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 June 30, 1999
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 August 11, 1999: 13,471,497.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
ASSETS
- ------
Investment in Real Estate, at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,600 $ 38,600
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,554 172,554
Building Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . 12,246 9,654
---------- ----------
223,400 220,808
Less: Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . (14,326) (11,399)
---------- ----------
209,074 209,409
---------- ----------
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 2,654 3,731
Restricted Cash - Capital Improvements . . . . . . . . . . . . . . . . . . 1,732 1,407
Restricted Cash - Other. . . . . . . . . . . . . . . . . . . . . . . . . . 1,976 1,250
Interest and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 1,280 1,544
Deferred Financing Costs (Net of Accumulated Amortization
of $1,377 and $1,246, respectively). . . . . . . . . . . . . . . . . . . 1,767 1,893
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,835 3,356
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 222,318 $ 222,590
========== ==========
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheets - CONTINUED
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities
Mortgage Loans Payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,382 $ 123,108
Bonds Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,040 21,140
Unsecured Loan Payable . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 7,400
Accounts Payable and Accrued Expenses. . . . . . . . . . . . . . . . . . . 2,216 2,625
Accrued Real Estate Taxes Payable. . . . . . . . . . . . . . . . . . . . . 1,930 967
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . 697 636
Unearned Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 758
Security Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,376 1,373
---------- ----------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,006 158,007
---------- ----------
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . 2,216 2,149
Shareholders' Equity
Shares of Beneficial Interest, No Par Value, Unlimited Authorization;
14,993,552 and 14,912,495 Shares Issued, respectively. . . . . . . . . . 120,290 119,872
Accumulated Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,828) (50,072)
Treasury Shares at Cost, 1,522,649 Shares. . . . . . . . . . . . . . . . . (7,366) (7,366)
---------- ----------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 62,096 62,434
---------- ----------
Total Liabilities and Shareholders' Equity . . . . . . . . . . . . . . . . $ 222,318 $ 222,590
========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Operations
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
(Dollars in thousands, except per share data)
1999 1998
---------- ----------
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,334 $ 16,003
Operating Cost Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . 1,921 1,570
Miscellaneous Tenant Income. . . . . . . . . . . . . . . . . . . . . . . . . . 570 533
Income on Investments and Other Income . . . . . . . . . . . . . . . . . . . . 86 115
---------- ----------
Total Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,911 18,221
---------- ----------
EXPENSES
Property Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,643 2,711
Repairs and Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,272 1,876
Real Estate Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,473 1,239
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,779 4,230
Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 470
Depreciation and Amortization. . . . . . . . . . . . . . . . . . . . . . . . . 3,234 2,305
General and Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 2,194 2,176
Amortization of Deferred Financing Costs . . . . . . . . . . . . . . . . . . . 131 141
---------- ----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,191 15,148
Income Before Minority Interest and Extraordinary Item . . . . . . . . . . . . . 2,720 3,073
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . . (255) (298)
---------- ----------
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . . 2,465 2,775
Extraordinary Item, Net of Minority Interest of $25. . . . . . . . . . . . . . . -- (141)
---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,465 $ 2,634
========== ==========
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Operations - CONTINUED
1999 1998
---------- ----------
Earnings Per Share of Beneficial Interest - Basic:
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . $ 0.18 $ 0.21
========== ==========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.18 $ 0.20
========== ==========
Earnings Per Share of Beneficial Interest - Assuming Dilution:
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . $ 0.18 $ 0.20
========== ==========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.18 $ 0.19
========== ==========
<FN>
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 June 30, 1999 and 1998
(Unaudited)
(Dollars in thousands, except per share data)
1999 1998
---------- ----------
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,138 $ 8,449
Operating Cost Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . 923 814
Miscellaneous Tenant Income. . . . . . . . . . . . . . . . . . . . . . . . . . 382 342
Income on Investments and Other Income . . . . . . . . . . . . . . . . . . . . 40 52
---------- ----------
Total Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,483 9,657
---------- ----------
EXPENSES
Property Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317 1,352
Repairs and Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,126 963
Real Estate Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698 686
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,889 2,370
Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 231
Depreciation and Amortization. . . . . . . . . . . . . . . . . . . . . . . . . 1,650 1,244
General and Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 1,139 1,142
Amortization of Deferred Financing Costs . . . . . . . . . . . . . . . . . . . 66 69
---------- ----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,115 8,057
Income Before Minority Interest and Extraordinary Item . . . . . . . . . . . . . 1,368 1,600
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . . (141) (182)
---------- ----------
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . . 1,227 1,418
Extraordinary Item, Net of Minority Interest of $25. . . . . . . . . . . . . . . -- (141)
---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,227 $ 1,277
========== ==========
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Operations - CONTINUED
1999 1998
---------- ----------
Earnings Per Share of Beneficial Interest - Basic:
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.11
========== ==========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.10
========== ==========
Earnings Per Share of Beneficial Interest - Diluted:
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.10
========== ==========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.09
========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Shareholders' Equity
For the Six Months Ended June 30, 1999
(Unaudited)
(Dollars in thousands)
Shares of
Beneficial Interest
---------------------------- Accumulated Treasury
Shares Amount Deficit Shares Total
----------- ----------- ----------- ----------- -----------
Shareholders' Equity,
January 1, 1999 . . . . . 14,912,495 $ 119,872 $ (50,072) $ (7,366) $ 62,434
Issuance of Shares,
net of issuance costs. . 81,057 418 -- -- 418
Net Income . . . . . . . . -- -- 2,465 -- 2,465
Distributions Paid . . . . -- -- (3,221) -- (3,221)
---------- ---------- ---------- ---------- ----------
Shareholders' Equity,
June 30, 1999. . . . . . 14,993,552 $ 120,290 $ (50,828) $ (7,366) $ 62,096
========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
(Dollars in thousands)
1999 1998
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,465 $ 2,634
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Extraordinary Items, Net of Minority Interest. . . . . . . . . . . . . . . . . -- 141
Depreciation and Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . 3,365 2,446
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . . 255 298
Net Change In:
Restricted Cash - Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (726) (1,095)
Interest and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 264 (97)
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (786) (601)
Accounts Payable and Accrued Expenses. . . . . . . . . . . . . . . . . . . . . (409) 417
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 307
Accrued Real Estate Taxes Payable. . . . . . . . . . . . . . . . . . . . . . . 963 990
Unearned Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 625
Security Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 575
---------- ----------
Net Cash Provided By Operating Activities. . . . . . . . . . . . . . . . . . . . 5,662 6,640
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Real Estate Assets. . . . . . . . . . . . . . . . . . . . . . . -- (37,661)
Additions to Investment in Real Estate . . . . . . . . . . . . . . . . . . . . (2,592) (2,057)
Earnest Money Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (500)
Restricted Cash - Capital Improvements . . . . . . . . . . . . . . . . . . . . (325) (300)
---------- ----------
Cash Used In Investing Activities . . . . . . . . . . . . . . . . . . . . . . . (2,917) (40,518)
---------- ----------
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Cash Flows - CONTINUED
1999 1998
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Bonds and Loans Payable. . . . . . . . . . . . . . . . . . . . . -- 88,450
Investments From Minority Partners . . . . . . . . . . . . . . . . . . . . . . -- 687
Distributions to Minority Partners . . . . . . . . . . . . . . . . . . . . . . (188) (173)
Deferred Financing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) (782)
Principal Payments on Mortgage Loans and Bonds Payable . . . . . . . . . . . . (826) (51,783)
Prepayment Penalties on Early Extinguishment of Debt . . . . . . . . . . . . . -- (136)
Distributions Paid to Shareholders . . . . . . . . . . . . . . . . . . . . . . (3,221) (2,916)
Shares Issued, Net of Issuance Costs . . . . . . . . . . . . . . . . . . . . . 418 377
---------- ----------
Net Cash Provided By (Used In) Financing Activities . . . . . . . . . . . . . . (3,822) 33,724
---------- ----------
Net Decrease In Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . (1,077) (154)
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . . . 3,731 4,429
---------- ----------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . . . $ 2,654 $ 4,275
========== ==========
Supplemental Disclosure of Cash Flow Information:
Interest Paid During the Period. . . . . . . . . . . . . . . . . . . . . . . . $ 5,718 $ 3,923
========== ==========
Supplemental Disclosure of Non-Cash Financing Activity:
Financing Assumed Upon Acquisition of Real Estate. . . . . . . . . . . . . . . $ -- $ 3,675
========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
BANYAN STRATEGIC REALTY TRUST
Notes to Consolidated Financial Statements
June 30, 1999
(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, 1998 which are included in the Trust's 1998
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
1998 consolidated financial statements in order to provide comparability
with the 1999 consolidated financial statements. These reclassifications
have not changed the 1998 results. In the opinion of management, all
adjustments necessary for a fair presentation have been made to the
accompanying consolidated financial statements as of June 30, 1999. 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 six months ended June 30, 1999 and 1998:
Six Months Ended
------------------------
6/30/99 6/30/98
---------- ----------
Numerator:
Income Before Extraordinary Item . . . . . $ 2,465 $ 2,775
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . -- (141)
---------- ----------
Net Income . . . . . . . . . . . . . . . $ 2,465 $ 2,634
========== ==========
Denominator:
Denominator for basic earnings per
weighted-average shares. . . . . . . . 13,428,444 13,267,394
Effect of dilutive securities:
Employee stock options . . . . . . . . . 5,968 33,749
Convertible debt . . . . . . . . . . . . -- 608,562
---------- ----------
Dilutive potential common shares . . . . . 5,968 642,311
Denominator for diluted earnings
per share-adjusted weighted-average
shares and assumed conversions . . . . 13,434,412 13,909,705
========== ==========
Six Months Ended
------------------------
6/30/99 6/30/98
---------- ----------
Basic Earnings Per Share:
Income Before Extraordinary Item . . . . . $ 0.18 $ 0.21
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . -- (0.01)
---------- ----------
Net Income . . . . . . . . . . . . . . . $ 0.18 $ 0.20
========== ==========
Diluted Earnings Per Share:
Income Before Extraordinary Item . . . . . $ 0.18 $ 0.20
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . -- (0.01)
---------- ----------
Net Income . . . . . . . . . . . . . . . $ 0.18 $ 0.19
========== ==========
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended June 30, 1999 and 1998:
Three Months Ended
------------------------
6/30/99 6/30/98
---------- ----------
Numerator:
Income Before Extraordinary Item . . . . . $ 1,227 $ 1,418
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . -- (141)
---------- ----------
Net Income . . . . . . . . . . . . . . . $ 1,227 $ 1,277
========== ==========
Denominator:
Denominator for basic earnings per
weighted-average shares. . . . . . . . . 13,449,337 13,283,195
Effect of dilutive securities:
Employee stock options . . . . . . . . . 6,380 43,889
Convertible debt . . . . . . . . . . . . -- 762,397
---------- ----------
Dilutive potential common shares . . . . . 6,380 806,286
Denominator for diluted earnings
per share-adjusted weighted-average
shares and assumed conversions . . . . . 13,455,717 14,089,481
========== ==========
Basic Earnings Per Share:
Income Before Extraordinary Item . . . . . $ 0.09 $ 0.11
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . -- (0.01)
---------- ----------
Net Income . . . . . . . . . . . . . . . $ 0.09 $ 0.10
========== ==========
Diluted Earnings Per Share:
Income Before Extraordinary Item . . . . . $ 0.09 $ 0.10
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . -- (0.01)
---------- ----------
Net Income . . . . . . . . . . . . . . . $ 0.09 $ 0.09
========== ==========
3. BUSINESS SEGMENTS
The Trust acquires and operates real estate properties located
principally in the Midwest and Southeast United States. The Trust has four
operating segments corresponding to the four property types comprising its
real estate assets: flex/industrial, office, residential and retail. As
of June 30, 1999, the flex/industrial segment consisted of thirteen
complexes with long-term leases to approximately 210 tenants; the office
segment consisted of fourteen office sites with long-term leases to
approximately 270 tenants; the residential segment consisted of four
apartment complexes with 864 units leased principally for six months; and
the retail segment consisted 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 Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
Revenue
Flex/Industrial. . . . . $ 2,852 $ 2,702 $ 5,588 $ 4,663
Office. . . . . . . . . 5,352 4,731 10,696 9,070
Residential. . . . . . . 1,103 1,043 2,158 2,095
Retail . . . . . . . . . 1,152 1,149 2,423 2,329
Corporate/Other. . . . . 24 32 46 64
-------- -------- -------- --------
$ 10,483 $ 9,657 $ 20,911 $ 18,221
======== ======== ======== ========
Income (Loss) Before
Extraordinary Item
Flex/Industrial. . . . . $ 640 $ 922 $ 1,168 $ 1,739
Office . . . . . . . . . 1,375 1,365 2,696 2,624
Residential. . . . . . . 219 177 421 373
Retail . . . . . . . . . 137 99 387 244
Corporate/Other. . . . . (1,144) (1,145) (2,207) (2,205)
-------- -------- -------- --------
$ 1,227 $ 1,418 $ 2,465 $ 2,775
======== ======== ======== ========
As of
As of Decem-
June 30, ber 31,
1999 1998
-------- --------
Total Assets
Flex/Industrial. . . . . $ 74,303 $ 74,513
Office . . . . . . . . . 105,724 105,049
Residential. . . . . . . 20,891 21,038
Retail . . . . . . . . . 18,387 18,359
Corporate/Other. . . . . 3,013 3,631
-------- --------
$222,318 $222,590
======== ========
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
Depreciation and
Amortization
Flex/Industrial. . . . . $ 549 $ 413 $ 1,093 $ 720
Office . . . . . . . . . 823 556 1,589 1,044
Residential. . . . . . . 143 133 284 262
Retail . . . . . . . . . 135 132 268 264
Corporate/Other. . . . . -- 10 -- 15
-------- -------- -------- --------
$ 1,650 $ 1,244 $ 3,234 $ 2,305
======== ======== ======== ========
Interest
Flex/Industrial. . . . . $ 889 $ 669 $ 1,774 $ 1,007
Office . . . . . . . . . 1,372 1,059 2,746 1,920
Residential. . . . . . . 296 300 594 601
Retail . . . . . . . . . 332 335 665 671
Corporate/Other. . . . . -- 7 -- 31
-------- -------- -------- --------
$ 2,889 $ 2,370 $ 5,779 $ 4,230
======== ======== ======== ========
Additions to Investment
in Real Estate
Flex/Industrial. . . . . $ 520 $ 26,014 $ 926 $ 26,101
Office . . . . . . . . . 402 7,627 1,460 17,048
Residential. . . . . . . 89 98 167 182
Retail . . . . . . . . . 34 13 39 62
-------- -------- -------- --------
$ 1,045 $ 33,752 $ 2,592 $ 43,393
======== ======== ======== ========
4. SUBSEQUENT EVENTS
Distributions
On July 7, 1999, the Trust declared a cash distribution for the
quarter ended June 30, 1999 of $0.12 per share payable August 20, 1999 to
shareholders of record on July 20, 1999.
Financing
On May 22, 1998, the Trust entered into a $7,700 loan agreement
("Pool B Loan") with the Capital Company of America ("CCA"). On June 11,
1999, CCA had the ability to require that the Trust either repay a portion
of Pool B Loan or add additional collateral to the pool if the ratio of net
operating income of the properties securing the loan to the principal and
interest on the loan was less than 1.65: 1.00 for the twelve months
following that date. On June 17, 1999, in exchange for increasing the
annual interest rate on the loan from 7.07% to 7.12%, CCA agreed to extend
the date of this measurement of loan coverage to July 11, 1999. On
August 4, 1999, CCA sold its rights, title, and interest in the Pool B Loan
to CDC Mortgage Capital, Inc. ("CDC"). On August 10, 1999, the Trust
agreed to pay $154 as a prepayment deposit and entered into an agreement
with CDC whereby the Trust is required to repay the outstanding loan
balance by October 11, 1999 in exchange for the full release of the
collateral property. In the event that the Trust is unable to secure
financing to repay the loan by October 11, 1999, the prepayment deposit
will be forfeited and the interest rate on the loan will increase from
7.12% to 7.62%. In addition, CDC agreed to waive its right to require the
Trust to reduce the principal of the loan or add additional collateral to
the pool.
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;
. lack of operating history associated with recent acquisitions;
. potential inability to raise capital by either equity or debt;
. potential inability to repay or refinance indebtedness at
maturity;
. increases in interest rates;
. competition for property acquisitions;
. 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, 1998 for a more
complete discussion.
We are a self-administered infinite life real estate investment trust
("REIT"), organized as a Massachusetts business trust, that acquires, 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, and BSRT UPREIT Corp., the
General Partner of the Operating Partnership. As of June 30, 1999, we were
the sole owner of both BSRT UPREIT Limited Partnership and BSRT UPREIT
Corp.
We have historically centered our acquisition activities on certain
major metropolitan areas such as Atlanta, Georgia and Chicago, Illinois as
well as smaller markets such as Huntsville, Alabama; Louisville, Kentucky;
Memphis, Tennessee; and Orlando, Florida. Because we consider ourselves an
"opportunistic" investor, we may expand our target areas to include other
cities or regions in the continental United States that exhibit
characteristics similar to our existing market areas. We believe that each
of the market areas where we currently own or would consider owning is
characterized by stable or increasing population and employment. We
believe economic growth in these markets will lead to an increase in the
demand for office and industrial space.
Our goal is to maximize the value of our shareholders' investment
through growth in Funds from Operations and Funds Available for
Distribution (as defined below). We seek to accomplish this goal through a
combination of internal growth achieved by carefully and aggressively
managing our assets, external growth achieved by making attractive
acquisitions, selectively disposing of properties and strategically
managing our debt structure.
RESULTS OF OPERATIONS
As of June 30, 1999, we owned individually, or, in some cases through
joint ventures, thirty-two properties consisting of:
. thirteen flex/industrial properties totaling 1,841,000 rentable
square feet;
. fourteen office properties totaling 1,545,600 rentable square
feet;
. four apartment complexes containing 864 units;
. one retail center which contains 321,600 rentable square feet.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 TO SIX MONTHS ENDED
JUNE 30, 1998
During the six months ended June 30, 1999 and 1998 our net income
totaled approximately $2.5 million ($0.18 per basic common share) and
approximately $2.6 million ($0.20 per basic common share), respectively.
The approximate $0.1 million decrease resulted primarily from expense
growth of approximately $3.1 million reduced by revenue growth of
approximately $2.7 million. In particular, our total revenues increased by
approximately $2.7 million or 14.8% to approximately $20.9 million from
approximately $18.2 million, due to an increase 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 six months ended June 30, 1999
with the results of the same properties owned during the entire six months
ended June 30, 1998), total revenues decreased by approximately $0.7
million. This decrease was caused by a decrease in the occupancy at three
of our properties, the Lexington Business Center, Elmhurst Metro Court, and
Airways Plaza Office Center. These properties were 54%, 60%, and 24%
occupied at June 30, 1999, respectively, compared to 93%, 74%, and 100%
occupancy levels at June 30, 1998. The occupancy at these three
properties, as well as for our overall portfolio, was lower than our
historical levels as a result of the termination of several leases during
1998 and 1999. Our ability to achieve "same-store" growth in revenue in
the future will be dependent on the time it takes to re-lease these and
future vacant spaces and the rental rates at which we obtain new tenants.
Furthermore, property acquisitions completed during 1998 significantly
contributed to our revenue growth in the six months ended June 30, 1999.
Our ability to make acquisitions in the future will depend upon our ability
to raise additional equity through realizing gains on the sale of
properties, selling additional shares of beneficial interest and/or issuing
operating partnership units in the Operating Partnership.
Our total expenses increased by approximately $3.1 million primarily
due to an increase in the number of properties that we own. Our total
operating expenses, which include property operating, repairs and
maintenance, real estate taxes, and ground lease increased by approximately
$0.6 million to approximately $6.9 million from approximately $6.3 million
in 1998. On a "same-store" basis, total operating expenses decreased by
approximately $0.2 million or 3.4% to approximately $5.7 million from
approximately $5.9 million. Interest expense increased by approximately
$1.6 million from approximately $4.2 million to approximately $5.8 million,
primarily due to an increase in the amount we have borrowed in connection
with the acquisitions that we completed in 1998. Depreciation and
Amortization expense increased by approximately $0.9 million from
approximately $2.3 million to approximately $3.2 million which accounts for
the remaining increase in total expenses.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 TO THREE MONTHS ENDED
JUNE 30, 1998
During the three months ended June 30, 1999 and 1998 our net income
totaled approximately $1.2 million ($0.09 per basic common share) and
approximately $1.3 million ($0.10 per basic common share), respectively.
The approximate $0.1 million decrease resulted primarily from expense
growth of approximately $1.1 million reduced by revenue growth of
approximately $0.8 million. In particular, our total revenues increased by
approximately $0.8 million or 8.2% to approximately $10.5 million from
approximately $9.7 million, due to an increase 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 June 30, 1999
with the results of the same properties owned during the entire three
months ended June 30, 1998), total revenues decreased by approximately $0.3
million. This decrease was caused by a decrease in the occupancy at three
of our properties, the Lexington Business Center, Elmhurst Metro Court, and
Airways Plaza Office Center. These properties were 54%, 60%, and 24%
occupied at June 30, 1999, respectively, compared to 93%, 74%, and 100%
occupancy levels at June 30, 1998. The occupancy at these three
properties, as well as for our overall portfolio, was lower than our
historical levels as a result of the termination of several leases during
1998 and 1999. Our ability to achieve "same-store" growth in revenue in
the future will be dependent on the time it takes to re-lease these and
future vacant spaces and the rental rates at which we obtain new tenants.
Furthermore, property acquisitions completed during 1998 significantly
contributed to our revenue growth in the three months ended June 30, 1999.
Our ability to make acquisitions in the future will depend upon our ability
to raise additional equity through realizing gains on the sale of
properties, selling additional shares of beneficial interest and/or issuing
operating partnership units in the Operating Partnership.
Our total expenses increased by approximately $1.1 million primarily
due to an increase in the number of properties that we own. Our total
operating expenses increased by approximately $0.2 million to approximately
$3.4 million from approximately $3.2 million in 1998. On a "same-store"
basis, total operating expenses decreased by approximately $0.1 million or
3.2% to approximately $3.0 million from approximately $3.1 million.
Interest expense increased by approximately $0.5 million from approximately
$2.4 million to approximately $2.9 million, primarily due to an increase in
the amount we have borrowed in connection with the acquisitions that we
completed in 1998. Depreciation and Amortization expense increased by
approximately $0.4 million from approximately $1.2 million to approximately
$1.6 million which accounts for the remaining increase in total expenses.
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. 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 monies
required to acquire and develop property and funds necessary for other non-
recurring capital improvements, from long-term secured and unsecured debt
and through issuing debt or equity securities, including issuing units in
the Operating Partnership in exchange for properties. We do not, however,
have any plans to do so in the near future and we may not be able to borrow
additional monies or sell additional equity in the future. We expect that
we will fund a portion of the cost of buying and improving properties in
the future by borrowing under our credit facilities or by mortgaging
properties we acquire.
At June 30, 1999, our assets totaled approximately $222.3 million, a
decrease of approximately $0.3 million from total assets at December 31,
1998 of approximately $222.6 million. Our liabilities totaled
approximately $158.0 million at June 30, 1999 and December 31, 1998. Our
shareholders equity decreased by approximately $0.3 million to
approximately $62.1 million at June 30, 1999 from approximately $62.4
million at December 31, 1998.
Cash and cash equivalents consist of cash and short-term investments.
Our cash and cash equivalents balance was approximately $2.7 million at
June 30, 1999 and approximately $3.7 million at December 31, 1998. The
decrease in total cash and cash equivalents resulted from using
approximately $2.9 million in investing activities and approximately $3.8
million in financing activities, while receiving approximately $5.7 million
from operating activities.
Cash Flows From Operating Activities: Net cash provided by operating
activities decreased by approximately $0.9 million for the six months ended
June 30, 1999 to approximately $5.7 million from approximately $6.6 million
in 1998. 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 extraordinary items, depreciation and
amortization and minority interest increased by approximately $0.6 million
to approximately $6.1 million from approximately $5.5 million for the six
months ended June 30, 1999 and 1998, respectively. 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, unusual and nonrecurring 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 in which the REIT holds an interest. 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 six months ended June 30, 1999 and 1998, our properties
generated FFO of approximately $5.6 million and $4.9 million, respectively.
FFO increased on a year to year basis due primarily to an increase in the
number of properties owned from period to period.
FFO for the six months ended June 30, 1999 and 1998 is calculated as
follows:
1999 1998
-------- --------
(Dollars in thousands)
Net Income . . . . . . . . . . . . . . . . . . $ 2,465 $ 2,634
Plus:
Depreciation and Amortization Expense . . . 3,234 2,290
Less:
Minority Interest
Share of Depreciation and
Amortization Expense . . . . . . . . . . . (148) (143)
Extraordinary Item, Net of Minority
Interest . . . . . . . . . . . . . . . . . . -- 141
-------- --------
Funds From Operations. . . . . . . . . . . . . $ 5,551 $ 4,922
======== ========
Cash Flows Provided By (Used For):
Operating Activities . . . . . . . . . . . . $ 5,662 $ 6,640
Investing Activities . . . . . . . . . . . . $ (2,917) $(40,518)
Financing Activities . . . . . . . . . . . . $ (3,822) $ 33,724
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. The amount of FAD is dependent upon,
among other things:
. 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;
. the operating performance of future acquisitions; and
. our level of operating expenses.
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. The capital reserve is
$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.
FAD for the six months ended June 30, 1999 and 1998 is calculated as
follows:
1999 1998
-------- --------
(Dollars in thousands)
Funds From Operations. . . . . . . . . . . . . $ 5,551 $ 4,922
Straight-line Rents. . . . . . . . . . . . . . (81) (180)
Lease Commissions. . . . . . . . . . . . . . . (567) (367)
Capital Reserve. . . . . . . . . . . . . . . . (256) (236)
-------- --------
Funds Available for Distribution . . . . . . . $ 4,647 $ 4,139
======== ========
Cash Flows From Investing Activities: During the six months ended
June 30, 1999, we used approximately $2.9 million in investing activities
compared to approximately $40.5 million in the same period in 1998. Cash
flow was primarily used during the six months ended June 30, 1999 to make
capital improvements at our various properties in the amount of
approximately $2.6 million. In comparison, during the same period in 1998,
we acquired three office and five flex/industrial properties for a total of
approximately $37.7 million and made capital improvements in the amount of
approximately $2.1 million.
Cash Flows From Financing Activities: During the six months ended
June 30, 1999, financing activities used approximately $3.8 million
compared to receiving approximately $33.7 million in the same period in
1998. During the six months ended June 30, 1999, we used cash primarily to
pay distributions to shareholders of approximately $3.2 million and make
principal payments on mortgage loans and bonds payable of approximately
$0.8 million. The cash flows provided by financing activities for the six
months ended June 30, 1998 resulted primarily from approximately $36.7
million of net proceeds from bonds and mortgage loans reduced by
distributions paid to shareholders of approximately $2.9 million.
IMPACT OF THE YEAR 2000
The Year 2000 issue, or Y2K for short, is the result of computer
programs utilizing two digits rather than four digits to define the
applicable year. Any of our computer programs or hardware that have date-
sensitive software or embedded chips may therefore recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a
system failure or in miscalculations causing disruptions of real estate
operations, such as the functioning of property mechanical systems, and
other activities, such as a temporary inability to process transactions,
generate invoices or reports, manage our portfolio, comply with regulatory
requirements or engage in similar normal business activities.
We have formed a Y2K Compliance Committee consisting of at least one
representative from each of our departments: legal, accounting, asset
management, investor relations and acquisitions. Our Y2K Compliance
Committee, in accordance with the Year 2000 Information and Readiness
Disclosure Act, has formulated the following Year 2000 Readiness
Disclosure:
We believe that the members of our committee, drawing upon their
various disciplines and resources available to them through professional
organizations and contacts, will collectively be able to formulate the
necessary initial questionnaires and inquiries described below and to
develop a comprehensive plan for testing and evaluating responses to our
inquiries.
Our committee will, as circumstances dictate, retain third party
consultants and professionals to assist it in evaluating technical issues
or making strategic recommendations for remedial action, if necessary.
We have established a plan for assessing and mitigating our exposure
to Y2K matters. The plan consists of several elements including a complete
upgrade of our computer hardware and software programs; assessing Y2K
compliance programs at each property and each property's reliance on
computer programs in operations; and inquiry and dialogue with our
significant suppliers, vendors and tenants as to their Y2K compliance
initiatives.
We have upgraded our networking, financial analysis, general ledger
and accounts payable software programs in order to minimize the potential
impact of Y2K at our headquarters. In addition, we expect to complete
testing procedures that will ensure that all upgraded systems will operate
subsequent to December 31, 1999. These testing procedures will include
simulating operating all systems at a date after December 31, 1999. As of
June 30, 1999, we have expended $47,000 on Y2K compliance issues. The vast
majority of these funds have been expended on the network and computer
software upgrades.
We anticipate a total expenditure of less than $75,000 on Y2K
compliance at our corporate headquarters. Based solely upon preliminary
discussions with our ten property managers, we do not presently anticipate
significant expenses at the property level. However, if there are
significant expenditures at the property level, we will revise our
projection of Y2K related costs.
We are also assessing the operations at each of our properties in an
effort to diagnose the impact that Y2K may have on property operations,
particularly mechanical systems. We anticipate completing this assessment
in the third quarter of 1999. At this time, we are gathering information
to evaluate what, if any, remedial action will be necessary and the
potential costs associated with the action.
We rely on various third parties to provide property level and other
administrative functions. We have sent a questionnaire to each of our
property managers inquiring about their ability to address the effect of
the Y2K issue on their own operations. To date, we have received responses
from all of our ten property managers. Of the ten property managers, seven
have systems that, in their view, are Y2K compliant; two are substantially
compliant and one expects to be compliant by the third quarter of 1999.
We intend to further verify and test each significant property
manager's compliance by the third quarter of 1999. The computerized aspect
of the relationship between us and our property managers is most prevalent
in the accounting and reporting functions from the property level to our
headquarters. We believe that the potential impact of a non-compliant
property manager is minimized because we have the right to cancel our
property management contracts generally on 30-day notice at no cost to us.
Therefore, any property managers who may not be Y2K compliant can be
replaced with a manager that has Y2K compliant systems. In spite of the
above steps to verify Y2K compliance, if any property manager is unable to
perform accounting functions after December 31, 1999, we expect to have the
internal capability to process all accounting transactions and to produce
financial statements needed to manage the properties and comply with our
reporting requirements.
We have also received Y2K reports from our payroll processing service
provider, our transfer agent and our principal bank. Our payroll service
provider has represented that it processes our payroll using Y2K compliant
software. Our principal bank represented that as of December 31, 1998, its
Y2K renovation and testing of its systems was substantially complete. The
remaining Y2K related system changes as well as external testing and
contingency planning were expected to be completed by June 30, 1999. We
have not received an update from our bank as to whether or not they met
this deadline. Our transfer agent has represented that all of its "mission
critical" systems and nearly all of its "non-mission critical" systems have
been tested for Y2K readiness. Furthermore, it continues to develop
Business Resumption Contingency Plans for each line of its business that
will ensure operations will continue with minimum disruption.
We are also in the process of contacting our other service providers
and vendors to ascertain their ability to continue to provide goods and
services to us. We are developing a mechanism to continue the review and
assessment of service providers and vendors on a regular basis until
circumstances no longer warrant monitoring. Other than described above,
the future success of our operations is not closely tied to any one third
party vendor, supplier or service provider. As such, if any of these third
parties fails to conduct business due to Y2K related problems, we expect to
be able to contract with other third parties without experiencing any
material disruption of our operations or financial condition. We cannot
quantify the potential costs and uncertainties associated with potential
Y2K program flaws at this time as they may relate to other organizations
that we rely upon but we do not anticipate that the effect of this
potential computer program flaw upon our operations will be significant.
As of June 30, 1999, we had over 500 tenants. Our ten (10) largest
tenants account for approximately twenty percent (20%) of our total
projected revenues for 1999 based on properties owned as of June 30, 1999.
Because of our broad tenant base, our future operations, particularly our
ability to collect rent, is not closely tied to the ability of any one
particular tenant to pay rent or other charges. We currently believe that
there will not be a material adverse effect upon our operations or
financial condition if any one tenant or small group of tenants ceases to
conduct business (and pay rent) or is simply unable to pay rent on a
timely-basis due to Y2K problems. However, if a large number of tenants,
particularly several of the ten largest tenants, fail to pay rent for an
extended period of time, our cash flow may be adversely effected. During
the first quarter of 1999, we initiated contact with our 68 largest tenants
to survey their plans to address Y2K related issues. This sampling
includes all tenants whose annual rental payments are greater than
$100,000. As of June 30, 1999, we have received responses from 27 of these
tenants with 14 reporting compliance and the remainder indicating testing
in progress or other non-committal responses.
We have formulated a contingency plan to address potential failures:
- at our home office;
- at our properties;
- regarding our property managers;
- regarding our tenants;
- regarding our suppliers and vendors.
- regarding communicating with our officers and Trustees.
We focused our efforts on determining a contingency plan for what we
believe to be the most likely worst case scenario - an isolated failure in
one or two of the categories described above. For example, there is the
possibility that we may be unable to provide an adequate working
environment for some of our tenants due to the failure of building
mechanical, life safety or security systems. Furthermore, the worst case
scenario includes Y2K problems inhibiting our ability to collect rent or
preventing some of our tenants from paying rent caused by Y2K issues
unrelated to property operations. We could be subject to litigation for
failing to provide an adequate working environment for our tenants as a
result of Y2K computer system disruptions. More immediately, the tenants
may cease paying rent which could impact our cash flow. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
We have not focused our contingency planning on a "doomsday" scenario
in which a near-universal malfunction of computers would have a sweeping
effect upon all businesses. It is unlikely that any planning we could
presently formulate would assist in the vast recovery process necessitated
by this event.
OTHER INFORMATION
As of June 30, 1999, 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
June 30, 1999
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 1999 2000 2001 2001
-------- ------- -------- ---- ---- ---- -----
FLEX/INDUSTRIAL
Milwaukee Industrial
Properties
Milwaukee, WI. . . . . . . . . 4/30/93 235,800 94% 18% 20% 11% 45%
Elmhurst Metro Court
Elmhurst, IL . . . . . . . . . 11/30/93 140,800 60% 15% 6% 30% 9%
Willowbrook Industrial Court
Willowbrook, IL. . . . . . . . 6/16/95 84,300 91% 12% 23% 15% 41%
Quantum Business Centre
Louisville, KY . . . . . . . . 9/26/95 182,300 83% 12% 23% 18% 30%
Lexington Business Center
Lexington, KY. . . . . . . . . 12/05/95 308,800 54% 2% 16% 10% 26%
Newtown Business Center
Lexington, KY. . . . . . . . . 12/05/95 87,100 79% 33% 4% 18% 24%
6901 Riverport Drive
Louisville, KY . . . . . . . . 11/19/96 322,100 100% 0% 45% 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 94% 23% 33% 15% 23%
Metric Plaza
Winter Park, FL. . . . . . . . 4/30/98 32,000 100% 0% 0% 0% 100%
Park Center
Orlando, FL. . . . . . . . . . 4/30/98 47,400 59% 0% 9% 25% 25%
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 1999 2000 2001 2001
-------- ------- -------- ---- ---- ---- -----
University Corporate Center
Winter Park, FL. . . . . . . . 4/30/98 127,800 100% 10% 49% 18% 23%
Johns Creek Office and
Industrial Park
Duluth and Suwanee, GA . . . . 8/14/98 119,300 100% 0% 0% 50% 50%
--------- ---- ---- ---- ---- ----
Sub-total. . . . . . . . . 1,841,000 84% 9% 22% 15% 38%
--------- ---- ---- ---- ---- ----
OFFICE
Colonial Penn Building
Tampa, FL. . . . . . . . . . . 3/22/94 79,200 100% 0% 100% 0% 0%
Commerce Center f/k/a
Florida Power & Light Building
Sarasota, FL . . . . . . . . . 3/22/94 81,100 100% 0% 0% 11% 89%
Woodcrest Office Park
Tallahassee, FL. . . . . . . . 12/19/95 264,900 88% 9% 27% 12% 40%
Midwest Office Center
Oakbrook Terrace, IL . . . . . 4/18/96 77,000 97% 18% 32% 14% 33%
Phoenix Business Park
Atlanta, GA. . . . . . . . . . 1/15/97 110,600 54% 15% 2% 13% 24%
Butterfield Office Plaza
Oak Brook, IL. . . . . . . . . 4/30/97 200,800 96% 10% 26% 16% 44%
Southlake Corporate Center
Morrow, GA . . . . . . . . . . 7/30/97 56,200 96% 0% 9% 42% 45%
University Square
Business Center
Huntsville, AL . . . . . . . . 8/26/97 184,700 87% 23% 15% 25% 24%
Technology Center
Huntsville, AL . . . . . . . . 8/26/97 48,500 100% 0% 35% 65% 0%
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 1999 2000 2001 2001
-------- ------- -------- ---- ---- ---- -----
Airways Plaza Office Center
Memphis, TN. . . . . . . . . . 12/10/97 87,800 24% 0% 16% 4% 4%
Peachtree Pointe Office Park
Norcross, GA . . . . . . . . . 1/20/98 71,700 98% 21% 16% 15% 46%
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 74% 0% 0% 0% 74%
Technology Park
Norcross, GA . . . . . . . . . 8/14/98 145,700 100% 17% 9% 26% 48%
--------- ---- ---- ---- ---- ----
Sub-total. . . . . . . . . 1,545,600 86% 10% 21% 16% 39%
--------- ---- ---- ---- ---- ----
RETAIL
Northlake Tower
Shopping Center
Atlanta, GA. . . . . . . . . . 7/28/95 321,600 98% 2% 17% 2% 77%
--------- ---- ---- ---- ---- ----
Total. . . . . . . . . . . . . 3,708,200 86% 9% 21% 14% 42%
--------- ---- ---- ---- ---- ----
Date Residential Occupancy
Acquired Units %
-------- ----------- ---------
RESIDENTIAL
Country Creek Apartments
Oklahoma City, OK. . . . . 5/22/97 320 100%
Willowpark Apartments
Lawton, OK . . . . . . . . 5/22/97 160 96%
Winchester Run Apartments
Oklahoma City, OK. . . . . 5/22/97 192 98%
Woodrun Village Apartments
Yukon, OK. . . . . . . . . 5/22/97 192 97%
---- ----
Total. . . . . . . . . 864 98%
==== ====
PORTFOLIO TOTAL (a). . . . 88%
====
- ----------------
(a) For purposes of calculating the weighted average occupancy for the
portfolio, we converted the number of residential apartments to an
equivalent square footage amount for each residential property.
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. . . . . . 1,841,000 $ 5.05 $ 5.30
Office . . . . . . . . . . 1,545,600 9.10 10.04
Retail . . . . . . . . . . 321,600 10.79 11.73
--------- ------ ------
Total. . . . . . . . . 3,708,200 $ 7.23 $ 7.83
========= ====== ======
Average Monthly Monthly
"In Place" Rents Market Rents
------------------- -------------------
Units Per Unit Sq. Ft. Per Unit Sq. Ft.
----- -------- ------- -------- -------
Residential. . . 864 $403 $0.67 $446 $0.63
==== ==== ===== ==== =====
- ------------------------
(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 22, 1998, we entered into a $7.7 million loan agreement
("Pool B Loan") with the Capital Company of America ("CCA"). On June 11,
1999, CCA had the ability to either require us to repay a portion of our
Pool B Loan or require us to add additional collateral to the pool if the
ratio of net operating income of the properties securing the loan to the
principal and interest on the loan was less than 1.65: 1.00 for the twelve
months following that date. On June 17, 1999, in exchange for increasing
the annual interest rate on the loan from 7.07% to 7.12%, CCA agreed to
extend the date of this measurement of loan coverage to July 11, 1999. As
of July 11, 1999, the projected occupancy including the square footage for
leases signed but not yet occupied was approximately 70%. (Actual
occupancy as of June 30, 1999 was 54%.) Although we were not notified by
CCA of the amount of the required partial repayment of the loan, we were
informed that we did not meet the required 1.65:1.0 coverage. On August 4,
1999, CCA sold its rights, title, and interest in the Pool B Loan to CDC
Mortgage Capital, Inc. ("CDC"). On August 10, 1999, we agreed to pay
$154,000 as a prepayment deposit and we entered into an agreement with CDC
whereby we are required to repay the outstanding loan balance by
October 11, 1999 in exchange for their full release of the collateral
property. In the event that we are unable to secure financing to repay
the loan by October 11, 1999, we agreed to forfeit our prepayment deposit
and we will increase the interest rate that we pay on the loan from 7.12%
to 7.62%. In return, CDC agreed to waive the requirement that we reduce
principal of the loan or add additional collateral to the pool.
ITEM 3A. 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 June 30, 1999, we had approximately $150.8 million of
outstanding long-term debt, of which $17.7 million bears interest at
variable rates that are adjusted on a monthly basis. As of June 30, 1999,
the weighted-average interest rate on this variable rate debt was 6.35%.
If interest rates on this variable rate debt increased by one percentage
point (1%), interest expense would increase by $177,000 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) None.
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: August 12, 1999
----------------------------------
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: August 12, 1999
----------------------------------
Joel L. Teglia, Vice President and
Chief Financial Officer
EXHIBIT
INDEX
- -------
3.1 Second Amended and Restated Declaration of Trust dated as of
August 8, 1986, as amended on March 8, 1991, May 1, 1993 and August 12,
1998, including Certificate of designations, preferences and rights of
Series A convertible preferred shares. (1)
3.2 By-Laws dated March 13, 1996. (2)
3.3 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. (1)
4.7 Loan Agreement dated May 22, 1998 between BSRT Lexington B
Corp. and BSRT Lexington Trust, as Borrower and the Capital Company of
America, as Lender. (6)
4.8 First Amendment to Loan Agreement dated September 11, 1998
between BSRT Lexington B Corp., and BSRT Lexington Trust, as Borrower and
the Capital Company of America LLC, as Lender. (1)
4.9 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)
4.10 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. (1)
EXHIBIT
INDEX
- -------
10.1 Employment Agreement of Leonard G. Levine as of October 1,
1997. (8)
10.2 Employment Agreement of Joel L. Teglia dated December 31, 1998.
(3)
10.3 Employment Agreement of Neil Hansen dated December 31, 1998.
(3)
10.4 Employment Agreement of Jay Schmidt dated December 31, 1998.
(3)
10.5 1997 Omnibus Stock and Incentive Plan dated July 9, 1997. (9)
10.6 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)
10.7 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)
10.8 Registration Rights Agreement dated as of October 1, 1997
between Banyan Strategic Realty Trust and Leonard G. Levine. (3)
10.9 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Walter E. Auch, Sr. (*)
10.10 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Norman M. Gold. (*)
10.11 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Marvin A. Sotoloff. (*)
10.12 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Leonard G. Levine. (*)
10.13 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Joel L. Teglia. (*)
10.14 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Neil D. Hansen. (*)
10.15 Indemnification Agreement dated as of January 1, 1999 between
Banyan Strategic Realty Trust and Jay E. Schmidt. (*)
10.16 Indemnification Agreement dated as of June 9, 1999 between
Banyan Strategic Realty Trust and Robert G. Higgins. (*)
10.17 Indemnification Agreement dated as of June 9, 1999 between
Banyan Strategic Realty Trust and Christopher J. Swieca. (*)
21 Subsidiaries of Banyan Strategic Realty Trust (3)
27 Financial Data Schedule *
99.5 Press Release dated July 7, 1999 *
99.6 Press Release dated August 11, 1999*
- ----------------
* Filed herewith.
(1) Incorporated by reference from the Trust's Form 8-K/A-1 dated
August 14, 1998.
(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 10-K dated
December 31, 1997.
(9) Incorporated by reference from the Trust's Form 10-Q for the
quarter ended June 30, 1997.