-----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, WiDRbE0e8sFs8BigWdmxuDgVln+S7fVAZ9WK10wOpSKP6tOHiV6Bk/b6vLYsgFp7 YAph3tp/fUaQipSPbqxGKg== 0000950116-99-001574.txt : 19990817 0000950116-99-001574.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950116-99-001574 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990816 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: 99691028 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 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] Quarterly Report Under 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 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 July 31, 1999, 6,173,097 common shares of beneficial interest, with a par value of $0.01, 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 June 30, 1999 (unaudited) and December 31, 1998 3 Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 1999 and 1998 4 Consolidated Statements of Cash Flows (unaudited) for the three and six months ended June 30, 1999 and 1998 5 Notes to Consolidated Financial Statements-June 30, 1999 (unaudited) 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 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
June 30, 1999 (unaudited) December 31, 1998 ------------- ----------------- ASSETS Cash and cash equivalents $ 8,247,437 $ 5,011,666 Accrued interest receivable 1,806,664 1,057,919 Investments in real estate loans, net 131,486,789 126,273,069 Investments in real estate, net 72,515,581 68,244,109 Furniture, fixtures and equipment, net 101,437 108,885 Prepaid expenses and other assets 970,028 563,443 ------------ ------------ Total Assets $215,127,936 $201,259,091 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts payable and accrued liabilities 94,347 142,067 Accrued interest payable 673,379 674,047 Deferred interest payable 474,504 115,568 Tenant security deposits 187,265 144,830 Borrowers' escrows 10,127 418,402 Dividends payable 3,144,320 - Deferred income 474,977 24,000 Senior indebtedness secured by real estate underlying the Company's wraparound loans 45,937,585 46,936,032 Long term debt secured by real estate owned 69,946,594 67,267,925 Secured line of credit 9,135,000 - ------------ ------------ Total Liabilities 130,078,098 115,722,871 Minority interest - 17,761 Shareholders' Equity Preferred Shares, $.01 par value; 25,000,000 authorized shares - - Common Shares, $.01 par value; 200,000,000 authorized shares; 6,165,334 issued and outstanding 61,654 61,654 Additional paid-in-capital 85,809,885 85,817,332 Accumulated deficit (821,701) (360,527) ------------ ------------ Total Shareholders' Equity 85,049,838 85,518,459 ------------ ------------ Total Liabilities and Shareholders' Equity $215,127,936 $201,259,091 ============ ============
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 For the six months ended June 30, ended June 30, -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- REVENUES Mortgage interest income $ 5,173,243 $ 2,349,423 $ 9,728,060 $ 3,475,849 Rental income 2,932,094 42,311 5,637,720 49,135 Fee income and other 22,500 - 295,000 50,000 Investment income 41,964 113,325 104,818 362,330 Gain on sale of loan 131,125 - 131,125 - ----------- ----------- ------------ ----------- Total Revenues 8,300,926 2,505,059 15,896,723 3,937,314 COSTS AND EXPENSES Interest 2,894,959 575,751 5,519,844 895,539 Property operating expenses 1,516,918 - 2,728,396 - General and administrative 396,531 325,210 788,862 488,773 Depreciation and amortization 608,348 30,437 1,052,915 37,829 ----------- ----------- ------------ ----------- Total Costs and Expenses 5,416,756 931,398 10,090,017 1,422,141 ----------- ----------- ------------ ----------- Net Income before minority interest $ 2,884,170 $ 1,573,661 $ 5,806,706 $ 2,515,173 ----------- ----------- ------------ ----------- Minority interest - - 17,761 - Net Income $ 2,884,170 $ 1,573,661 $ 5,824,467 $ 2,515,173 =========== =========== ============ =========== Net Income per common share-basic $ .47 $ .46 $ .94 $ .80 =========== =========== ============ =========== Weighted average common shares outstanding-basic 6,165,334 3,394,972 6,165,334 3,124,955 =========== =========== ============ =========== Net income per common share-diluted $ .47 $ .45 $ .94 $ .79 =========== =========== ============ =========== Weighted average common shares outstanding-diluted 6,178,942 3,465,589 6,179,062 3,185,011 =========== =========== ============ ===========
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 six months ended June 30, --------------------------------- 1999 1998 ------------- -------------- Cash flows from operating activities Net Income $ 5,824,467 $ 2,515,173 Adjustments to reconcile net income to net cash provided by operating activities Gain on sale of loan (131,125) - Minority interest (17,761) - Depreciation and amortization 1,052,915 37,829 Amortization of original issue discount - (5,001) Accretion of loan discount (317,573) (101,409) Increase in accrued interest receivable (748,745) (431,299) Increase in prepaid expenses and other assets (358,727) (314,539) Decrease in accounts payable and accrued liabilities (47,720) (321,679) (Decrease) increase in accrued interest payable (668) 108,797 Increase in deferred interest payable 358,936 - Increase in tenant security deposits 42,435 - Increase (decrease) in deferred income 450,977 (345,032) (Decrease) increase in borrowers' escrows (408,275) 300,000 Decrease in due affiliate - (1,579,330) ------------ ------------ Net cash provided by operating activities 5,699,136 553,574 ------------ ------------ Cash flows from investing activities Purchase of furniture, fixtures and equipment (5,460) (116,057) Real estate loans purchased (14,225,435) (20,646,388) Real estate loans originated (8,868,192) (15,150,000) Proceeds from sale of loan 2,481,782 - Principal repayments of loans 14,861,932 3,785,073 Real estate purchases and improvements (2,971,572) (1,655,170) Utilization of reserves held by mortgagee to pay taxes 684,091 - ------------ ------------ Net cash used in investing activities $ (8,042,854) $(33,857,628) ------------ ------------ Cash flows from financing activities Advances on secured line of credit 9,135,000 - Issuance of common stock, net - 87,682,055 Payment of dividends (3,144,320) (2,500,076) Principal repayments on senior indebtedness (184,888) - Principal repayments on long-term debt (221,857) - Other (4,446) - ------------ ------------ Net cash provided by financing activities 5,579,489 85,181,979 ------------ ------------ Net change in cash and cash equivalents 3,234,771 51,877,925 ------------ ------------ Cash and cash equivalents, beginning of period 5,011,666 - ------------ ------------ Cash and cash equivalents, end of period $ 8,247,437 $ 51,877,925 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -5- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 (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 June 30, 1999 and the results of operations and the cash flows for the three and six months ended June 30, 1999 and 1998. 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 Form 10-K for the period ended December 31, 1998. NOTE 2 - INVESTMENTS IN REAL ESTATE LOANS The Company's portfolio of Investments in real estate loans consisted of the following at June 30, 1999: Long-term first mortgages and senior loan participations $ 37,201,793 Mezzanine (including wraparound) loans 76,919,441 Short-term bridge loans 17,591,712 Less: Provision for loan losses (226,157) ------------ Investments in real estate loans 131,486,789 Less: Senior indebtedness secured by real estate underlying the Company's wraparound loans (45,937,585) ------------ Net Investments in real estate loans $ 85,549,204 ============ 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 8 56% 9-22% 9/2/99-7/31/21 Mezzanine (including wraparound) loans 12 85% 9-18% 1/1/02-1/31/09 Short term bridge loans 1 90% 18% 11/30/99
Approximately $88.5 million of the loans are secured by multi-family residential properties and $43.2 million are secured by commercial properties. As of June 30, 1999, twelve of the loans were subject to pre-existing forbearance agreements or other contractual restructurings. These agreements were in place prior to the Company's acquisition of the loans. During the quarter ending June 30, 1999, all payments under the agreements were timely made and all borrowers (except one, see NOTE 5-LEGAL PROCEEDINGS) were otherwise in full compliance with the terms of the agreements. The remaining nine 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 June 30, 1999. -6- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) As of June 30, 1999, 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 $ 1,923,394 Loan payable, secured by real estate, monthly installments of $17,051, including interest at 6.83%, remaining principal due December 1, 2008 2,432,032 Loan payable, secured by real estate, monthly installments of $10,070, including interest at 6.83%, remaining principal due December 1, 2008 1,532,647 Loan payable, secured by real estate, monthly installments of $80,427, including interest at 6.95%, remaining principal due July 1, 2008 12,036,103 Loan payable. secured by real estate, monthly installments of $28,090, including interest at 6.82%, remaining principal due November 1, 2008 4,274,019 Loan payable, secured by real estate, monthly installments of $72,005, including interest at 7.55%, remaining principal due December 1 2008 9,939,390 Loan payable, secured by Company's interest in short-term bridge loan of $17,576,712, interest at 8.25% due monthly, balance due December 1, 1999 12,000,000 Loan payable, secured by real estate, monthly installments of interest only at 10% until July, 1999 at which time amortization on a 20-year schedule, including interest at 10% begins, remaining principal due June 30, 2003 1,800,000 ----------- $45,937,585 ===========
-7- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) As of June 30, 1999 the senior indebtedness secured by real estate underlying the Company's wraparound loans maturing in 1999, over the next four years, and the aggregate indebtedness maturing thereafter is as follows: 1999 $ 12,203,656 2000 418,646 2001 450,441 2002 483,501 2003 2,173,450 Thereafter 30,207,891 ------------ $ 45,937,585 ============ NOTE 3 - INVESTMENTS IN REAL ESTATE Investments in real estate are comprised of the following at June 30,1999: Land $ 5,621,425 Office buildings and improvements 64,261,466 Apartment buildings 4,291,318 ----------- Subtotal 74,174,209 Less: Accumulated depreciation (1,658,628) ----------- Investments in real estate, net $72,515,581 =========== As of June 30, 1999, 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 $ 1,086,755 Loan payable, secured by real estate, monthly installments of $288,314, including interest at 6.85%, remaining principal due August 1, 2008 43,653,244 Loan payable, secured by real estate, monthly payments of interest only at 10%, principal due August 1, 2008 4,552,293(1) Loan payable, secured by partnership interests, 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 18,000,266(1) Loan payable, secured by real estate, monthly installments of $23,345, including interest at 9.75%, remaining principal due January 1, 2001 2,654,036(1) ------------- $ 69,946,594 =============
(1) These loans all relate to a single investment in real estate. -8- RESOURCE ASSET INVESTMENT TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) As of June 30, 1999 the amount of long-term debt secured by the Company's Investments in real estate maturing in 1999, over the next four years, and the aggregate indebtedness maturing thereafter, is as follows: 1999 $ 232,131 2000 498,385 2001 3,128,718 2002 545,628 2003 584,837 Thereafter 64,956,895 ----------- $69,946,594 =========== NOTE 4 - SECURED LINE OF CREDIT In April 1999, the Company established a $20.0 million secured line of credit with interest at the Wall Street Journal Prime Rate. The facility has a two-year term with a one-year extension option, and an 11-month non-renewal notice requirement. This facility will be used to enhance the Company's ability to expand its loan portfolio and to generate income from that portfolio. As of June 30, 1999, $9.1 million was outstanding on the line of credit at 7.75%. NOTE 5 - LEGAL PROCEEDINGS Pursuant to a loan restructuring agreement entered into prior to the Company's acquisition of one of the loans, the borrower was required to make payments on the loan in a minimum monthly amount plus certain excess cash flow. The borrower was current on minimum payments, but the Company determined that the borrower had not made all required excess cash flow payments. Accordingly, the Company moved to exercise its remedies, which included the right to replace the current manager of the property, an affiliate of the borrower. In November 1998, the borrower sought protection under Chapter 11 of the United States Bankruptcy Code in order to prevent the Company's exercise of this remedy. The borrower has continued to make all minimum monthly payments throughout the term of the bankruptcy proceedings. In June 1999, the joint plan of reorganization between the Company and the borrower was approved, pursuant to which the borrower relinquished ownership and management control of the property. The Company believes that the property has not been managed to its full potential and that this change in management control will increase the Company's return on this investment. -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 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 $7.1 million for the quarter ended June 30, 1999 ($17.3 million for the six months ended June 30, 1999). The principal use of these funds for the quarter ended June 30, 1999, has been the origination, acquisition and purchase of loans in the amount of $9.2 million ($23.1 million for the six months ended June 30, 1999) and the purchase of real estate in the amount of $4.8 million for both the three and six months ended June 30, 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 June 30, 1999, the Company declared dividends of $3.1 million, which were paid on July 13, 1999. In the second quarter of 1999, the Company utilized $9.1 million of the $20.0 million available from its secured line of credit to consummate two loan purchases, and assumed an existing mortgage loan in the amount of $2.7 million in connection with the purchase of real estate. 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 June 30, 1999, the Company had approximately $16.0 million in funds available for investment. This includes cash of $5.1 million ($3.1 million of cash held at June 30, 1999 was reserved to pay a cash dividend on July 13, 1999) and availability of $10.9 million on the secured line of credit. All cash was temporarily invested in a money-market account that the Company believed had a high degree of liquidity and safety. Results of Operations The Company had average earning assets for the three and six months ended June 30, 1999 of $95.1 million and $93.0 million, respectively ($63.8 million and $70.1 million for the three and six months ended June 30, 1998), including $6.2 million of average earning assets invested in a money-market account for both the three and six months ended June 30, 1999 ($13.7 million and $8.6 million for the three and six months ended June 30, 1998). The increase in total average earning assets and the decrease in average earning assets invested in a money-market account from both the three and six months ended June 30, 1998 to the corresponding period in 1999 was due to the origination of loans and the acquisition of loans and property interests, in part utilizing non-recourse debt financing. Interest income derived from financings was $5.2 million and $9.7 million for the three and six months ended June 30, 1999 as compared to $2.3 million and $3.5 million for the corresponding periods in 1998. Interest income from the money market account was $42,000 and $105,000 for the three and six months ended June 30, 1999 compared to $113,000 and $362,000 for the corresponding periods in 1998. The increase in interest income derived from financings and the decrease in interest income from the money market account were due to the Company's investment of the proceeds of its two public offerings in 1998. The yield on average earning non-money market assets was 17.3% and 17.4% for the three and six months ending June 30, 1999 and was 15.3% and 14.0% for the corresponding periods in 1998. The increases in yield are due to a decrease in the Company's cost of funds due to utilization of the secured line of credit and to the Company's ability to increase the pricing of its loans in response to market conditions. The yield on average earning money market account assets for both the three and six months ending June 30, 1999 was 5.0% as compared to 5.3% for both the three and six months ending June 30, 1998. The Company derived $2.9 million from rents from its property interests for the quarter ended June 30, 1999 ($5.6 million for the six months ending June 30, 1999) compared to $42,000 for the same period in 1998 ($49,000 for the six months ending June 30, 1998). The increase in rents from the Company's property interests from the three and six months ending June 30, 1998 to the same periods in 1999 was due to the acquisition of two property interests during the first and third quarters of 1998. Twelve of the Company's purchased loans were subject to pre-existing forbearance agreements or other contractual restructurings. These agreements were in place prior to RAIT's acquisition. During the quarter ending June 30, 1999, all payments under the agreements were timely made and all borrowers (except one, see Part II, Item 1. Legal Proceedings) were otherwise in full compliance with the terms of the agreements. The remaining nine 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 June 30, 1999. -11- During the quarter ending June 30, 1999, the Company incurred expenses of $5.4 million ($10.1 million for the six months ending June 30, 1999) compared to $931,000 for the same period in 1998 ($1.4 million for the six months ending June 30, 1998). The expenses consist of interest expense, operating expenses relating to the Company's property interests, general and administrative expenses and depreciation and amortization. Interest expense was $2.9 million and $5.5 million for the three and six months ending June 30, 1999 as compared to $576,000 and $896,000 for the corresponding periods in 1998. 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 $1.5 million and $2.7 million for the three and six months ending June 30, 1999, relating to the property interests purchased in the third quarter of 1999. Depreciation and amortization was $608,000 and $1.1 million for the three and six months ending June 30, 1999 as compared to $30,000 and $38,000 for the corresponding periods in 1998. The increases in depreciation and amortization from the three and six months ending June 30, 1998 to the corresponding periods in 1999 were due to the Company's acquisition of two property interests in the first and third quarters of 1998. General and administrative expenses were $397,000 and $789,000 for the three and six months ending June 30, 1999 as compared to $325,000 and $489,000 for the corresponding periods in 1998. The increase in general and administrative expenses from the second quarter of 1998 to the same period in 1999 was due to increased employee costs resulting from the addition of one employee and salary increases for existing employees. General and administrative expenses increased from the first six months of 1998 to the first six months of 1999 because the first quarter of 1998 amounts did not reflect a full quarter of operations. 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 1998 Annual Report on Form 10-K. -12- PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Pursuant to a loan restructuring agreement entered into prior to the Company's acquisition of one of its loans, the borrower was required to make payments on the loan in a minimum monthly amount plus certain excess cash flow. The borrower was current with respect to minimum payments, but the Company determined that the borrower had not made all required excess cash flow payments. Accordingly, the Company moved to exercise its remedies, which included the right to replace the current manager of the property, an affiliate of the borrower. In November 1998, the borrower sought protection under Chapter 11 of the United States Bankruptcy Code in order to prevent the Company's exercise of this remedy. The borrower has continued to make all minimum monthly payments throughout the term of the bankruptcy proceedings. In June 1999, the joint plan of reorganization between the Company and the borrower was approved, pursuant to which the borrower relinquished ownership and management control of the property. The Company believes that the property has not been managed to its full potential and that this change in management control will increase the Company's return on this investment. 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 June 30, 1999. -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. August 13, 1999 /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 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 8,247,437 0 1,806,664 226,157 0 0 131,938 30,501 215,127,936 0 0 0 0 61,654 84,988,184 215,127,936 0 15,896,723 0 0 4,570,173 0 5,519,844 5,806,706 0 5,806,706 0 0 0 5,806,706 .94 .94
-----END PRIVACY-ENHANCED MESSAGE-----