operating Income . . . . . . . . . . . . . . . . 2,509
Recovery of Losses on Loans, Notes and
Interest Receivable. . . . . . . . . . . . . . 870
Depreciation . . . . . . . . . . . . . . . . . . (1,616)
Minority Interest in Consolidated Partnerships . (153)
Issuance of Shares . . . . . . . . . . . . . . . 54
Distributions Paid to Shareholders . . . . . . . (580)
--------
Net Assets in Liquidation at March 31, 2001. . . $ 62,221
========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheet
December 31, 2000
(Unaudited)
(Dollars in Thousands)
ASSETS
- ------
Investment in Real Estate Held for Sale, at cost:
Land . . . . . . . . . . . . . . . . . . . . . $ 36,445
Building . . . . . . . . . . . . . . . . . . . 148,608
Building Improvements. . . . . . . . . . . . . 20,633
--------
205,686
Less: Accumulated Depreciation . . . . . . . . (21,511)
--------
184,175
--------
Cash and Cash Equivalents. . . . . . . . . . . . 2,393
Restricted Cash - Capital Improvements . . . . . 1,200
Restricted Cash - Other. . . . . . . . . . . . . 1,178
Interest and Accounts Receivable . . . . . . . . 1,344
Deferred Financing Costs (Net of Accumulated
Amortization of $1,620). . . . . . . . . . . . 1,219
Deferred Leasing Commissions, Net of Accumulated
Amortization of $2,165 . . . . . . . . . . . . 2,612
Other Assets . . . . . . . . . . . . . . . . . . 1,936
--------
Total Assets . . . . . . . . . . . . . . . . . . $196,057
========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities
Mortgage Loans Payable . . . . . . . . . . . . . $115,452
Bonds Payable. . . . . . . . . . . . . . . . . . 4,200
Unsecured Loan Payable . . . . . . . . . . . . . --
Accounts Payable and Accrued Expenses. . . . . . 3,147
Accrued Real Estate Taxes Payable. . . . . . . . 898
Accrued Interest Payable . . . . . . . . . . . . 676
Unearned Revenue . . . . . . . . . . . . . . . . 578
Security Deposits. . . . . . . . . . . . . . . . 1,439
--------
Total Liabilities. . . . . . . . . . . . . . . . 126,390
--------
Minority Interest in Consolidated Partnerships . 2,317
Shareholders' Equity
Series A Non-Voting 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; 15,805,289 Shares Issued 124,559
Accumulated Deficit. . . . . . . . . . . . . . . (52,856)
Employees' Notes . . . . . . . . . . . . . . . . (3,144)
Treasury Shares at Cost, 1,522,649 Shares. . . . (7,366)
--------
Total Shareholders' Equity . . . . . . . . . . . 67,350
--------
Total Liabilities and Shareholders' Equity . . . $196,057
========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Operations
For the Three Months March 31, 2000
(Unaudited)
(Dollars in thousands, except per share data)
REVENUE
Rental Income. . . . . . . . . . . . . . . . . $ 8,135
Operating Cost Reimbursement . . . . . . . . . 869
Miscellaneous Tenant Income. . . . . . . . . . 71
Income on Investments and Other Income . . . . 275
--------
Total Revenue. . . . . . . . . . . . . . . . . . 9,350
--------
EXPENSES
Property Operating . . . . . . . . . . . . . . 1,110
Repairs and Maintenance. . . . . . . . . . . . 894
Real Estate Taxes. . . . . . . . . . . . . . . 734
Interest . . . . . . . . . . . . . . . . . . . 2,367
Ground Lease . . . . . . . . . . . . . . . . . 229
Depreciation and Amortization. . . . . . . . . 1,630
General and Administrative . . . . . . . . . . 1,012
Amortization of Deferred Financing Costs . . . 64
--------
Total Expenses . . . . . . . . . . . . . . . . . 8,040
--------
Income Before Minority Interest and Extraordinary Item1,310
Minority Interest in Consolidated Partnerships . (126)
--------
Income Before Extraordinary Item . . . . . . . . 1,184
Extraordinary Item . . . . . . . . . . . . . . . (42)
--------
Net Income . . . . . . . . . . . . . . . . . . . 1,142
Less Income Allocated to Preferred Shares. . . . (123)
--------
Net Income Available to Common Shares. . . . . . $ 1,019
========
Basic and Diluted Earnings Available to Common Shares
per weighted-average Common Share:
Income Before Extraordinary Item . . . . . . . $ 0.07
========
Net Income . . . . . . . . . . . . . . . . . . $ 0.07
========
The accompanying notes are an integral part
of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 2000
(Unaudited)
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 1,142
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Extraordinary Item . . . . . . . . . . . . . . . 42
Depreciation and Amortization. . . . . . . . . . 1,694
Minority Interest in Consolidated Partnerships . 126
Net Change In:
Restricted Cash - Other. . . . . . . . . . . . (510)
Interest and Accounts Receivable . . . . . . . 71
Other Assets . . . . . . . . . . . . . . . . . (261)
Accounts Payable and Accrued Expenses. . . . . (780)
Accrued Interest Payable . . . . . . . . . . . (68)
Accrued Real Estate Taxes Payable. . . . . . . 579
Unearned Revenue . . . . . . . . . . . . . . . (80)
Security Deposits. . . . . . . . . . . . . . . 98
--------
Net Cash Provided By Operating Activities. . . . . 2,053
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Investment in Real Estate . . . . (1,101)
Earnest Money Deposits . . . . . . . . . . . . --
Restricted Cash - Capital Improvements . . . . 153
--------
Net Cash Used In Investing Activities . . . . . . (948)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Minority Partners . . . . . . . (66)
Deferred Financing Costs . . . . . . . . . . . . --
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)
Distributions Paid to Shareholders . . . . . . . (1,695)
Payment of Preferred Distributions . . . . . . . (123)
Prepayment Penalties on Early Extinguishment of Debt (6)
Shares Issued, Net of Issuance Costs . . . . . . 206
--------
Net Cash Used In Financing Activities. . . . . . . (9,295)
--------
Net Decrease In Cash and Cash Equivalents. . . . . (8,190)
Cash and Cash Equivalents at Beginning of Period . 13,097
--------
Cash and Cash Equivalents at End of Period . . . . $ 4,907
========
Supplemental Information:
Interest Paid During the Period. . . . . . . . . $ 2,435
========
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, 2001
(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, 2000 which are included in the Trust's 2000
Form 10-K, as certain footnote disclosures which would substantially
duplicate those contained in such audited statements have been omitted from
this report.
Certain reclassifications have been made to the previously reported
2000 consolidated financial statements in order to provide comparability
with the 2001 consolidated financial statements. These reclassifications
have not changed the 2000 results.
2. LIQUIDATION OF THE TRUST
On January 8, 2001, the Trust entered into a Purchase and Sale
Agreement to sell all of its real estate assets to Denholtz Management
Corporation ("Denholtz") for $226 million plus the cost of all prepayment
penalties and assumption fees related to our mortgage debt. The contract
contains certain conditions to closing including a due diligence period
during which the buyer had the right to terminate the contract for any
reason without penalty until March 30, 2001. Pursuant to the First
Amendment to Purchase and Sale Agreement, the due diligence period was
extended until April 9, 2001.
On April 9, 2001, the Trust entered into the Second Amendment to
Purchase and Sale Agreement to, among other things, make the purchaser's
initial earnest money of $1.5 million non-refundable as of that date and to
make an additional deposit of approximately $0.8 million non-refundable as
of April 30, 2001, thereby increasing the total non-refundable earnest
money deposit to approximately $2.3 million. In addition, the closing date
for all but three properties was scheduled for May 11, 2001, with an
automatic extension to as late as June 11, 2001, if various lender
requirements cannot be met by the earlier date. Of the three remaining
properties, University Square in Huntsville, Alabama, remains subject to
the contract of sale with Denholtz. The closing for this property is
scheduled for December 19, 2001. The Trust is permitted to sell the other
two properties - its Riverport property in Louisville, Kentucky and its
Northlake Festival Shopping Center in Atlanta, Georgia - to third parties
or the Trust may elect to "put" these properties to Denholtz at agreed upon
prices any time between the initial closing and January of 2002. All of the
Trust's properties, except for the two "put" properties have been
classified as held for sale in the Trust's financial statements.
On May 11, 2001, the closing was adjourned by Denholtz, who has the
responsibility for the defeasance of the Trust's securitized debt, to
obtain rating agency approval of the defeasance transaction. On the same
date the Trust entered into the Third Amendment to the Purchase and Sale
Agreement, which requires the Trust to provide affiliates of Denholtz with
unsecured purchase money financing in the amount of $3 million. Two notes,
each in the amount of $1.5 million will be delivered at closing. The notes
will bear interest at a rate equal to 12 percent per annum, require monthly
payment of interest only and are due on June 30, 2002. Furthermore, the
third amendment provides resolution to certain disputed closing proration
items, the net result of which is a proration adjustment in favor of
Denholtz of approximately $0.2 million. The closing is expected to resume
and be concluded on or before May 21, 2001.
Following the initial closing, the sum of $1 million will remain in
escrow to secure Denholtz's performance under the deferred closings.
Furthermore, the contract amendment reduced the total sales proceeds that
the Trust could recover if Denholtz ultimately purchases all of the Trust's
properties to $224 million from $226 million.
In anticipation of the sale of the Trust's real estate assets, the
Trustees, on January 5, 2001, adopted a Plan of Termination and Liquidation
under which the Trust will be dissolved, the obligations of the Trust will
be paid, appropriate reserves will be taken and the net proceeds will be
distributed to the shareholders. Effective as of January 5, 2001, the
Trust adopted the liquidation basis of accounting.
3. 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:
Numerator:
Income Available to Common Shares Before
Extraordinary Item . . . . . . . . . . . . . $ 1,061
Extraordinary Item . . . . . . . . . . . . . . (42)
----------
Net Income Available to Common Shares . . $ 1,019
==========
Denominator:
Denominator for basic earnings per weighted-average
shares . . . . . . . . . . . . . . . . . . . 14,073,785
Effect of dilutive securities - Employee stock
options. . . . . . . . . . . . . . . . . . . 5,447
----------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions14,079,232
==========
Basic and Diluted Earnings Available to Common Shares
Per weighted-average Common Share:
Income Before Extraordinary Item . . . . . . . $ 0.07
Extraordinary Item . . . . . . . . . . . . . . --
----------
Net Income . . . . . . . . . . . . . . . . $ 0.07
==========
4. 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. 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
------------
Revenue
Flex/Industrial. . . . . . . . . . . . . . . . . $ 2,805
Office . . . . . . . . . . . . . . . . . . . . . 5,149
Retail . . . . . . . . . . . . . . . . . . . . . 1,124
Corporate/Other. . . . . . . . . . . . . . . . . 272
--------
$ 9,350
========
Income (Loss) Before Extraordinary Item
Flex/Industrial. . . . . . . . . . . . . . . . . $ 696
Office . . . . . . . . . . . . . . . . . . . . . 1,102
Retail . . . . . . . . . . . . . . . . . . . . . 130
Corporate/Other. . . . . . . . . . . . . . . . . (744)
--------
$ 1,184
========
As of
March 31,
2000
--------
Total Assets
Flex/Industrial. . . . . . . . . . . . . . . . . $ 68,756
Office . . . . . . . . . . . . . . . . . . . . . 106,458
Retail . . . . . . . . . . . . . . . . . . . . . 18,246
Corporate/Other. . . . . . . . . . . . . . . . . 4,735
--------
$198,195
========
Three Months
Ended
March 31,
2000
------------
Depreciation and Amortization
Flex/Industrial. . . . . . . . . . . . . . . . . $ 572
Office . . . . . . . . . . . . . . . . . . . . . 914
Retail . . . . . . . . . . . . . . . . . . . . . 144
--------
$ 1,630
========
Interest Expense
Flex/Industrial. . . . . . . . . . . . . . . . . $ 754
Office . . . . . . . . . . . . . . . . . . . . . 1,284
Retail . . . . . . . . . . . . . . . . . . . . . 329
--------
$ 2,367
========
Additions to Investment in Real Estate
Flex/Industrial. . . . . . . . . . . . . . . . . $ 308
Office . . . . . . . . . . . . . . . . . . . . . 792
Retail . . . . . . . . . . . . . . . . . . . . . 1
--------
$ 1,101
========
5. SUBSEQUENT EVENTS
Conversion of Series A Convertible Preferred Shares
During 1998, the Trust borrowed $7.4 million pursuant to its $20
million 1997 Convertible Term Loan Agreement for an unsecured convertible
term loan (the "Unsecured Loan"). On January 20, 2000, the Trust repaid
$1,243 of the Unsecured Loan and the remaining balance of $6,157 was
converted into 61,572 Series A convertible preferred shares. The Series A
convertible preferred shares paid quarterly preferred dividends at rate of
10% per annum and were convertible into common shares at a conversion price
of $5.15 per share. On April 17, 2001, 61,572 Series A convertible
preferred shares were converted into 1,195,574 common shares.
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, 2000 for a more
complete discussion.
On January 8, 2001, we entered into a Purchase and Sale Agreement to
sell all our real estate assets to Denholtz Management Corporation
("Denholtz") for $226 million plus the cost of all prepayment penalties and
assumption fees related to our mortgage debt. The contract contains
certain conditions to closing including a due diligence period during which
the buyer had the right to terminate the contract for any reason without
penalty until March 30, 2001. Pursuant to the First Amendment to Purchase
and Sale Agreement, the due diligence period was extended until April 9,
2001.
On April 9, 2001, we entered into the Second Amendment to Purchase and
Sale Agreement to, among other things, make the purchaser's initial earnest
money of $1.5 million non-refundable as of that date and to make an
additional deposit of approximately $0.8 million non-refundable as of April
30, 2001, thereby increasing the total non-refundable earnest money deposit
to approximately $2.3 million. In addition, the closing date for all but
three properties was scheduled for May 11, 2001, with an automatic
extension to as late as June 11, 2001, if various lender requirements
cannot be met by the earlier date. Of the three remaining properties,
University Square in Huntsville, Alabama, remains subject to the contract
of sale with Denholtz. The closing for this property is scheduled for
December 19, 2001. We are permitted to sell the other two properties, our
Riverport property in Louisville, Kentucky and our Northlake Festival
Shopping Center in Atlanta, Georgia to third parties or we may elect to
"put" these properties to Denholtz at agreed upon prices any time between
the initial closing and January of 2002. All of our properties, except for
the two "put" properties have been classified as held for sale in the
Trust's financial statements.
On May 11, 2001, the closing was adjourned by Denholtz, who has the
responsibility for the defeasance of our securitized debt, to obtain rating
agency approval of the defeasance transaction. On the same date we entered
into the Third Amendment to the Purchase and Sale Agreement, which requires
us to provide affiliates of Denholtz with unsecured purchase money
financing in the amount of $3 million. Two notes, each in the amount of
$1.5 million will be delivered at closing. The notes will bear interest at
a rate equal to 12 percent per annum, require monthly payment of interest
only and are due on June 30, 2002. Furthermore, the Third Amendment
provides resolution to certain disputed closing proration items, the net
result of which is a proration adjustment in favor of Denholtz of
approximately $0.2 million. The closing is expected to resume and be
concluded on or before May 21, 2001.
Following the initial closing, the sum of $1 million will remain in
escrow to secure Denholtz's performance under the deferred closings.
Furthermore, the contract amendment reduced the total sales proceeds that
the Trust could recover if Denholtz ultimately purchases all of the Trust's
properties to $224 million from $226 million.
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. On January 5,
2001, we adopted a Plan of Termination and Liquidation (the "Plan")under
which our Trust will be dissolved, the obligations of the Trust will be
paid, appropriate reserves will be taken and the net proceeds will be
distributed to our shareholders.
RESULTS OF OPERATIONS
As a result of the adoption of the Plan, we began reporting on the
liquidation basis of accounting effective for the quarter ending March 31,
2001. Therefore, operations for the three months ending March 31, 2001 are
reported on the Consolidated Statement of Changes in Net Assets in
Liquidation while the March 31, 2000 results are reported on a going
concern basis on the Consolidated Statement of Operations. The Statement
of Changes in Net Assets in Liquidation differs from the Statement of
Operations in that we no longer amortize deferred financing fees and
leasing commissions and we no longer record straight line rental income.
We do, however, deduct leasing commissions in the computation of Operating
Income. As a result of these differences, the results of the quarter
ending March 31, 2001 are not comparable to the results for the quarter
ending March 31, 2000.
Prior to reporting the operating activity for quarter ending March 31,
2001, we adjusted our Shareholders' Equity as of December 31, 2000 as
reported on a going concern basis to the liquidation basis of accounting.
As a result, we recorded an adjustment of approximately $5.5 million
related to the write off of certain intangible assets, specifically leasing
commissions and deferred financing fees, that were included in our total
assets as at December 31, 2000. In addition, we recorded a charge of
approximately $0.8 million for costs related to the liquidation and
termination of the company.
For the three months ending March 31, 2001, our Net Assets in
Liquidation increased by approximately $1.1 million from approximately
$61.1 million at December 31, 2000 to approximately $62.2 million at
March 31, 2001. This increase is primarily the result of operating income
in the amount of approximately $2.5 million and recovery of losses on
loans, notes and interest receivable of approximately $0.9 million reduced
by depreciation expense of approximately $1.6 million, distributions to
shareholders in the amount of approximately $0.6 million and minority
interest of approximately $0.1 million. The recovery of losses on loans,
notes and interest receivable of approximately $0.9 million represents cash
received in respect of our interest in a liquidating trust established for
the benefit of the unsecured creditors of VMS Realty Partners and its
affiliates. Our interest in this liquidating trust had previously been
accorded no value in our financial statements
For the three months ending March 31, 2000, we reported Net Income
Available to Common shares of approximately $1.0 million. Because of the
differences between the liquidation basis of accounting and the going
concern basis of accounting described above, this amount is not comparable
to the net changes in assets in liquidation as reported for the three
months ending March 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, our total assets (liquidation basis) were
approximately $191.5 million, a decrease of approximately $4.6 million from
total assets at December 31, 2000 (going concern basis) of approximately
$196.1 million. Our liabilities totaled approximately $126.9 million at
March 31, 2001, a increase of approximately $0.5 million from approximately
$126.4 million at December 31, 2000. At March 31, 2001 our net assets in
liquidation (liquidation basis) were approximately $62.2 million compared
to shareholders equity (going concern basis) of approximately $67.4 million
at December 31, 2000, a decrease of approximately $5.2 million. The
significant decreases in total assets and net assets in liquidation are
attributable to the write off of leasing commissions and deferred financing
fees upon adoption of the liquidation basis of accounting effective as of
the first quarter of 2001. See "Results of Operations", above, for the
discussion regarding differences the liquidation basis of accounting and
the going concern basis of accounting.
Cash and cash equivalents consist of cash and short-term investments.
Our cash and cash equivalents balance increased approximately $1.5 million
to approximately $3.9 million at March 31, 2001 from approximately $2.4
million at December 31, 2000. The increase in total cash and cash
equivalents resulted primarily from receiving approximately $2.5 million
from operating income, approximately $0.9 million from the recovery of
losses on loans, notes and interest receivable less approximately $0.7
million invested in real estate held for sale, approximately $0.6 million
in distributions paid to shareholders and approximately $0.4 million of
principal payments on mortgage debt.
During the quarter ending March 31, 2000, our operating activities
provided net cash of approximately $2.0 million. We used approximately
$0.9 million in investing activities to make capital improvements at our
various properties net of proceeds from restricted cash. During the three
months ended March 31, 2000, our financing activities used approximately
$9.3 million of 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.
With the completion of the Denholtz Transaction, it is our intention
to establish only those essential reserves needed to cover liquidation
costs and contingent liabilities, including those costs and contingent
liabilities related to pending litigation. Furthermore, it is our
intention to distribute all cash proceeds from the sale of our assets in
excess of these reserves to our shareholders. We expect to make a first
distribution as soon as practical after the closing and a final liquidating
distribution during the third or fourth quarter of 2002.
FINANCINGS:
On May 1, 2000, we entered into a loan agreement with LaSalle Bank
National Association (the "LaSalle Loan") which provided for a loan in the
amount of $12.1 million of which $10.5 million was outstanding as of
March 31, 2001. The loan 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 on May 31, 2001.
On October 8, 1999, we entered into a loan agreement with LaSalle Bank
N.A. in the amount of $7.8 million. The loan, which is collateralized by
the Trust's Lexington Business Center property, bears interest at a
variable rate equal to LIBOR plus 2% and is payable monthly. The loan
principal is pre-payable without penalty and matures on May 31, 2001.
In the event that the Denholtz transaction is delayed or terminated,
we will exercise our final option to extend the Lexington loan and will
attempt to extend or replace the Johns Creek and Technology Park LaSalle
Loan.
During the third quarter of 1998, we borrowed $7.4 million under a
convertible term loan agreement entered into with a group of lenders in
October 1997. On January 20, 2000, we paid conversion fee of $37,000 (0.5%
of the outstanding loan balance) and we repaid approximately $1.2 million
of the convertible term loan. The remaining balance of approximately $6.2
million was converted into 61,572 Series A convertible preferred shares at
a conversion rate of $100 per share and on April 17, 2001 these preferred
shares were further converted into 1,195,574 common shares at a conversion
rate of $5.15 per common share.
OTHER - LITIGATION
During the first quarter of 2001, we (and/or three of our trustees and
certain of our shareholders) were involved in three separate matters being
litigated with suspended president Leonard G. Levine. A description
follows:
On August 14, 2000, we exercised our rights under the Trust's
employment agreement with Mr. Levine by suspending him and placing him on
leave from his position as president. Simultaneously, we initiated an
arbitration proceeding as required under the employment agreement. On
October 5, 2000, Mr. Levine brought an action in the Circuit Court of Cook
County, Illinois to halt the arbitration proceedings by reason of improper
forum. On October 18, 2000, we filed a lawsuit against Mr. Levine in the
Circuit Court of Cook County, Illinois. Our complaint alleges violations
of Mr. Levine's duty of loyalty owed to the Trust.
On December 6, 2000, we and Mr. Levine, through our respective
attorneys, agreed to dismiss the arbitration action and Mr. Levine's
lawsuit challenging the arbitration, and further agreed to resolve all
issues under Mr. Levine's employment contract within the lawsuit we had
filed against Mr. Levine in the Circuit Court of Cook County (the
"Employment Litigation").
On January 19, 2001, Mr. Levine filed an answer, affirmative defenses
and counterclaim in the Employment Litigation. The pleading generally
denies that Mr. Levine breached his fiduciary duties, raises various
defenses and seeks a judgment in favor of Mr. Levine and against us on the
counterclaim, for money damages and also seeks a reinstatement to active
employment status. Discovery in this case has commenced.
On May 2, 2001, Mr. Levine presented a motion for partial judgment on
the pleadings, which is currently being briefed. We filed a Second Amended
Complaint on May 7, 2001, seeking, among other things, $300,000 in
compensatory damages and $3 million in punitive damages against Mr. Levine
in connection with various alleged breaches of fiduciary duty. The factual
bases underlying the Second Amended Complaint include allegations that (i)
Mr Levine caused the Trust to pay on his account or reimburse him for
expenses that were not reasonable, ordinary and necessary business
expenses; (ii) during negotiations between the Trust and Oak Realty Group,
Inc. (an entity solely owned by Mr. Levine) Mr. Levine attempted to
pressure the Trust into accepting Oak's offer to acquire the Trust by
revealing to one of the trustees that Oak had entered into certain
confidentiality and exclusivity agreements which had the effect of
excluding potential purchasers and/or capital providers from purchasing or
providing financing to a potential purchaser of the Trust, except through
Oak; (iii) Mr. Levine's failure to disclose to our Board of Trustees a
prior pattern and practice of obtaining unauthorized expense reimbursements
allows the Board to rescind Mr. Levine's 1999 Employment Contract and
legally estops Mr. Levine from obtaining any benefits under that contract
and (iv) Mr. Levine's prosecution of the Derivative Action (see description
below) amounts to a separate breach of fiduciary duty by Mr. Levine.
In addition, on May 7, 2001, the Trust amended its answer to Mr.
Levine's counterclaim in the Employment Litigation to add several
affirmative defenses based upon Mr. Levine's breaches of his fiduciary duty
of loyalty. The maximum potential liability in connection with Mr.
Levine's contract (inclusive of incentives but exclusive of base salary) is
estimated to be approximately $1.8 million.
On January 19, 2001, Mr. Levine filed two lawsuits in the Circuit
Court of Cook County. In the first action, Mr. Levine, suing derivatively
on behalf of our shareholders (the "Derivative Action"), sought to enjoin
trustees Daniel Levinson, Stephen Peck and L.G. Schafran from completing
the pending sale of substantially all of our assets to Denholtz Management
Corporation until we obtained approval of the transaction from a majority
of our shareholders. This matter was removed to the United States District
Court for the Northern District of Illinois and we intervened as an
additional defendant. We and the named trustees filed a motion for summary
judgment on February 9, 2001, and Mr. Levine filed a cross-motion for
summary judgment on February 20, 2001. On March 15, 2001, the Court
entered judgment in favor of the trustees and us and against Mr. Levine.
On April 16, 2001, all rights of appeal lapsed. This matter is now
concluded.
On January 19, 2001, Mr. Levine also filed an action in the Circuit
Court of Cook County against trustees Daniel Levinson, Stephen Peck and
L.G. Schafran as well as two of our largest shareholders, Morgens,
Waterfall, Vintiadis & Company, Inc. and Magten Asset Management
Corporation. This action sought unspecified compensatory and punitive
damages for a variety of business related torts which Mr. Levine alleged
the defendants committed. The individual defendants and the shareholders
filed motions to dismiss. On April 30, 2001, before those motions could be
heard, Mr. Levine voluntarily dismissed this case in its entirety.
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, 2001, we had approximately $119.2 million of
outstanding long-term debt, of which $22.5 million bears interest at
variable rates that are adjusted on a monthly basis. As of March 31, 2001,
the weighted-average interest rate on this variable rate debt was 6.76%.
If interest rates on this variable rate debt increased by one percentage
point (1%), interest expense would increase by $225,000 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) . dated January 8, 2001, filed January 10, 2001, including
item 5 and item 7;
. dated and filed January 19, 2001, including item 5 and
item 7;
. dated January 24, 2001, filed January 25, 2001, including
item 5 and item 7;
. dated February 20, 2001, filed February 21, 2001,
including item 5, item 7 and item 9;
. dated March 13, 2001, filed March 14, 2001, including
item 5 and item 7;
. dated March 16, 2001, filed March 19, 2001, including
item 5 and item 7; and
. dated March 28, 2001, filed March 29, 2001, including
item 5 and item 7.
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/ L.G. Schafran Date: May 15, 2001
------------------------------
L.G. Schafran,
Interim President
By: /s/ Joel L. Teglia Date: May 15, 2001
------------------------------
Joel L. Teglia,
Executive Vice President and
Chief Financial Officer
EXHIBIT
INDEX
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2.1 Plan of Termination and Liquidation (1)
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. (2)
3.2 First Amendment of Third Amended and Restated Declaration of
Trust effective December 13, 1999. (3)
3.3 By-Laws dated March 13, 1996. (4)
3.4 BSRT UPREIT Limited Partnership Limited Partnership Agreement (5)
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. (6)
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. (7)
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. (8)
4.4 Revolving Credit Agreement dated April 30, 1998 among Banyan
Strategic Realty Trust, as Borrower and the Capital Company of America, as
Lender. (9)
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. (8)
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. (10)
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. (8)
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. (10)
10.1 Employment Agreement of L.G. Schafran dated October 26, 2000.
(14)
10.2 Employment Agreement of Leonard G. Levine as of December 14,
1999. (2)
EXHIBIT
INDEX
- -------
10.3 Employment Agreement of Leonard G. Levine as of October 1, 1997.
(11)
10.4 Employment Agreement of Joel L. Teglia dated November 1, 2000.
(14)
10.5 Employment Agreement of Joel L. Teglia dated December 31, 1998.
(5)
10.6 Employment Agreement of Robert G. Higgins dated September 1,
2000. (14)
10.7 Separation Agreement of Neil Hansen dated October 1, 2000. (14)
10.8 Employment Agreement of Neil Hansen dated December 31, 1998. (5)
10.9 Separation Agreement of Jay Schmidt dated October 1, 2000. (14)
10.10 Employment Agreement of Jay Schmidt dated December 31, 1998. (5)
10.11 1997 Omnibus Stock and Incentive Plan dated July 9, 1997. (12)
10.12 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. (6)
10.13 Registration Rights Agreement dated as of October 10, 1997
between Banyan Strategic Realty Trust and the Purchasers listed on the
Signature Pages attached thereto. (6)
10.14 Registration Rights Agreement dated as of October 1, 1997 between
Banyan Strategic Realty Trust and Leonard G. Levine. (5)
10.15 Consulting Agreement dated as of February 18, 2000 between CFC
Advisory Services Limited Partnership and Banyan Strategic Realty Trust.
(13)
10.16 Modification to Consulting Agreement dated as of May 31, 2000
between CFC Advisory Services Limited Partnership and Banyan Strategic
Realty Trust. (13)
10.17 Purchase and Sale Agreement dated January 8, 2001. (1)
10.18 First Amendment to Purchase and Sale Agreement dated March 28,
2001 (16)
10.19 Second Amendment to Purchase and Sale Agreement dated April 9,
2001 (17)
10.20 Third Amendment to Purchase and Sale Agreement dated May 11, 2001
(*)
21. Subsidiaries of Banyan Strategic Realty Trust (15)
99.12 Press Release dated May 11, 2001 (*)
99.13 Press Release dated May 14, 2001 (*)
99.14 Press Release dated May 15, 2001 (*)
- --------------------
(*) Filed herewith.
(1) Incorporated by reference from the Trust's Form 8-K dated
January 8, 2001.
(2) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 1999.
(3) Incorporated by reference from the Trust's Form 10-Q
dated March 31, 2000.
(4) Incorporated by reference from the Trust's Registration
Statement on Form S-11 (file number 33-4169).
(5) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 1998.
(6) Incorporated by reference from the Trust's Form 8-K dated
October 14, 1997.
(7) Incorporated by reference from the Trust's Form 10-K/A
for the year ended December 31, 1997.
(8) Incorporated by reference from the Trust's Form 8-K dated
May 22, 1998.
(9) Incorporated by reference from the Trust's Form 10-Q
dated March 31, 1998.
(10) Incorporated by reference from the Trust's Form 8-K/A-1
dated August 14, 1998.
(11) Incorporated by reference from the Trust's Form 10-K
dated December 31, 1997.
(12) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended June 30, 1997.
(13) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended June 30, 2000.
(14) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended September 30, 2000.
(15) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 2000.
(16) Incorporated by reference from the Trust's Form 8-K dated
March 28, 2001.
(17) Incorporated by reference from the Trust's Form 8-K dated
April 9, 2001.
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