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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_ _ Quarterly report pursuant to Section 13 or 15(d) of the Securities
| | Exchange Act of 1934
| X |
|_ _| For the quarterly period ended April 30, 1997
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_ _
| | Transition pursuant to Section 13 or 15(d) of the Securities Exchange
| | Act of 1934
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For the transition period from ________________ to ________________
Commission File Number 1-7062
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REALTY ReFUND TRUST
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(Exact name of registrant as specified in its chart)
Ohio 34-6647590
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1385 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 771-7663
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N/A
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Former name, former address and former fiscal year,
if changed since last report.
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 ______ N/A ______
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ______ No ______ N/A ___X___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date._____________1,020,586__________
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REALTY ReFUND TRUST
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PART I. FINANCIAL INFORMATION
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REALTY ReFUND TRUST
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BALANCE SHEETS
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APRIL 30, AND JANUARY 31, 1997
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ASSETS
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April 30, January 31,
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(Unaudited) (Audited)
CASH $ 219,418 $ 531,997
OTHER ASSETS 290,519 285,004
REAL ESTATE HELD FOR SALE, net of a $4,085,000 valuation
allowance at April 30, and January 31, 1997 5,599,122 5,599,122
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$6,109,059 $6,416,123
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Note payable to related party $2,300,000 $2,300,000
Deposits and accrued expenses 750,869 864,903
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Total liabilities 3,050,869 3,164,903
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SHAREHOLDERS' EQUITY:
Shares of beneficial interest without par value; unlimited
authorization; 1,020,586 shares outstanding at April 30
and January 31, 1997 3,058,190 3,251,220
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$6,109,059 $6,416,123
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The accompanying notes are an integral part of these balance sheets.
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REALTY ReFUND TRUST
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UNAUDITED
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STATEMENTS OF INCOME
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FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
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1997 1996
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REVENUES:
Interest income from loans receivable $ -- $ 349,415
Interest income from loan receivable from related
party -- 207,453
Rental revenue from real estate held for sale 558,933 525,466
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558,933 1,082,334
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EXPENSES:
Interest on loans underlying wrap-around mortgages -- 80,288
Interest on loan underlying wrap-around mortgage to
related party -- 45,954
Interest on note payable to bank -- 113,664
Interest on note payable to related party 47,485 92,010
Fee to related party investment advisor -- 34,175
Operating expenses of real estate held for sale 533,649 537,031
Amortization of deferred leasing commissions 10,861 10,606
Other operating expenses, net 57,911 66,831
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649,906 980,559
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NET INCOME (LOSS) $ (90,973) $ 101,775
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NET INCOME (LOSS) PER SHARE $ (.09) $ .10
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CASH DIVIDENDS PER SHARE DECLARED $ .05 $ .10
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The accompanying notes are an integral part of these statements.
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REALTY ReFUND TRUST
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UNAUDITED
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STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ - $ 560,939
Interest paid (47,609) (338,730)
Cash payments to investment advisor and other
suppliers (208,173) (220,587)
Rental revenue received from real estate held for sale 544,230 634,914
Cash payments for operating costs of real estate held for
sale (498,968) (712,461)
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Net cash used for operating activities (210,520) (75,925)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on mortgage loans receivable - 1,695,921
Principal payments on mortgage loans payable - (1,670,952)
Payments for tenant improvements - -
Purchase of fee interest in land - (278,138)
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Net cash used for investing activities - (253,169)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on note payable to related party - (125,000)
Net bank borrowings - 625,000
Payment of cash dividends (102,059) (102,059)
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Net cash provided by (used for) financing
activities (102,059) 397,941
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NET INCREASE (DECREASE) IN CASH (312,579) 68,847
CASH AT BEGINNING OF PERIOD 531,997 16,285
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CASH AT END OF PERIOD $ 219,418 $ 85,132
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1997 1996
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RECONCILIATION OF NET INCOME TO NET CASH (USED FOR) PROVIDED
BY OPERATING ACTIVITIES:
Net income (loss) $ (90,973) $ 101,775
Adjustments to reconcile net income (loss) to net cash
used for operating activities-
Amortization of deferred leasing commissions 10,861 10,606
Amortization of deferred loan fees - (4,500)
Increase in interest receivable and other assets (16,375) (114,131)
Decrease in deposits and accrued expenses (114,033) (69,675)
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$(210,520) $ (75,925)
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The accompanying notes are an integral part of these statements.
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
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APRIL 30, 1997 AND 1996
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1. BASIS OF PRESENTATION:
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The accompanying unaudited financial statements contain all adjustments which
are, in the opinion of the Trust's management, necessary to present fairly the
financial position of the Trust as of April 30, 1997, and the results of its
operations and cash flows for the three-month periods ended April 30, 1997 and
1996. Such adjustments are of a normal recurring nature.
The financial statements included herein have been prepared by the Trust,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Trust's latest annual report on Form 10-K.
2. DIVIDEND DECLARATION:
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On May 15, 1997, the Trustees declared a distribution, payable on June 16, 1997
in the amount of .05 cents per share of beneficial interest.
3. NET INCOME PER SHARE:
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Net income per share has been computed based on the weighted average number of
shares outstanding. Net income per share for the three months ended April 30,
1997 and 1996, was based upon 1,020,586 shares. During these periods, the Trust
had no potentially dilutive securities outstanding. At April 30, 1997 and 1996,
there were 1,020,586 shares of beneficial interest outstanding.
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Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Interest income on mortgage loans receivable decreased during the quarter ended
April 30, 1997 as compared to the corresponding period of 1996 due to the
maturity of the Forth Worth, Texas loan in November 1996 and the retirement of
the Toledo, Ohio loan, both of which occurred during the fiscal year ended
January 31, 1997. Interest expense on mortgage loans payable decreased due to
the normal amortization of mortgage loan balances and the conversion of the
Toledo, Ohio wrap-around mortgage loan to a junior mortgage loan in September
1996.
During the three months ended April 30, 1997, the Chicago property incurred net
operating income of approximately $14,000, inclusive of amortization charges for
deferred leasing commissions totaling approximately $11,000. For the prior year
quarter, the Chicago property incurred a net operating loss of approximately
$22,000, inclusive of deferred leasing commissions of approximately $11,000.
Rental revenue increased between periods due to increases in rental rates.
Operating expenses of the Chicago property and amortization of deferred leasing
commissions was comparable between periods.
The Trust's real estate held for sale is within the scope of FAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." Pursuant to this standard, long-lived assets to be disposed of
are to be reported at the lower of carrying amount or fair value less
incremental direct costs to sell. Long-lived assets to be disposed of shall not
be depreciated while being held for disposal. As such, no depreciation expense
was recorded on the real estate held for sale in the quarter ended April 30,
1997 and 1996. During the fiscal year ended January 31, 1997, the Trust entered
into a contract to sell the Chicago building for $6,000,000. The sale is
expected to close in the summer of 1997.
There was no interest expense on bank borrowings during the quarter ended April
30, 1997 as the proceeds received in the fiscal year ended January 31, 1997, in
connection with the maturity of the Forth Worth, Texas loan in November 1996 and
the retirement of the Toledo, Ohio loan were used to retire all outstanding bank
borrowings.
Interest expense on the note payable to related party decreased due to quarterly
principal payments of $125,000 and a $1,700,000 payment from a portion of the
proceeds from the repayment of the Forth Worth, Texas loan, both of which
occurred during the fiscal year ended January 31, 1997.
There was no fee to investment advisor during the quarter ended April 30, 1997
due to the reduction in the Trust's investments in mortgage loans.
Other operating expenses were comparable between periods.
Liquidity
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To maintain tax-exempt status, the Trust is required to distribute at least 95%
of its taxable income to its shareholders. It is currently the policy of the
Trust to distribute sufficient dividends to maintain its tax-exempt status. The
Trust has available approximately $9.5 million of net operating loss
carryforwards for income tax purposes. The loss carryforwards can be used to
reduce future dividend payment requirements and still allow the Trust to
maintain its tax-exempt status. The Trustees will assess the level of dividends
to be declared on a quarterly basis.
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For the three months ended April 30, 1997 as compared to the prior year period,
net cash provided by operating activities decreased due to decreased interest
income from mortgage loan investments and a higher level of net cash payments
for operating costs of the Chicago property.
Cash flows from investing activities was zero as all mortgage activity was
eliminated during the fiscal year ended January 31, 1997.
Cash used for financing activities decreased as the Trust had no bank borrowings
as compared to the prior year quarter.
The Trust's primary source of funds is cash flow, if any, generated by operating
or selling the Chicago property. If the Chicago property generates cash flow
operating deficits, the Trust must fund such deficits. In the opinion of
management, available cash and cash flow from operations will be sufficient to
fund cash requirements.
In February 1997, the Trust has signed an agreement to form a limited
partnership with Hospitality Corporation International ("HCI") of Phoenix,
Arizona. Under the terms of the agreement, this newly-formed partnership will
acquire several of HCI's seven all-suite hotel properties in Arizona and
California, as well as certain assets of the Trust. The remaining HCI hotel
properties will be acquired by the Trust in exchange for newly-issued Realty
ReFund Trust shares and debt. These seven HCI properties contain 1,036 suites.
These transactions will be subject to approval by the shareholders of the Trust
and the investors in HCI's hotels. There can be no assurance that the necessary
approvals will be obtained. Should the approvals not be obtained, this agreement
will be terminated. At such time, the Trust would review its options, which may
include merger or alternative acquisition possibilities, if any, or liquidation.
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FORM 10-Q -- PART II: OTHER INFORMATION
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Items 1 through 5 are not applicable or the answer to such items is negative;
therefore, the items have been omitted and no reference is required in this
report.
ITEM 6: Exhibits and Reports on Form 8-K
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(a) Exhibit
Number Exhibit
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27 Financial Data Schedule(1)
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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(1) Filed only in electronic format pursuant to Item 601(b) (27) of
Regulation S-K.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
June 12, 1997. REALTY ReFUND TRUST
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(Registrant)
By: /s/ Alan M. Krause
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Alan M. Krause
Chairman
And By: /s/ James H. Berick
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James H. Berick
President and Principal Financial Officer
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