-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JjI3xlUiz7aiVKIfWnE1ZzKAxtQ9dA6ZxhiGkP/UJB6jboMNjyO6YRsb5SZMCGUN hK1YO3BLRmXkHwrcp4uGHQ== 0000950116-00-001212.txt : 20000516 0000950116-00-001212.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950116-00-001212 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE ASSET INVESTMENT TRUST CENTRAL INDEX KEY: 0001045425 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 232919819 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14760 FILM NUMBER: 632761 BUSINESS ADDRESS: STREET 1: 1521 LOCUST ST STREET 2: 6TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155465119 MAIL ADDRESS: STREET 1: 1521 LOCUST ST STREET 2: 6TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19102 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 -------------- or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ----------------- Commission file number 1-14760 -------------------------- RESOURCE ASSET INVESTMENT TRUST ------------------------------------------------------ (Exact name of registrant as specified in its charter) MARYLAND 23-2919819 ------------------------------ ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1845 WALNUT STREET, 10TH FLOOR, PHILADELPHIA, PA 19103 - ------------------------------------------------ --------- (Address of principal executive offices) (Zip Code) (215) 861-7900 -------------------------------------------------- (Registrant's telephone number, including area code) 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 preceding12 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 ------ ------- As of April 30, 2000, 6,218,459 common shares of beneficial interest, with a par value of $0.01 per share, were outstanding. RESOURCE ASSET INVESTMENT TRUST and Subsidiaries Index to Quarterly Report on Form 10-Q PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Consolidated Balance Sheets at March 31, 2000 (unaudited) and December 31, 1999 3 Consolidated Statements of Income (unaudited) for the three months ended March 31, 2000 and 1999 4 Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2000 and 1999 5 Notes to Consolidated Financial Statements-March 31, 2000 (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 6. Exhibits 15 The accompanying notes are an integral part of these consolidated financial statements. -2- PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RESOURCE ASSET INVESTMENT TRUST and Subsidiaries Consolidated Balance Sheets
March 31, 2000 (unaudited) December 31, 1999 --------- ----------------- ASSETS Cash and cash equivalents $ 16,817,407 $ 11,323,301 Restricted cash 4,820,265 5,283,886 Tenant escrows 153,992 164,378 Accrued interest receivable 1,934,660 1,544,984 Investments in real estate loans, net 116,544,534 160,485,767 Investments in real estate, net 107,850,117 89,936,339 Furniture, fixtures and equipment, net 83,538 88,243 Prepaid expenses and other assets 2,695,915 1,001,775 ------------ ------------ Total Assets $250,900,428 $269,828,673 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts payable and accrued liabilities $ 463,143 $ 332,040 Accrued interest payable 1,315,151 1,033,484 Deferred interest payable 641,903 788,841 Tenant security deposits 436,295 270,908 Borrowers' escrows 3,865,379 5,308,136 Dividends payable 3,161,554 - Deferred income 91,000 693,162 Senior indebtedness secured by real estate underlying the Company's wraparound loans 43,850,653 78,478,730 Long term debt secured by real estate owned 94,310,036 82,685,074 Secured line of credit 14,000,000 14,000,000 ------------ ------------ Total Liabilities 162,135,114 183,590,375 Minority interest 2,645,083 - Shareholders' Equity Preferred Shares, $.01 par value; 25,000,000 authorized shares - - Common Shares, $.01 par value; 200,000,000 authorized shares; 6,199,127, issued and outstanding 61,991 61,991 Additional paid-in-capital 86,159,238 86,159,238 (Accumulated deficit)/retained earnings (100,998) 17,069 ------------ ------------ Total Shareholders' Equity 86,120,231 86,238,298 ------------ ------------ Total Liabilities and Shareholders' Equity $250,900,428 $269,828,673 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -3- RESOURCE ASSET INVESTMENT TRUST and Subsidiaries Consolidated Statements of Income (Unaudited)
For the Three Months Ended March 31, 2000 1999 ---- ---- REVENUES Mortgage interest income $4,660,726 $4,554,817 Rental income 3,850,010 2,705,626 Fee income and other 141,983 272,500 Investment income 172,189 62,854 ---------- ---------- Total Revenues 8,824,908 7,595,797 COSTS AND EXPENSES Interest 2,802,296 2,624,885 Property operating expenses 1,959,586 1,211,478 General and administrative 350,110 392,332 Depreciation and amortization 626,301 444,567 ---------- ---------- Total Costs and Expenses 5,738,293 4,673,262 ---------- ---------- Net Income before minority interest $3,086,615 $2,922,535 Minority interest - 17,761 ---------- ---------- Net Income $3,086,615 $2,940,296 ========== ========= Net Income per common share-basic $ .50 $ .48 ========== ========== Weighted average common shares outstanding-basic 6,199,127 6,165,334 ========== ========== Net income per common share-diluted $ .50 $ .48 ========== ========== Weighted average common shares outstanding-diluted 6,207,304 6,177,882 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. -4- RESOURCE ASSET INVESTMENT TRUST and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
For the three months ended March 31, 2000 1999 ---- ---- Cash flows from operating activities Net Income $ 3,086,615 2,940,297 Adjustments to reconcile net income to net cash provided by operating activities Minority interest - (17,761) Depreciation and amortization 626,301 444,567 Accretion of loan discount - (165,987) Decrease in security deposit escrows 10,386 - Increase in accrued interest receivable (389,676) (200,944) Increase in prepaid expenses and other assets (1,815,020) (261,050) Increase (decrease) in accounts payable and accrued liabilities 87,977 (14,276) Increase in accrued interest payable 281,667 302,213 (Decrease) increase in deferred interest payable (146,938) 163,574 Increase (decrease) in tenant security deposits 165,387 (8,049) (Decrease) increase in deferred income (602,161) 450,977 Decrease in borrowers' escrows (851,364) (401,218) ----------- ---------- Net cash provided by operating activities 453,174 3,232,343 ----------- ---------- Cash flows from investing activities Purchase of furniture, fixtures and equipment (7,688) (2,211) Real estate loans purchased - (5,000,000) Real estate loans originated (270,000) (8,901,576) Principal repayments of loans 9,800,911 10,169,543 Purchase of real estate (5,646,876) - Utilization of reserves held by mortgagee to pay taxes 1,417,405 893,272 ----------- ---------- Net cash provided by (used in) investing activities 5,293,752 (2,840,972) ----------- ---------- Cash flows from financing activities Principal repayments on senior indebtedness (96,880) (276,675) Principal repayments on long-term debt (155,940) (118,195) Other - (1,896) ----------- ---------- Net cash used in financing activities (252,820) (396,766) ----------- ---------- Net change in cash and cash equivalents 5,494,106 (5,395) ----------- ---------- Cash and cash equivalents, beginning of period 11,323,301 5,011,666 ----------- ----------- Cash and cash equivalents, end of period $16,817,407 $ 5,006,271 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -5- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (Unaudited) NOTE 1 - BASIS OF PRESENTATION In the opinion of management, these unaudited financial statements contain all disclosures, which are necessary to present fairly the Company's consolidated financial position at March 31, 2000, and the results of operations and the cash flows for the three months ended March 31, 2000 and 1999. The financial statements include all adjustments (consisting only of normal recurring adjustments) which in the opinion of management are necessary in order to present fairly the financial position and results of operation for the interim periods. Certain information and footnote disclosures normally included in financial statements under generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. NOTE 2 - RESTRICTED CASH AND BORROWERS' ESCROWS Restricted cash and borrowers' escrows represents borrowers' funds held by the Company to fund certain expenditures or to be released at the Company's discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for the loans. NOTE 3-INVESTMENTS IN REAL ESTATE LOANS The Company's portfolio of Investments in real estate loans consisted of the following at March 31, 2000:
Long-term first mortgages and senior loan participations $ 11,008,480 Mezzanine (including wraparound) loans 71,722,645 Short-term bridge loans 33,860,161 Loan costs 179,405 Less: Provision for loan losses (226,157) ------------ Investments in real estate loans 116,544,534 Less: Senior indebtedness secured by real estate underlying the Company's wraparound loans (43,850,653) ------------ Net Investments in real estate loans $ 72,693,881 ============
The following is a summary description of the assets contained in the Company's portfolio of Investments in real estate loans:
Number of Average Loan-to- Yield Range of Type of Loan Loans Value Range Maturities ------------ --------- ---------------- ------- ----------- Long-term first mortgages and senior loan participations 6 44% 10-15% 3/28/01-7/14/09 Mezzanine (including wraparound) loans 12 86% 11-18% 2/1/02-1/31/09 Short term bridge loans 5 78% 15-30% 5/31/00-7/29/00
-6- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (Unaudited) Approximately $60.4 million of the loans are secured by multi-family residential properties and $56.2 million of the loans are secured by commercial properties. As of March 31, 2000, twelve of the Company's purchased loans were still subject to forbearance agreements or other contractual restructurings that existed at the time the Company acquired the loans. During the quarter ended March 31, 2000, all payments under the agreements were timely and all borrowers were otherwise in full compliance with the terms of the agreements. The remaining eleven loans in the Company's portfolio were performing in accordance with their terms as originally underwritten by the Company and were current as to payments as of March 31, 2000. As of March 31, 2000, senior indebtedness secured by real estate underlying the Company's wraparound loans consists of the following:
Loan payable, secured by real estate, monthly installments of $13,789, including interest at 7.08%, remaining principal due December 1, 2008 $ 1,902,117 Loan payable, secured by real estate, monthly installments of $17,051, including interest at 6.83%, remaining principal due December 1, 2008 2,403,974 Loan payable, secured by real estate, monthly installments of $10,070, including interest at 6.83%, remaining principal due December 1, 2008 1,521,171 Loan payable, secured by real estate, monthly installments of $80,427, including interest at 6.95%, remaining principal due July 1, 2008 11,937,380 Loan payable. secured by real estate, monthly installments of $28,090, including interest at 6.82%, remaining principal due November 1, 2008 4,238,491 Loan payable, secured by real estate, monthly installments of $72,005, including interest at 7.55%, remaining principal due December 1 2008 9,847,520 Loan payable, secured by Company's interest in short-term bridge loan of $17,576,712, interest only at 8.25% due monthly, principal balance due December 1, 1999 12,000,000 ----------- $43,850,653 ===========
-7- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (Unaudited) As of March 31, 2000 the senior indebtedness secured by real estate underlying the Company's wraparound loans maturing in the remainder of 2000, over the next four years, and the aggregate indebtedness maturing thereafter is as follows: 2000 $12,299,192 2001 420,498 2002 451,502 2003 484,796 2004 520,550 Thereafter 29,674,115 ----------- $43,850,653 =========== NOTE 4-INVESTMENTS IN REAL ESTATE Investments in real estate are comprised of the following at March 31, 2000: Land $ 12,262,187 Office buildings and improvements 63,761,110 Apartment buildings 34,908,741 ------------ Subtotal 110,932,038 Less: Accumulated depreciation (3,081,921) ----------- Investments in real estate, net $107,850,117 ============ As of March 31, 2000, long-term debt secured by the Company's Investments in real estate consists of the following:
Loan payable, secured by real estate, monthly installments of $8,008, including interest at 7.33%, remaining principal due August 1, 2008 $ 1,074,131 Loan payable, secured by real estate, monthly installments of $288,314, including interest at 6.85%, remaining principal due August 1, 2008 43,318,802(1) Loan payable, secured by real estate, monthly payments of interest only at 10%, principal due August 1, 2008 4,860,161(1) Loan payable, secured by partnership interests in a real estate partnership, monthly payments of interest only at 8.19%, additional interest of 3.81% is deferred and payable from net cash flow, principal and deferred interest due September 1, 2008 18,308,135(1)
-8- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (Unaudited)
Loan payable, secured by real estate, monthly installments of $107,255, including interest at 7.73%, remaining principal due December 1, 2009 14,967,905 ---------- Loan payable, secured by real estate, monthly installments of $87,960, including interest at 8.37%, remaining principal due March 1, 2008 11,780,902 ----------- $94,310,036 ===========
(1) These loans all relate to a single investment in real estate. As of March 31, 2000 the amount of long-term debt secured by the Company's Investments in real estate maturing in the remainder of 2000, over the next four years, and the aggregate indebtedness maturing thereafter, is as follows: 2000 516,693 2001 749,710 2002 806,369 2003 867,337 2004 932,945 Thereafter 90,436,982 ----------- $94,310,036 =========== -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In addition to historical information, this discussion and analysis contains forward-looking statements. These statements can be identified by the use of forward-looking terminology including "may", "believe", "will", "expect", "anticipate", "estimate", "continue" or similar words. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report. Overview The Company commenced investment operations in January 1998. Its principal business objective is to generate income for distribution to its shareholders from a combination of interest, rents and distributions from loans that the Company originates and funds, loans or property interests acquired and other investments. The Company completed two public offerings of its common shares during 1998 and utilized these proceeds, combined with repayment and refinancing of its loans and property interests and its line of credit, to build its investment portfolio. Liquidity and Capital Resources Since commencement of investment operations in January 1998, the principal source of the Company's capital resources has been the two offerings of its common shares, which, after offering costs and underwriting discounts and commissions, resulted in net proceeds to the Company of $86.0 million. Secondarily, the Company has obtained capital resources from the repayment, refinancing, and sale of loans in its portfolio (or principal payments on those loans), aggregating $9.8 million for the quarter ended March 31, 2000 ($10.2 million for the quarter ended March 31, 1999). The principal use of these funds has been the origination, acquisition and purchase of loans in the amount of $270,000 for the quarter ended March 31, 2000 ($13.9 million for the quarter ended March 31, 1999), and the purchase of real estate and improvements in the amount of $5.6 million for the quarter ended March 31, 2000 ($0 for the quarter ended March 31, 1999). The Company also receives funds from interest payments on its loans and operating income from its property interests. As required by the Internal Revenue Code of 1986, the Company utilizes these funds (to the extent of not less than 95% of its taxable income) to pay dividends to its shareholders. For the quarter ended March 31, 2000, the Company declared dividends of $3.2 million, which were paid on April 12, 2000. In order to maintain liquidity, the Company continues to pursue a strategy of providing shorter-term financing to its borrowers (generally in the form of bridge financing) to increase the turnover of its investments, and pursuing borrower refinancing of the Company's loans through senior lenders, with the Company retaining junior interests. The Company is not currently experiencing material difficulties in originating shorter-term financings or obtaining senior lien refinancings on acceptable terms. However, there can be no assurance that difficulties will not be encountered in the future, depending upon the development of conditions in the credit markets -10- At March 31, 2000, the Company had approximately $13.6 million in funds available for investment ($3.2 million of cash held at March 31, 2000 was reserved to pay a cash dividend on April 12, 2000). All cash was temporarily invested in a money-market account that the Company believes has a high degree of liquidity and safety. Results of Operations The Company had average earning assets for the quarter ended March 31, 2000 of $100.6 million ($92.4 million for the quarter ended March 31, 1999), including $14.1 million of average earning assets invested in a money-market account for the quarter ended March 31, 2000 ($5.0 million for the quarter ended March 31, 1999). The increases in total average earning assets and average earning assets invested in a money-market account from the quarter ended March 31, 1999 to the corresponding period in 2000 were due the utilization of the Company's credit line ($14.0 million and $0 outstanding at March 31, 2000 and 1999, respectively) to originate loans and to acquire loans and property interests. Interest income derived from loans was $4.7 million and $4.6 million for the quarter ended March 31, 2000 and 1999, respectively. Interest income from the money market account was $172,000 for the quarter ended March 31, 2000 compared to $63,000 for the corresponding period in 1999. The increase in interest income from the money market account from the quarter ended March 31, 1999 to the quarter ended March 31, 2000 was due to a higher balance of assets invested in a money-market account due to a loan repayment in the first quarter of 2000. The yield on average earning non-money market assets was 18.0% and 15.8% for the quarters ended March 31, 2000 and 1999, respectively. The yield on average earning money market account assets was 4.9% and 5.0% for the quarters ended March 31, 2000 and 1999, respectively. The increase in yield on average earning non-money market assets was due to increased yields obtained from loans originated subsequent to March 31, 1999. The decrease in yield on average earning money market account assets was due to a decrease in amounts paid by banks on money market funds. The Company derived $3.9 million from rents from its property interests for the quarter ended March 31, 2000 compared to $2.7 million for the quarter ended March 31, 1999. The increase in rents from the Company's property interests from the quarter ended March 31, 1999 to the same period in 2000 was due to the acquisition of a total of three property interests during the second and fourth quarters of 1999 and the first quarter of 2000. Twelve of the Company's purchased loans remained subject to forbearance agreements or other contractual restructurings that existed at the time the Company acquired the loans. During the quarter ended March 31, 2000, all payments under the agreements were timely made and all borrowers were otherwise in full compliance with the terms of the agreements. The remaining eleven loans in the Company's portfolio are performing in accordance with their terms as originally underwritten by the Company and were current as to payments as of March 31, 2000. During the quarter ended March 31, 2000, the Company incurred expenses of $5.7 million compared to $4.7 million for the same period in 1999. The expenses consist of interest expense, operating expenses relating to the Company's property interests, general and administrative expenses and -11- depreciation and amortization. Interest expense was $2.8 million for the quarter ended March 31, 2000 as compared to $2.6 million for the corresponding period in 1999. Interest expense relates to interest payments made on senior indebtedness encumbering properties underlying the Company's investments in wraparound loans and properties owned by the Company and interest payments made on the Company's secured line of credit, all of which increased as a result of the increase in the Company's loan portfolio. Property operating expenses were $2.0 million for the quarter ended March 31, 2000 compared to $1.2 million for the quarter ended March 31, 1999. Depreciation and amortization was $626,000 for the quarter ended March 31, 2000 as compared to $445,000 for the corresponding period in 1999. The increases in property operating expenses, depreciation and amortization from quarter ended March 31, 1999 to the corresponding period in 2000, were due to the Company's acquisition of a total of three property interests in the second and fourth quarters of 1999 and the first quarter of 2000. General and administrative expenses were $350,000 for the quarter ended March 31, 2000 as compared to $392,000 for the corresponding period in 1999. The decrease in general and administrative expenses from the first quarter of 1999 to the same period in 2000 was due to a timing difference in the recognition of bonuses paid. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in the Company's assessment of its sensitivity to market risk since its presentation in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. -12- PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Financial Data Schedule (b) Reports on Form 8-K (1) No reports were filed on Form 8-K during the quarter ended March 31, 2000. -13- SIGNATURES 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. May 15, 2000 /s/ Ellen J. DiStefano - ------------- ----------------------- DATE Ellen J. DiStefano Chief Financial Officer (On behalf of the registrant and as its principal financial officer) -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 16,817,407 0 1,934,660 226,157 0 0 133,929 50,391 250,900,428 0 0 0 0 61,991 86,058,240 250,900,428 0 8,824,908 0 0 2,935,497 0 2,802,296 3,086,615 0 3,086,615 0 0 0 3,086,615 .50 50
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