-----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, Bp8Ao2O8CCHJ7CqWRCB5aN03W4hAEsLPeoGbah89xrkmb2OxaXkWdka/Yoeis9Y2 Uul+eGOE4EHm5REb0DyRcg== 0000014846-99-000009.txt : 19990816 0000014846-99-000009.hdr.sgml : 19990816 ACCESSION NUMBER: 0000014846-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRT REALTY TRUST CENTRAL INDEX KEY: 0000014846 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 132755856 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07172 FILM NUMBER: 99688029 BUSINESS ADDRESS: STREET 1: 60 CUTTER MILL RD STREET 2: SUITE 303 CITY: GREAT NECK STATE: NY ZIP: 11021-3190 BUSINESS PHONE: 5164663100 FORMER COMPANY: FORMER CONFORMED NAME: BERG ENTERPRISES REALTY GROUP DATE OF NAME CHANGE: 19750724 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 Commission File Number 1-7172 BRT REALTY TRUST (Exact name of registrant as specified in its charter) Massachusetts 13-2755856 ---------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 60 Cutter Mill Road, Great Neck, NY 11021 ---------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 466-3100 Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date. 7,165,263 Shares of Beneficial Interest, $3 par value, outstanding on August 10,1999 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 Part 1 - FINANCIAL INFORMATION Item 1. Financial Statements
BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts In Thousands) June 30, September 30, 1999 1998 ---- ---- (Unaudited) (Audited) ASSETS Real estate loans - Note 3 Earning interest $ 47,798 $ 51,175 Less allowance for possible losses 2,041 2,041 ---------- ---------- 45,757 49,134 --------- --------- Real estate assets: Foreclosed properties held for sale 15,005 16,622 Investment in real estate venture 613 613 ---------- ----------- 15,618 17,235 Less valuation allowance 349 349 ----------- ----------- 15,269 16,886 --------- ---------- Cash and cash equivalents 25,055 13,949 Securities available-for-sale at market - 3,364 Other assets 2,075 2,488 ---------- ---------- Total Assets $ 88,156 $ 85,821 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Note payable - Credit facility - Note 5 $ 2,365 $ 5,500 Loans and mortgages payable 7,829 8,494 Accounts payable and accrued liabilities, including deposits of $1,143 and $1,253 2,102 2,080 --------- -------- Total Liabilities 12,296 16,074 -------- ------- Shareholders' Equity - Note 2: Preferred shares, $1 par value: Authorized 10,000 shares, none issued - - Shares of beneficial interest, $3 par value: Authorized number of shares - unlimited, issued - 8,888 shares at each date 26,665 26,665 Additional paid-in capital, net of distributions of $5,171 81,521 81,521 Accumulated other comprehensive income - net unrealized gain on available-for-sale securities - 769 Accumulated deficit (17,446) (24,328) --------- -------- 90,740 84,627 Cost of 1,723 treasury shares of beneficial interest at each date (14,880) (14,880) --------- --------- Total Shareholders' Equity 75,860 69,747 --------- --------- Total Liabilities and Shareholders' Equity $ 88,156 $ 85,821 ========= ========= See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (Unaudited) (In Thousands except for Per Share Data) Three Months Ended Nine Months Ended June 30, June 30, 1999 1998 1999 1998 --------- --------- --------- --------- Revenues: Interest and fees on real estate loans $ 1,744 $ 1,312 $ 5,770 $ 3,715 Operating income on real estate owned 943 1,003 2,795 3,106 Other, primarily investment income 237 224 554 668 ---------- ---------- --------- --------- Total Revenues 2,924 2,539 9,119 7,489 Expenses: Interest-notes payable and loans payable 112 25 391 75 Advisor's fee 134 126 450 370 General and administrative 836 671 2,395 1,888 Operating expenses relating to real estate owned including interest on mortgages of $161 and $229 for the three-month periods and $488 and $710 for the nine-month periods, respectively 526 611 1,707 1,828 Amortization and depreciation 98 86 266 258 --------- --------- -------- -------- Total Expenses 1,706 1,519 5,209 4,419 ------- ------- ------- ------- Income before gain on sale of real estate Loans and foreclosed properties held for sale and available-for-sale securities 1,218 1,020 3,910 3,070 Net gain on sale of real estate loans and foreclosed properties held for sale 326 1,066 2,103 5,777 Net realized gain on available-for-sale securities 229 209 869 209 --------- --------- --------- --------- Net Income $ 1,773 $ 2,295 $ 6,882 $ 9,056 ======== ======== ======== ======== Income per share of Beneficial Interest: Basic earnings per share $ 0.25 $ 0.28 $ 0.96 $ 1.11 ========= ========= ========= ========= Diluted earnings per share $ 0.24 $ 0.28 $ 0.95 $ 1.10 ========= ========= ========= ========= Accumulated deficit, beginning of period $(19,219) $(31,155) $(24,328) $(37,916) Net income 1,773 2,295 6,882 9,056 ----------- ---------- --------- ----------- Accumulated deficit, end of period $(17,446) $(28,860) $(17,446) $(28,860) ========= ========= ========= ========= See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Nine Months Ended June 30, 1999 1998 ---- ---- Cash flow from operating activities: Net income $ 6,882 $ 9,056 Adjustments to reconcile net income to net cash provided by operating activities: Amortization and depreciation 266 258 Gain on sale of real estate and foreclosed properties (2,103) (5,777) Gain on sale of available-for-sale securities (869) (209) Decrease in interest receivable 118 (166) Decrease in prepaid expenses 66 54 Increase (decrease) in accounts payable and accrued liabilities 312 (845) Decrease in deferred revenues (9) (134) Decrease in rent receivables - 124 Increase (decrease) in escrow deposits 25 (179) Increase in deferred costs (661) (5) Net change in other assets 731 225 ----------- ---------- Net cash provided by operating activities 4,758 2,402 ---------- --------- Cash flows from investing activities: Collections from real estate loans 19,066 12,214 Sale of senior participating interest in loans 7,860 - Additions to real estate loans (22,649) (9,556) Costs capitalized to real estate owned (311) (554) Proceeds from sale of real estate owned 3,024 8,450 (Decrease) Increase in deposits payable (305) 398 Purchase of marketable securities - (347) Sales of marketable securities 3,463 635 Increase in investment in Partnership interest - (631) ------------ --------- Net cash (used in) provided by investing activities 10,148 10,609 --------- -------- Cash flow from financing activities: Payoff/paydown of loan and mortgages payable (665) (767) Payoff/paydown of credit facility (3,135) - Repurchase of shares of beneficial interest, a portion of which were cancelled - (2,707) Other - 11 ------------ ----------- Net cash used in financing activities (3,800) (3,463) --------- --------- Net increase in cash and cash equivalents 11,106 9,548 Cash and cash equivalents at beginning of period 13,949 10,152 ------- -------- Cash and cash equivalents at end of period $ 25,055 $ 19,700 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for interest expense $ 840 $ 802 ========= ========== See Accompanying Notes to Consolidated Financial Statements.
BRT REALTY TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1 - Basis of Preparation The accompanying interim unaudited consolidated financial statements as of June 30, 1999 and for the three and nine months ended June 30, 1999 and 1998 reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for such interim periods. The results of operations for the three and nine months ended June 30, 1999 are not necessarily indicative of the results for the full year. Certain items on the consolidated financial statements for the preceding periods have been reclassified to conform with the current consolidated financial statements. The consolidated financial statements include the accounts of BRT Realty Trust, its wholly-owned subsidiaries, and its majority-owned or controlled real estate entities. Investments in less than majority-owned entities have been accounted for using the equity method. Material intercompany items and transactions have been eliminated. Many of the wholly-owned subsidiaries were organized to take title to various properties acquired by BRT Realty Trust. BRT Realty Trust and its subsidiaries are hereinafter referred to as "BRT". These statements should be read in conjunction with the consolidated financial statements and related notes which are included in BRT's Annual Report on Form 10-K for the year ended September 30, 1998. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Note 2 - Shareholders' Equity Per Share Data In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. Statement No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. Basic earnings per share were determined by dividing net income for the period by the weighted average number of shares of common stock outstanding during each period which were 7,165,263 for both the three and nine month periods ended June 30, 1999 and 8,048,832 and 8,126,746 for the three and nine month periods ended June 30, 1998, respectively. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of BRT. Note 2 - Shareholders' Equity - Continued For the three and nine months ended June 30, 1999 and 1998 diluted earnings per share was determined by dividing net income for the period by the total of the weighted average number of shares of common stock outstanding plus the dilutive effect of BRT's outstanding options using the treasury stock method which aggregated 7,241,882 and 7,202,132 and 8,083,069 and 8,169,639 respectively. Note 3 - Real Estate Loans If all loans classified as non-earning were earning interest at their contractual rates for the three and nine months ended June 30, 1998, interest income would have increased by approximately $65,000 and $366,000, respectively. During the three and nine month period ended June 30, 1999 there were no non-interest earning loans. On May 4, 1999 BRT sold senior participating interest in several real estate loans to a financial institution. These senior participating interests, which were classified as held for sale, were sold at cost which approximated estimated fair value. Note 4 - Comprehensive Income In June 1997, the Financial Accounting Standards Board issued Statement No. 130, Reporting Comprehensive Income, which is effective for fiscal years beginning after December 15, 1997. Statement No. 130 establishes standards for reporting comprehensive income and its components in a full set of general-purpose financial statements and requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. BRT elected early adoption of Statement No. 130 as of October 1, 1997. During the three months ended June 30, 1999, accumulated other comprehensive income, which was solely composed of the net unrealized gain on available-for-sale securities, decreased $224,000 from $224,000 to $-0-. For the nine months ended June 30, 1999 accumulated other comprehensive income decreased $769,000 from $769,000 to $-0- as a result of the sale of the related securities. Note 5 - Credit Facility On May 18, 1999 BRT entered into a $45,000,000 revolving credit facility with TransAmerica Business Credit Corporation ("TransAmerica"). It replaces a $25,000,000 facility with Credit Suisse First Boston Mortgage Capital LLC. The agreement with TransAmerica is a revolving facility, which may be used for specific purposes, the primary of which is lending. Borrowings under this facility are secured by specific receivables of BRT and its subsidiary BRT Funding Corp. and the agreement provides that the amount borrowed will not exceed 75% of the value of the collateral. BRT paid a non refundable fee of $337,500 at closing. Interest is charged on the outstanding balance at prime plus 1/2% or under certain circumstances at LIBOR plus 3 1/4%. The facility matures on May 17, 2002. Unused line fees are calculated at 1/8% on the difference between $45,000,000 (the maximum principal debt) and the average amount outstanding. BRT is required to maintain a minimum tangible net worth (as defined) of $70,000,000 and meet certain other covenants, all of which have been met. Note 6 - Segment Reporting In June 1997 the Financial Accounting Standards Board issued Statement No. 131, Disclosure About Segments of an Enterprise and Related Information, which is effective for financial statements issued for periods beginning after December 15, 1997. Statement No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. BRT adopted Statement No. 131 as of October 1, 1998. As BRT operates predominantly in one industry segment, management believes it is in compliance with the standards established by Statement No. 131. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources BRT engages in the business of originating and holding for investment senior real estate mortgages, secured by income producing property and to a lesser extent junior real estate mortgage loans secured by income producing property. BRT from time to time, sells senior participating interests in its loans to other institutions. During the quarter ended June 30, 1999 BRT sold $7,860,000 of these loans to a financial institution. Repayments of real estate loans in the amount of $31,995,000 are due during the twelve months ending June 30, 2000, including $3,819,000 due on demand. The availability of mortgage financing secured by real property and the market for selling real estate is cyclical. Accordingly, BRT cannot project the portion of loans maturing during the next twelve months which will be paid or the portion which will be extended for a fixed term or on a month to month basis. On May 18, 1999 BRT entered into a $45,000,000 revolving credit facility with TransAmerica Business Credit Corporation ("TransAmerica"). This facility replaces a $25,000,000 facility with Credit Suisse First Boston Mortgage Capital LLC. The TransAmerica agreement is a revolving facility, which can be used for specific business purposes, the primary of which is lending. Borrowings under the facility are secured by specific receivables of BRT and its subsidiary, BRT Funding and the agreement provides that the amount borrowed will not exceed 75% of the value of the collateral. Interest is charged on the outstanding balance at prime plus 1/2% or under certain circumstances at LIBOR + 3 1/4%. The interest rate at June 30, 1999 was 8.25%. Unused line fees are calculated at 1/8% on the difference between $45,000,000 (the maximum principal debt) and the average amount outstanding. The facility matures on May 17, 2002. The outstanding balance at August 10, 1999 was $373,687. During the nine months ended June 30, 1999, the Trust generated cash of $3,024,000 from the sale of real estate owned, $19,066,000 from collections from real estate loans and $7,860,000 from the sale of senior participating interest in real estate loans. These funds in addition to cash on hand, were used primarily to fund real estate loan originations of $22,649,000. BRT's cash and cash equivalents were $25,055,000 at June 30, 1999. There will be no effect on BRT's liquidity relating to the year 2000 issue because during the last quarter of the 1997 fiscal year the Trust acquired new computer hardware and software to handle the Trust's accounting and real estate management. The computer software is capable of handling all issues relating to the year 2000. BRT has also reviewed the impact of the failure of its tenants, borrowers or suppliers to be year 2000 compliant. Based upon its review and the nature of BRT's business, the inability of its tenants, borrowers and/or suppliers to be year 2000 compliant will not have a material adverse effect on BRT's business. BRT will satisfy its liquidity needs from cash and liquid investments on hand, interest received on outstanding real estate loans, net cash flow generated from the operation of real estate assets and from time to time the sale of senior participating interests in its loans. Results of Operations Interest and fees on real estate loans increased by $432,000 to $1,744,000 for the three months ended June 30, 1999 as compared to $1,312,000 for the corresponding period in 1998. The increase was due to a higher average balance of earning real estate loans outstanding during the quarter. This category also increased by $2,055,000 to $5,770,000 for the nine months ended June 30, 1999 as compared to $3,715,000 for the corresponding period in 1998. This increase was also due to a higher average balance of earning real estate loans outstanding during the current nine month period. Operating income on real estate owned decreased by $60,000 to $943,000 for the three months ended June 30, 1999 as compared to $1,003,000 for the corresponding period in 1998. During the nine month period ended June 30, 1999 this category decreased $311,000 from $3,106,000 to $2,795,000. The decrease for both periods is primarily due to the reduction of rental income that has resulted from the continued sale of foreclosed properties. Other revenues, primarily investment income, increased by $13,000 to $237,000 for the three months ended June 30, 1999 as compared to $224,000 for the corresponding period in 1998. This was the result of an increase in the average balance of cash and cash equivalents during the period. This category decreased by $114,000 to $554,000 for the nine months ended June 30, 1999 compared to $668,000 for the corresponding period in 1998. This decrease is the result of decreased interest rates on invested balances. Interest expense on notes and loans payable increased by $87,000 to $112,000 for the three months ended June 30, 1999 as compared to $25,000 for the corresponding period in 1998. During the nine month period ended June 30, 1999 interest expense increased by $316,000 from $75,000 to $391,000. The increases in both periods is the result of having a higher outstanding balance under its credit facility. The Advisor's fee increased by $8,000 to $134,000 for the three-month period ended June 30, 1999 as compared to $126,000 for the corresponding period in 1998. For the nine months ended June 30, 1999 the advisor's fees increased by $80,000 to $450,000 from $370,000. These increases were the result of an increase in total invested assets, the basis upon which the fee is calculated. General and administrative expenses increased by $165,000 to $836,000 for the three months ended June 30, 1999 as compared to $671,000 for the corresponding period in 1998. This category increased by $507,000 to $2,395,000 for the nine months ended June 30, 1999 as compared to $1,888,000 for the corresponding period in 1998. The increases in both periods was primarily the result of increased expenses, primarily salaries, rent and costs associated with BRT's expansion of staff and marketing efforts in order to generate new business. Operating expenses relating to real estate assets decreased by $85,000 to $526,000 for the three months ended June 30, 1999 as compared to $611,000 for the corresponding period in 1998. This category decreased by $121,000 to $1,707,000 for the nine months ended June 30, 1999 as compared to $1,828,000 for the corresponding period in 1998. These decreases were the result of decreased interest expense on mortgages and a general decrease in operating expenses on BRT's commercial real estate assets. Amortization and depreciation increased by $12,000 to $98,000 for the three month period ended June 30, 1999 as compared to $86,000 in the corresponding period in 1998. During the nine month period ended June 30, 1999 amortization and depreciation increased $8,000 to $266,000 from $258,000 for the corresponding period in 1998. These increases are the result of amortization of costs associated with the TransAmerica credit facility completed in May 1999. Net gains on sale of real estate loans and foreclosed properties and available-for-sale investments was $555,000 for the three months ended June 30, 1999 as compared to $1,275,000 for the comparable period in 1998. For the nine month period ended June 30, 1999 net gains on sale of real estate loans and foreclosed properties and available-for-sale investments was $2,972,000 as compared to $5,986,000 for the comparable period in 1998. It is the policy of BRT to offer for sale all foreclosed property at prices that management believes represent fair value. Item 3. Quantitative and Qualitative Disclosures About Market Risks BRT has considered the effects of derivatives and exposures to market risk relating to interest rate, foreign currency exchange rate, commodity price and equity price risk. BRT has assessed the market risk for its variable rate debt and variable rate mortgage receivables and believes that a one-percent change in interest rates would not have a material effect on net income. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K On May 25, 1999 BRT filed an 8-K reporting the consummation and material terms of a $45 million revolving credit facility with TransAmerica Business Credit Corporation that took place on May 18, 1999. On June 7, 1999 BRT filed an 8-K reporting a filing with the Office of Thrift Supervision to establish a de novo federal savings and loan association. 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. BRT REALTY TRUST Registrant August 13, 1999 /s/ Jeffrey Gould - --------------- ----------------- Date Jeffrey Gould, President August 13, 1999 /s/ George Zweier - --------------- ----------------- Date George Zweier, Vice President and Chief Financial Officer EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000014846 BRT REALTY TRUST 1,000 9-MOS SEP-30-1999 OCT-01-1998 JUN-30-1999 25,055 0 0 0 0 0 0 0 88,156 0 10,194 0 0 26,665 49,195 88,156 0 2,924 0 0 1,706 0 0 1,773 0 1,773 0 0 0 1,773 .25 .24
-----END PRIVACY-ENHANCED MESSAGE-----