South Carolina
57-0405064
(State or other jurisdiction (I.R.S. Employer Identification
No.)
of incorporation of organization)
45 Liberty Lane, Greenville, South Carolina 29607
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (864) 233-6007
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
Shares of Beneficial Interest - $1 Par Value
(Title of class)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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
(continued)
PAGE
Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to the Form 10-KSB [x]
The issuer's revenues for its most recent fiscal year: $1,949,249
The aggregate market value of the voting stock held by non-affiliates of the issuer computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days:
Not
available
The number of shares outstanding of each of the registrant's classes of common equity, as of March 15, 2001:
Shares of Beneficial Interest
1,770,006
Documents Incorporated by Reference
1. Portions of Annual Report to Stockholders for the year ended December 31, 2000 ("Annual Report") in Part II.
2. Portions of Registrant's Definitive Proxy Statement for the 2000 Annual Meeting of Stockholders in Part III.
2
PAGE
Part I
Item 1. Business
Palmetto Real Estate Trust (the "Trust"), was organized as a qualified real estate investment trust under the Internal Revenue Code, Section 856, as amended, and the applicable state laws of the State of South Carolina.
The principal office of the Trust is located in Greenville, South Carolina, and the managing agent of the Trust is B. A. Franks. Prior to its formation in 1972, the Trust was known as Palmetto Industrial Corporation. The ownership of the equitable
interest in the Trust is evidenced by shares of beneficial interest. At December 31, 2000, there are 1,770,006 shares of beneficial interest issued and outstanding.
The primary business of the Trust is the ownership, development and rental of restaurants, dry cleaning establishments, department stores, convenience food stores, grocery stores, post offices, and various other retail establishments. It is the intention
of the Trust to continue to invest in profitable commercial properties for suitable tenants.
The Trust derives more than 98 percent of its gross income from rents received on leases with terms ranging up to twenty years with many including renewal options ranging from one to five years.
The leases do not require the Trust to furnish any services to tenants. The Trust has no full-time employees and is engaged in no lines of business other than real estate investments. The Trust does not at present, nor in the future, intend to purchase
property primarily for resale. The Trust is not involved in any type of research or development activities, and is not affiliated with any foreign corporation.
Item 2. Properties
All of the leased buildings are suitable and adequate for the purposes for which they were designed and are in a good state of repair. The managing agent makes every effort to ensure that the rent is timely paid by all the tenants, that the taxes and
insurance are current on all properties, and that all buildings are being properly maintained and repaired. In management's opinion, all properties are adequately covered by insurance. The following briefly describes each of the properties:
A. Speedy Cash of SC - 1307 Richland Avenue, Aiken, South Carolina; masonry, brick and block building; 2,344 square feet; adequate parking; construction date--1966; no mortgages or liens; two-year lease expires December 31, 2000. Annual base rent $9,600; property taxes for 2000--$2,125.
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B. Rent Smart, Inc., 405 South Pleasantburg Drive, Greenville, South Carolina; block and masonry building; 3,600 square feet--acquired in 1992; adequate parking; no mortgage or liens; annual base rent of $34,458; three-year lease expires October 31, 2002; property taxes for 2000--$4,106.
C. Cateran Family Restaurant, Wade Hampton Boulevard, Greenville, South Carolina; brick and concrete building; 3,280 square feet; adequate parking; construction date--1966; no mortgages or liens; annual base rent $16,200 (in effect during renegotiation period); a month-to-month rental; property taxes for 2000--$4,548.
D. Dove Cleaners, Reidville Road, Spartanburg, South Carolina; masonry and block building; 1,632 square feet; adequate parking; construction date--1970; no mortgages or liens; and is vacant; property taxes for 2000--$1,758.
E. Enigma Spinx (retail convenience store and service station), Haywood--Pelham Road, Greenville, South Carolina; two masonry and block buildings; 8,500 square feet; acquired 1993; mortgage balance at December 31, 2000--$627,200; fifteen-year lease expires May 31, 2008; annual lease payments of $112,000; property taxes are paid by tenant.
F. Venture Park, Rutherford Road, Greenville, South Carolina; three concrete block warehouses; acquired November 14, 1979; 9,200 square feet; no mortgages or liens; property taxes for 2000--$2,480.
| Principal Tenants | Lease Arrangements |
| Andy Oxy Company, Inc. | Month-to-month rental. Annual base rent $15,300. |
| Jaguar South | One-year lease expires April 30, 2001. Annual base rent $9,900. |
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G. Pleasantburg Shopping Center, Laurens Road, Greenville, South Carolina; brick masonry and concrete building; 162,000 square feet; acquired in 1976; mortgage balance at December 31, 2000--$2,336,800; collateral for line of credit balance of $-0-; property taxes for 2000--$95,389.
| Principal Tenants | Lease Arrangements |
| Belk-Simpson Company | Carpet and furniture sales. Five-year lease expires January 31, 2004; 48,000 square feet. Annual base rent $159,072. |
| Book Rack | Month-to-month rental. Annual base rent $10,080. |
| The Open Book | Five-year lease expires September 30, 2002; 16,000 square feet. Annual base rent $72,000. |
| American General | Five-year lease expires June 30, 2004. Annual base rent $8,640. |
| Alpha Beauty School | Five-year lease expires May 31, 2004. Annual base rent $15,180. |
| Joey's Inc. | Three-year lease expires April 30, 2001. Annual base rent $15,480. |
| Mother's Love | Annual base rent $3,960. Month-to-month rental. |
| Olan Mills Studio | Five-year lease expires April 30, 2001. Annual base rent $6,900. |
| Pleasantburg Shoe Service | Three-year lease expires January 31, 2003. Annual base rent $5,400. |
| SharMari Hair Extraordinaire | Two-year lease expires January 31, 2003. Annual base rent $5,520. |
| Simply the Best | One-year lease expires January 31, 2001. Annual base rent $12,780. |
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G. Pleasantburg Shopping Center (continued)
| Principal Tenants | Lease Arrangements |
| The Underground | Three-year lease expires August 31, 2002. Annual base rent $16,380. |
| Gregory's Boutique | Two-year lease expires March 31, 2001. Annual base rent $10,800. |
| Fred A. Fuller Appliances | Three-year lease expires February 28, 2003. Annual base rent $14,056. |
| Wilson's 5 cents to $1.00 | Five-year lease expires January 31, 2005. Annual base rent $39,084. |
| Branch Banking & Trust Co. | Five-year lease expires December 31, 2003. Annual base rent $10,800. |
| Nichole's | Two-year lease expires May 31, 2003. Annual base rent $5,400. |
| Novelty Shop | Three-year lease expires March 31, 2003. Annual base rent $31,632. |
| A & E Enterprises | Three-year lease expires March 31, 2003. Annual base rent $56,700. |
| The Great Escape | Five-year lease expires January 31, 2005; 16,000 square feet. Annual base rent $54,000. |
| Kutting Room | Month-to-month rental. Annual base rent $5,452. |
| Living Color | Three-year lease expires January 31, 2003. Annual base rent $4,800. |
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G. Pleasantburg Shopping Center (continued)
| Principal Tenants | Lease Arrangements |
| Act II | Month-to-month rental. Annual base rent $5,100. |
| King David Salon | Two-year lease expires June 30, 2003. Annual base rent $5,700. |
| Best Upholstering | Three-year lease expires November 30, 2002. Annual base rent $8,100. |
| Manifest Discs & Tapes | Five-year lease expires January 31, 2002. Annual base rent $52,500. |
| Borderlands | Three-year lease expires January 31, 2003. Annual base rent $22,920. |
| Half Moon Outfitters | Two-year lease expires May 31, 2002. Annual base rent $31,536. |
H. Wade Hampton Property, Wade Hampton Boulevard, Greenville, South Carolina; brick and masonry building divided into seven office spaces; 7,730 square feet; no mortgages or liens; property taxes for 2000--$6,757.
| Principal Tenants | Lease Arrangements |
| Mr. Curtis Hair Design | Three-year option expires August 31, 2001. Annual base rent $7,200. |
| Filter Queen | Three-year lease expires May 31, 2002. Annual base rent $6,171. |
| Check World | Three-year lease expires May 31, 2003. Annual base rent $8,280. |
| Jay Mac Photography | Three-year lease expires August 31, 2001. Annual base rent $6,600. |
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H. Wade Hampton Property (continued)
| Principal Tenants | Lease Arrangements |
| Beltone Hearing Aid Center | Three-year lease expires June 30, 2001. Annual base rent is $10,560. |
I. Willard Oil property, I-85, Spartanburg, South Carolina; block and masonry building; 4,000 square feet; adequate parking; originally constructed and acquired in 1986; no mortgages or liens; annual base rent $24,680; five-year lease expires May 15, 2001. Property taxes are paid by the tenant.
J. BP Oil Station, I-385 and Roper Mountain Road, Greenville, South Carolina; block and masonry building; 2,000 square feet; adequate parking; constructed in 1985 and acquired in 1986; no mortgages or liens; annual base rent $61,710; fifteen-year lease expires June 30, 2001; property taxes paid by tenant.
K. Laurens Road Property, Laurens Road, Greenville, South Carolina; block and masonry building; 3,000 square feet; adequate parking; constructed in 1973 and acquired in 1987; no mortgages or liens; property taxes for 2000--$2,076.
| Principal Tenants | Lease Arrangements |
| Playhouse Fashions | One-year lease expires April 30, 2001. Annual base rent $12,000. |
| Family Alteration Shop | Three-year lease expires April 30, 2001. Annual base rent $6,384. |
| Before-N-After Salon | Three-year lease expires May 31, 2003. Annual base rent - $7,590. |
L. Transit Drive Property, 216 Transit Drive, Greenville, South Carolina; brick building containing approximately 6,700 square feet on 200 x 250 feet tract of land; acquired in 1991; no mortgages or liens; annual base rent $35,940; three-year lease expires July 14, 2003; property taxes paid by tenant.
M. Lesco, Inc., Northway Court, Greer, South Carolina; block and masonry building; approximately 6,000 square feet; constructed and acquired in 1994; no mortgages or liens; seven-year lease expires April 30, 2001; annual base rent $30,000.
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N. Brake Experts, 544 North Church Street, Spartanburg, South Carolina; block and masonry building; approximately 3,500 square feet; acquired in 1994; no mortgages or liens, annual base rent $19,800, ten-year lease expires May 31, 2007; property taxes paid by tenant.
O. Tireama, Inc., 236 East Blackstock Road, Spartanburg, South Carolina; block and masonry building; approximately 3,000 square feet; acquired in 1994; no mortgages or liens; annual base rent $42,000; five-year lease expires April 30, 2005; property taxes paid by tenant.
P. Atlas Services, Inc., 90 Sunbelt Boulevard, Columbia, South Carolina; metal building containing approximately 20,000 square feet located on 2 acres; acquired in 1995; no mortgages or liens; annual base rent $81,600; ten-year lease expires January 12, 2005; property taxes paid by tenant.
Q. Atlas Services, Inc., Old Mill Road, Mauldin, South Carolina; brick and metal building containing approximately 17,500 square feet; acquired in 1996; no mortgages or liens; annual base rent $73,800; ten-year lease expires July 31, 2006; property taxes paid by tenant.
R. TruGreen Chemlawn, 255 Echelon Road, Greenville, South Carolina; brick and metal building containing approximately 17,500 square feet; acquired in 1999; mortgage balance at December 31, 2000 - $742,000; annual base rent - $89,700; eight-year lease expires November 14, 2007; property taxes paid by tenant.
S. Taylors Point Shopping Center - Wade Hampton Boulevard, Greenville, South Carolina; brick and masonry building containing 45,922 square feet located on 5.4 acres; acquired in 1995; mortgage balance at December 31, 2000 - $1,976,000; property taxes for 2000--$40,975.
| Principal Tenants | Lease Arrangements |
| Truett Automotive | Three-year lease expires July 30, 2002; 7,500 square feet. Annual base rent $42,000. |
| American General Finance | Three-year lease expires May 31, 2001. Annual base rent $23,352. |
| Partyland | Five-year lease expires July 31, 2004; 6,400 square feet. Annual base rent $66,000. |
| Brenda's Boutique | Three-year lease expires January 31, 2003. Annual base rent $11,220. |
| Foremost Insurance | One-year lease expires August 31, 2001. Annual base rent is $7,306. |
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S. Taylors Point Shopping Center (continued)
| Principal Tenants | Lease Arrangements |
| Hardee's Restaurant | Fifteen-year lease expires December 30, 2004. Annual base rent $22,200. |
| Harvey's Family Restaurant | Three-year lease expires April 30, 2002. Annual base rent $20,400. |
| Little Caesar's Pizza | One-year lease expires May 14, 2001. Annual base rent $19,680. |
| Impressions | Three-year lease expires April 30, 2002. Annual base rent $8,760. |
| Jackson Hewitt | One-year five-month lease expires April 30, 2001. Annual base rent $15,000. |
| Great Wall | Five-year lease expires October 31, 2001. Annual base rent $16,800. |
| TCBY Yogurt | Five-year lease expires January 31, 2005. Annual base rent $22,524. |
| All In a Basket | Two-year lease expires February 28, 2001. Annual base rent $10,500. |
| Med Four LLC | Three-year lease expires November 30, 2003. Annual base rent $66,000. |
| Midway Barber Shop | One-year lease expires March 31, 2001. Annual base rent $12,000. |
| On Deck Circle | Month-to-month rental. Annual base rent $8,100. |
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T. Potomac Place Shopping Center – 3214 Augusta Road, Greenville, South Carolina; brick and masonry building containing 23,486 square feet located on 2.3 acres; acquired in 1998, mortgage balance at December 31, 2000--$948,000; property taxes for 2000--$19,625.
| Principal Tenants | Lease Arrangements |
| Advance Auto | Five-year lease expires December 31, 2004; 6,574 square feet; annual base rent $39,444. |
| Corner Pub | Three-year lease expires June 30, 2001. 1,700 square feet; annual base rent $15,711. |
| Generation Gap | Three-year lease expires February 15, 2002; 1,700 square feet; annual base rent $11,025. |
| Goodwill Industries | Five-year lease expires November 30, 2002; 3,500 square feet; annual base rent $20,700. |
| Rainbow Rental | Five-year lease expires May 31, 2003; 7,512 square feet; annual base rent $31,926. |
| Sarah's Kitchen | Five-year lease expires November 30, 2003; 2,500 square feet; annual base rent $20,755. |
| Bell South | Year-to-year rental; annual base rent $900. |
Item 3. Legal Proceedings
There were no material pending legal proceedings by the Trust or against the Trust or its properties at December 31, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the fourth quarter of 2000.
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Part II
Item 5. Market for Common Equity and Related Security Holder Matters
The information under the caption "Common Stock Information" in the Annual Report is incorporated herein by reference.
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report is incorporated herein by reference.
Item 7. Financial Statements
The report of the independent auditors and financial statements contained in the Annual Report which are listed under Item 13 herein are incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None.
Part III
Item 9. Trustees and Executive Officers of the Registrant
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
The information called for by Items 9, 10, 11 and 12 is hereby incorporated by reference from registrant's definitive proxy statement.
Item 13. Exhibits and Reports on Form 8-K
a. Exhibits:
13 Annual report to stockholders
b. Report on Form 8-K - none
12
PAGE
Pursuant to the requirements of Section 13 or 15(d) 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.
PALMETTO REAL ESTATE TRUST
Date: March 17, 2001 by: /s/ James A. Boling
James A. Boling
Chairman of the Board of Trustees
Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURES | TITLE | DATE |
| /s/ William J. Ables William J. Ables |
President |
March 17, 2001 |
| /s/ Hunter Howard, Sr. Hunter Howard, Sr. |
Vice- President |
March 17, 2001 |
| /s/ Melvin K. Younts Melvin K. Younts |
Secretary/Treasurer |
March 17, 2001 |
| /s/ C. Laney Younts Laney Younts |
Trustee |
March 17, 2001 |
| /s/ Billy B. Huskey Billy B. Huskey |
Trustee |
March 17, 2001 |
| /s/ Hunter Howard, Jr. Hunter Howard, Jr. |
Trustee |
March 17, 2001 |
| /s/ R. Riggie Ridgeway R. Riggie Ridgeway |
Trustee |
March 17, 2001 |
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Palmetto Real Estate Trust
45 Liberty Lane
Greenville, South Carolina 29607
(864) 233-6007
PALMETTO REAL ESTATE TRUST
Annual Report
December 31, 2000
PAGE
PALMETTO REAL ESTATE TRUST
Annual Report
December 31, 2000
Contents
| Independent Auditors' Report | ......................................................................................................... | 1 |
| Audited Financial Statements | ||
| Balance Sheet | ......................................................................................................... | 2 |
| Statements of Income | ......................................................................................................... | 3 |
| Statements of Shareholders' Equity | ......................................................................................................... | 4 |
| Statements of Cash Flow | ......................................................................................................... | 5 |
| Notes to Financial Statements | ......................................................................................................... | 6-13 |
| Common Stock Information | ......................................................................................................... | 14 |
| Management's Discussion and Analysis of Financial Condition and Results of Operations |
......................................................................................................... | 15-16 |
| Directors and Officers | ......................................................................................................... | 17 |
PAGE
Independent Auditors' Report
To the Board of Directors and Shareholders
Palmetto Real Estate Trust
We have audited the accompanying balance sheet of Palmetto Real Estate Trust as of December 31, 2000, and the related statements of income, shareholders' equity and cash flows for the two years ended December 31, 2000. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Palmetto Real Estate Trust as of December 31, 2000, and the results of its operations and its cash flows for the two years ended December 31, 2000 in conformity with generally accepted accounting principles.
/s/ CRISP HUGHES EVANS LLP
Greenville, South Carolina
January 11, 2001
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PALMETTO REAL ESTATE TRUST
Balance Sheet
December 31, 2000
Assets
| Real estate investments, at cost: | |
| Rental property, net of accumulated depreciation | 9,430,274 |
| Timberlands | 24,864 |
| Total real estate investments | 9,455,138 |
| Other assets: | |
| Cash | 323,909 |
| Rent receivable | 3,679 |
| Note receivable | 187,933 |
| Deferred loan expense, net of accumulated amortization |
18,395 |
| Total other assets | 533,916 |
| Total assets | $ 9,989,054 |
Liabilities and Shareholders' Equity
| Liabilities: | |
| Mortgage notes payable | 6,630,000 |
| Accounts payable and accrued expenses | 142,161 |
| Dividend payable | 333,687 |
| Total liabilities | 7,105,848 |
| Shareholders' equity: | |
| Shares of beneficial interest, $1 par value; 5,000,000 shares authorized; 1,770,006 shares issued and outstanding |
1,770,006 |
| Capital surplus | 498,734 |
| Undistributed earnings | 614,466 |
| Total shareholders' equity | 2,883,206 |
| Total liabilities and shareholders' equity | 9,989,054 |
See accompanying notes to financial statements
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PALMETTO REAL ESTATE TRUST
Statements of Income
Years Ended December 31, 2000 and 1999
| 2000 | 1999 | |
| Income: | ||
| Rental income | 1,925,224 | 1,781,988 |
| Other income | 24,025 | 40,777 |
| Total income | 1,949,249 | 1,822,765 |
| Expenses: | ||
| Depreciation and amortization | 306,396 | 287,120 |
| Interest | 535,658 | 500,465 |
| Repairs and maintenance | 59,861 | 77,527 |
| Property taxes | 184,287 | 169,849 |
| General and administrative | 188,831 | 210,693 |
| Total expenses | 1,275,033 | 1,245,654 |
| Income from operations before income taxes | 674,216 | 577,111 |
| Gains on sale of real estate | 137,934 | 19,333 |
| Income before income taxes | 812,150 | 596,444 |
| Income tax expense | 7,200 | 6,300 |
| Net income | $804,950 | $590,144 |
| Basic earnings per share of beneficial interest | $0.45 | $0.33 |
See accompanying notes to financial statements
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PALMETTO REAL ESTATE TRUST
Statements of Shareholders' Equity
Years Ended December 31, 2000 and 1999
| Shares of Beneficial Interest $1 Par Value |
Capital |
Undistributed |
|||
| Shares | Amount | Surplus | Earnings | Total | |
| Balance at December 31, 1997 |
1,770,006 |
$ 1,770,006 |
$ 498,734 |
$ 478,152 |
$ 2,746,892 |
| Net income | - | - | - | 473,143 | 473,143 |
| Distributions to shareholders |
- |
- |
- |
(463,858) |
(463,858) |
| Balance at December 31, 1998 |
1,770,006 |
1,770,006 |
498,734 |
487,437 |
2,756,177 |
| Net income | - | - | - | 590,144 | 590,144 |
| Distributions to shareholders |
- |
- |
- |
(597,988) |
(597,988) |
| Balance at December 31, 1999 |
1,770,006 |
1,770,006 |
498,734 |
479,593 |
2,748,333 |
| Net income | - | - | - | 804,950 | 804,950 |
| Distributions to shareholders |
- |
- |
- |
(670,077) |
(670,077) |
| Balance at December 31, 2000 |
1,770,006 |
$1,770,006 |
$498,734 |
$614,466 |
$2,883,206 |
See accompanying notes to financial statements
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PALMETTO REAL ESTATE TRUST
Statements of Cash Flows
Years Ended December 31, 2000 and 1999
| 2000 | 1999 | |
| Cash from operating activities: | ||
| Net income | 804,950 | 590,144 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
||
| Depreciation expense | 299,993 | 282,104 |
| Amortization of deferred expenses | 6,403 | 5,016 |
| Gain on sale of real estate | (137,934) | (19,333) |
| (Increase) decrease in: | ||
| Rent receivable | 2,767 | 25,840 |
| Increase (decrease) in: | ||
| Accounts payable and accrued expenses | (4,022) |
6,874 |
| Net cash provided by operating activities | 972,157 |
890,645 |
| Cash from investing activities: | ||
| Property additions and improvements | (40,350) | (951,523) |
| Proceeds from sale of property | - | 9,959 |
| Collections on mortgage notes receivable | 13,770 |
13,785 |
| Net cash used in investing activities | (26,580) |
(927,779) |
| Cash from financing activities: | ||
| Deferred loan costs | - | (8,322) |
| Principal payments on long-term debt | (258,000) | (238,000) |
| Proceeds from long-term debt | - | 770,000 |
| Payment of dividends | (633,357) |
(517,733) |
| Net cash provided by financing activities | (891,357) |
5,945 |
| Net increase (decrease) in cash | 54,220 | (31,189) |
| Cash at beginning of year | 269,689 | 300,878 |
| Cash at end of year | 323,909 |
269,689 |
| Supplemental disclosures of cash flow information: | ||
| Cash paid during the year: | ||
| Interest | 536,390 |
501,198 |
| Income taxes | 7,407 |
6,004 |
| Noncash transactions: | ||
| Accrued dividends | 36,197 |
80,262 |
See accompanying notes to financial statements.
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PALMETTO REAL ESTATE TRUST
Notes to Financial Statements
December 31, 2000 and 1999
1. Summary of Significant Accounting Policies
Organization - Palmetto Real Estate Trust ("the Trust") has been organized as a qualified real estate investment trust under the Internal Revenue Code and the applicable state laws. The primary business of the Trust is the ownership, development and rental of various properties in upstate South Carolina. A substantial percentage of revenue is derived from tenants in one shopping center. The Trust generally does not require collateral for its receivables.
Investments in Rental Property - Investments in rental property are recorded at cost. Depreciation is computed using straight-line methods for financial reporting and straight-line and accelerated methods for income tax purposes. Estimated useful lives of assets range from five to forty years.
The Trust reviews the carrying value of long-lived assets if the facts and circumstances suggest that its recoverability may have been impaired. The Trust believes that no impairment of rental property exists at December 31, 2000.
Deferred Loan Expense - Costs associated with obtaining financing are amortized over the lives of the respective loans. Net deferred loan costs at December 31, 2000 amounted to:
| Deferred loan costs | $ 42,249 |
| Accumulated amortization | 23,854 |
| $ 18,395 |
Basic Earnings Per Share - Basic earnings per share were computed by dividing earnings available to shareholders by the weighted average number of shares outstanding during each year, or 1,770,006 shares for 2000 and 1999.
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PAGE
Income Taxes - The Trust files its tax returns under Sections 856-858 of the Internal Revenue Code and the applicable state laws as a real estate investment trust, and makes distributions to its shareholders of its real estate trust taxable income. As a qualified real estate investment trust, distribution of the Trust's taxable income and capital gains are taxed at the shareholder level. The Trust is required to distribute at least 95% of its taxable income other than capital gains to maintain its tax status. To avoid additional excise tax, an amount equal to the sum of 85% of ordinary income and 95% of capital gains must be distributed in the year it is earned. Differences in income for financial reporting and tax reporting result from utilization of different methods of calculating depreciation and differences in reporting gains on the sale of real estate.
Estimates - The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - The Trust includes cash equivalents, defined as all highly liquid instruments purchased with a maturity of three months or less, when reporting cash and cash flows. At times, cash balances may exceed federally insured amounts. The Trust has not experienced any losses on such accounts and management does not believe the Trust is exposed to any significant credit risk on cash and cash equivalents.
Revenue Recognition - Minimum rental income is recognized on a straight-line basis over the term of each lease. Unpaid rents are included in accounts receivable. Certain lease agreements contain provisions which provide reimbursement of real estate taxes and insurance. All rent and other receivables from tenants are due from commercial building tenants located in the properties.
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2. Investment in Rental Property and Gain on Sale of Real Estate
| Costs Capitalized Subsequent |
||||
| Initial Cost to Company | Acquisition | |||
| Description |
Encumbrances |
Land |
Building and Improvements |
Improvements |
| Aiken, SC | $ - | $ 24,500 | $ 33,123 | $ 1,350 |
| Cateran Family Restaurant - - | ||||
| Greenville, SC | - | 20,000 | 90,004 | - |
| Reidville Road Brake and Car | ||||
| Wash--Spartanburg, SC | - | 10,000 | 39,820 | - |
| Enigma Spinx--Greenville, SC | 627,200 | 350,000 | 670,000 | - |
| Venture Park--Greenville, SC | - | 11,000 | 81,017 | 12,140 |
| Pleasantburg Shopping Center- - | ||||
| Greenville, SC | 2,336,800 | 977,759 | 1,739,570 | 1,263,044 |
| Wade Hampton Property- - | ||||
| Greenville, SC | - | 40,000 | 200,000 | 21,814 |
| Willard Oil Property- - | ||||
| Spartanburg, SC | - | 55,984 | 79,140 | - |
| BP Oil--Greenville, SC | - | 100,000 | 328,736 | - |
| Laurens Road Property-- | ||||
| Greenville, SC | - | 16,235 | 82,261 | 3,656 |
| Transit Drive--Greenville, SC | - | 50,000 | 175,000 | 19,213 |
| Ace TV Rentals--Greenville, SC | - | 50,000 | 160,000 | - |
| Lesco--Greer, SC | - | 30,000 | 200,000 | - |
| Tireama--Spartanburg, SC | - | 26,000 | 234,000 | - |
| CV Master--Spartanburg, SC | - | 18,000 | 162,000 | 20,485 |
| Atlas Services--Columbia, SC | - | 75,000 | 670,000 | - |
| Taylors Point Shopping Center-- | ||||
| Greenville, SC | 1,976,000 | 500,000 | 2,300,000 | 1,398 |
| Atlas Services--Mauldin, SC | - | 50,000 | 621,000 | - |
| Potomac Place Shopping | ||||
| Center--Greenville, SC | 948,000 | 150,000 | 850,350 | - |
| Truegreen-Chemlawn-- | ||||
| Greenville, SC | 742,000 | 100,000 | 845,000 | - |
| Other | - |
- |
- |
119,373 |
| $ 6,630,000 |
$ 2,654,478 |
$ 9,561,021 |
$ 1,462,473 |
|
(1) Construction date unavailable
PAGE
| Life on Which | ||||||
| Gross Amount at Which | Depreciation in | |||||
| Carried at Close of Period |
|
Latest Income | ||||
| Building and | Accumulated | Date of | Date | Statement is | ||
| Land | Improvements | Total | Depreciation | Construction | Acquired | Computed |
| $ 24,500 | $ 34,473 | $ 58,973 | $ 33,881 | 1966 | 1965 | 33 |
| 20,000 | 90,004 | 110,004 | 90,004 | 1966 | 1974 | 25 |
| 10,000 | 39,820 | 49,820 | 39,820 | 1970 | 1970 | 25 |
| 350,000 | 670,000 | 1,020,000 | 312,241 | (1) | 1993 | 31/15 |
| 11,000 | 93,157 | 104,157 | 55,877 | 1977 | 1979 | 25 |
| 977,759 | 3,002,644 | 3,980,403 | 2,370,221 | 1965 | 1976 | 31 |
| 40,000 | 221,814 | 261814 | 145,419 | 1982 | 1983 | 25 |
| 55,984 | 79,140 | 135,124 | 40,010 | 1993 | 1986 | 15 |
| 100,000 | 328,736 | 428,736 | 287,069 | 1985 | 1986 | 25 |
| 16,235 | 85,917 | 102,152 | 35,785 | 1973 | 1988 | 31 |
| 50,000 | 194,213 | 244,213 | 60,586 | (1) | 1991 | 31 |
| 50,000 | 160,000 | 210,000 | 44,021 | (1) | 1992 | 31 |
| 30,000 | 200,000 | 230,000 | 32,917 | 1994 | 1994 | 39 |
| 26,000 | 234,000 | 260,000 | 36,563 | (1) | 1994 | 39 |
| 18,000 | 182,485 | 200,485 | 28,983 | (1) | 1994 | 39/20 |
| 75,000 | 670,000 | 745,000 | 87,938 | 1995 | 1995 | 40 |
| 500,000 | 2,301,398 | 2,801,398 | 292,292 | 1990 | 1995 | 40 |
| 50,000 | 621,000 | 671,000 | 67,275 | 1996 | 1996 | 40 |
| 150,000 | 850,350 | 1,000,350 | 47,862 | - | 1998 | 40 |
| 100,000 | 845,000 | 945,000 | 24,646 | 1999 | 1999 | 40 |
| - |
119,373 |
119,373 |
114,288 |
- | Various | 7 |
| $2,654,478 |
$11,023,494 |
$13,677,972 |
$4,247,698 |
|||
8
PAGE
The aggregate cost and accumulated depreciation for federal income tax purposes is $13,186,493 and $4,182,185 at December 31, 2000, respectively.
Activity in the Trust's investment in real estate for the two years in the period ended December 31, 2000, is summarized as follows:
| Years Ended December 31 | |||
| 2000 | 1999 | ||
| Investment in Real Estate | |||
| Balance at beginning of year | $13,637,622 | $12,686,096 | |
| Acquisitions | 40,350 | 951,526 | |
| Balance at end of year | $13,677,972 | $13,637,622 | |
| Accumulated Depreciation | |||
| Balance at beginning of year | $ 3,947,705 | $ 3,665,601 | |
| Depreciation expense | 299,993 | 282,104 | |
| Balance at end of year | $ 4,247,698 | $ 3,947,705 | |
In September 1994, the Trust sold property located at 201 North Cedar Street in Summerville, South Carolina (Piggly Wiggly) with a net book value of $83,972 for $262,944. The entire sale was financed by the Trust (See Note 3). The buyer's initial investment did not meet the criteria specified in Statement of Financial Accounting Standards No. 66 for recognition of the gain by the full accrual method, accordingly, the Trust recorded a deferred gain under the installment method of $178,972 for financial reporting purposes. Gain in the amount of $9,374 was recognized for 1999, based on payments received on the note receivable. For income tax purposes, the sale of the property was included as a part of a tax-free exchange and is not subject to either federal or state income taxes. The Trust acquired property on East Blackstock Road and North Church Street (Tireama, Inc.) in Spartanburg, South Carolina as part of this exchange.
During the year, the Trust recognized the remainder of the installment sale gain of $137,934 in accordance with Financial Accounting Standards No. 66, Accounting for Sales of Real Estate. Principal payments received through June 30, 2000 equal 25% of the sales value, which meets the requirement for the full accrual method of recognizing profit from real estate sales. Therefore, the Trust changed to the full accrual method and recognized the remaining profit in income. The recognition of this gain increased basic earnings per share of beneficial interest of approximately $.08 per share, but had no tax effect on the Trust.
9
PAGE
3. Mortgage Note Receivable
The Trust received a $262,944 mortgage note receivable in connection with the sale of its Summerville property (Piggly Wiggly) in 1994, which bears interest at 9% and is payable in monthly installments of $2,725, including interest through January 2009. The carrying amount of the mortgage note receivable was $187,933 at December 31, 2000.
4. Mortgage Notes Payable
Long-term debt at December 31, 2000 consists of the following:
| Term note payable in monthly payments of $2,000 | |
| plus interest through November 2004, at 8.00%; | |
| final balloon payment due December 2004: | |
| collateralized by rental property located on | |
| Echelon Road in Greenville, SC. | |
| $ 742,000 | |
| Term note payable in monthly payments of $2,000 | |
| plus interest through September 2003, at 7.75%; | |
| final balloon payment due October 2003; | |
| collateralized by rental property located on | |
| Augusta Road in Greenville, SC. | 948,000 |
| Term note payable in monthly payments of $2,275 | |
| plus interest through March 2003, at 7.75%; | |
| final balloon payment due April 2003; | |
| collateralized by rental property located on | |
| Haywood Road in Greenville, SC. | 627,200 |
| Term note payable in monthly payments of $8,225 | |
| plus interest through March 2003, at 7.75%; | |
| final balloon payment due April 2003; | |
| collateralized by rental property located on | |
| Pleasantburg Drive in Greenville, SC. | 2,336,800 |
| Term note payable in monthly payments of $7,000 | |
| plus interest through March 2003, at 7.75%; | |
| final balloon payment due April 2003; | |
| collateralized by rental property located on | |
| Wade Hampton Boulevard in Greenville, SC. | 1,976,000 |
| Total mortgage notes payable | $ 6,630,000 |
10
PAGE
Future maturities of debt at December 31, 2000 are as follows:
7. Long-Term Rental Leases
The Trust holds noncancelable long-term leases on certain of its rental properties. The minimum long-term rentals are summarized below:
| Year | Annual Base |
| 2001 | $ 1,700,241 |
| 2002 | 1,410,646 |
| 2003 | 1,014,915 |
| 2004 | 654,233 |
| 2005 | 322,334 |
| Thereafter | 513,691 |
| $ 5,616,060 |
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PAGE
Certain of the leases contain rentals contingent upon annual sales of the tenants and have renewal options for periods from one to five years. Contingent rentals recorded were approximately $-0- for 2000 and $3,000 for 1999. Leases with renewal options generally contain escalation clauses.
8. Distributions to Shareholders
Cash dividends of $633,357 and $517,733 were paid during the years ended December 31, 2000 and 1999, respectively. All dividends are distributions of earnings and not a return of capital.
9. Related Party Transactions
During the years ended December 31, 2000 and 1999, the Trust participated in transactions with several related parties including primarily expenditures for legal services, management services, maintenance on the Trust's rental properties and rental of real estate.
The following summarizes transactions with affiliates for the years ending December 31:
|
|
2000 |
1999 |
|
|
|
|
|
Rental income |
$ 3,500 |
$ 4,200 |
|
Repairs and maintenance |
7,200 |
7,200 |
|
General and administrative expenses |
37,000 |
34,375 |
10. Income Taxes
A summary of income tax expenses for the years ending December 31, 2000 and 1999 follows:
|
|
Federal |
State |
Total |
|
2000 |
|
|
|
|
Current |
$ 5,300 |
$ 1,900 |
$ 7,200 |
|
|
|
|
|
|
1999 |
|
|
|
|
Current |
$ 4,700 |
$ 1,600 |
$ 6,300 |
The difference between income before income taxes and taxable income is as follows:
|
|
2000 |
1999 |
|
|
|
|
|
Income before income taxes |
$ 812,150 |
$ 596,444 |
|
Differences: |
|
|
|
Gain on sale of real estate |
(137,934) |
(9,374) |
|
Depreciation |
40,680 |
35,017 |
|
Dividends paid deduction |
677,491 |
(580,145) |
|
Capital gain distribution |
- |
(9,959) |
|
Other |
(1,748) |
(1,449) |
|
Taxable income |
$ 35,657 |
$ 30,534 |
12
PAGE
The differences between actual income tax expense and the amount computed by applying the federal statutory income tax rate of 34% to income before income taxes are reconciled as follows:
|
|
2000 |
1999 |
|
Income taxes at the statutory rate |
$ 276,000 |
$ 202,000 |
|
State taxes net of federal benefits |
1,200 |
1,000 |
|
Surtax exemption |
(12,000) |
(12,000) |
|
Dividend paid deduction |
(258,000) |
(184,700) |
|
|
$ 7,200 |
$ 6,300 |
Common Stock Information
The Trust's shares of beneficial interest are not traded on an exchange. The approximate number of holders of shares of beneficial interest at December 31, 2000 was 1,102.
Dividends - The dividends declared quarterly in 2000 and 1999 are as follows:
| Per | ||
| 2000 | Total | Share |
| First Quarter | $ 106,200 | .06 |
| Second Quarter | 106,200 | .06 |
| Third Quarter | 123,990 | .07 |
| Fourth Quarter | 333,687 |
.19 |
| $ 670,077 |
.378 |
|
| Per | ||
| 1999 | Total | Share |
| First Quarter | $ 88,500 | .05 |
| Second Quarter | 106,200 | .06 |
| Third Quarter | 106,200 | .06 |
| Fourth Quarter | 297,088 |
.168 |
| $ 597,988 |
.338 |
The Trust expects to continue its policy of paying regular quarterly cash dividends, although there is no assurance as to future dividend amounts since they are dependent on future earnings and the financial condition of the Trust.
Market - There is no active market for the trading of the Trust's shares of beneficial interest besides the trading between shareholders and repurchase of shares by the Trust.
13
PAGE
Management's Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis that follows addresses the financial condition, changes in financial condition, and results of operations.
Financial Condition
There have been no significant changes in the Trust's liquidity or financial condition since December 31, 1999 other than scheduled debt repayments and dividend payments. At present, there are no large capital expenditures planned that would present a liquidity problem.
Results of Operations
Rental income has increased by approximately 8% in 2000 as a result of the acquisition of an additional property acquired in 1999 which produced additional rental income of approximately $143,000. The Trust intends to continue to invest in profitable income-producing properties that will command long-term leases.
Depreciation expense and property taxes increased for 2000 due to the purchase of new property.
The Trust recognized the remainder of the installment sale gain of $137,934 during 2000, in accordance with Financial Accounting Standards No. 66, Accounting for Sales of Real Estate. Principal payments received through June 30, 2000 equaled 25% of the sales value, which met the requirement for the full accrual method of recognizing profit from real estate sales. Therefore, the Trust changed to the full accrual method and recognized the remaining profit in income. The recognition of this gain increased basic earnings per share of beneficial interest $.08 per share but had no tax effect on the Trust.
Liquidity and Capital Resources
The primary liquid asset of the Trust is cash. Cash provided by operating activities was $972,270 in 2000 and $890,645 in 1999. The cash provided was used for the repayment of debt and payment of dividends. The Trust showed net cash provided in 2000 of $54,220 as compared to net cash used during 1999 of $31,189.
Because it holds noncancelable leases with most of its tenants, the Trust is reasonably assured of receiving the minimum funds necessary to operate effectively. Leases that are expiring within the next year are being negotiated and management does not expect a significant negative impact on liquidity. At this time, there are no significant vacant properties. Known future commitments of the Trust include the repayment of its debt and certain noncancelable tenant leases, both of which are described in the financial statements filed as part of this annual report. Past capital acquisitions and improvements have been financed through funds provided from operations and proceeds from long-term debt. Future capital expenditures are contingent upon the availability of funds as determined by the board of trustees. Dividend payments to shareholders are discretionary and require the board of trustees' approval. Future dividend payments are contingent upon the available funds and may be increased or decreased as is necessary.
As with all businesses, inflation has an effect on the operations of the Trust, particularly with maintenance costs and property taxes. The Trust is attempting to offset the effects of inflation by requiring tenants to pay for any increases in costs over their base year rentals.
14
PAGE
PALMETTO REAL ESTATE TRUST
BOARD OF TRUSTEES
December 31, 2000
OFFICERS
James A. Boling
Chairman of the Board of Trustees
William J. Ables
President
Hunter Howard, Sr.
Vice President
Melvin K. Younts
Secretary/Treasurer
C. Laney Younts
Trustee
Billy B. Huskey
Trustee
Hunter Howard, Jr.
Trustee
R. Riggie Ridgeway
Trustee
INDEPENDENT AUDITORS
Crisp Hughes Evans LLP
GENERAL COUNSEL
Younts, Alford, Brown & Goodson
15
PAGE