0000790817-95-000005.txt : 19950815 0000790817-95-000005.hdr.sgml : 19950815 ACCESSION NUMBER: 0000790817-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANYAN STRATEGIC REALTY TRUST CENTRAL INDEX KEY: 0000790817 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363375345 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15465 FILM NUMBER: 95562566 BUSINESS ADDRESS: STREET 1: 150 S WACKER DR STE 2900 STREET 2: SUITE 2900 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3125539800 FORMER COMPANY: FORMER CONFORMED NAME: BANYAN STRATEGIC LAND TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VMS STRATEGIC LAND TRUST DATE OF NAME CHANGE: 19910325 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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, 1995 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 0-15465 Banyan Strategic Realty Trust (Exact name of Registrant as specified in its charter) Massachusetts 36-3375345 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 South Wacker Drive, Chicago, IL 60606 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (312) 553-9800 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 . Shares of beneficial interest outstanding as of August 14, 1995: 10,471,102 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED) Consolidated Consolidated ASSETS 1995 1994 Cash and Cash Equivalents $ 16,338,942 $ 14,769,170 Interest Receivable on Investments 311,441 82,180 Interest Receivable on Mortgage Loans 55,073 55,106 Accounts Receivable 161,586 107,672 Due from Affiliates --- 730,229 Investment Securities --- 1,017,236 ------------ ------------ 16,867,042 16,761,593 ------------ ------------ Mortgage Loans Receivable (Net of unamortized discount of $1,631,204 and $1,808,716, respectively) 5,275,977 5,136,229 Investment in Real Estate, at cost: Land 7,144,994 6,182,494 Building 36,108,019 33,152,589 Building Improvements 2,070,993 1,863,219 ------------ ------------ 45,324,006 41,198,302 Less: Accumulated Depreciation (1,529,115) (1,036,890) ------------ ------------ 43,794,891 40,161,412 ------------ ------------ Investment in Real Estate Ventures 9,204,834 10,697,791 Deferred Financing Costs (Net of Accumulated Amortization of $118,484 and $21,411, respectively) 794,847 793,649 Other Assets 759,464 533,677 ------------ ------------ Total Assets $ 76,697,055 $ 74,084,351 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts Payable and Accrued Expenses $ 563,315 $ 802,335 Accrued Real Estate Taxes 695,607 666,567 Mortgage Loans Payable 10,475,040 7,900,695 Bond Payable 5,500,000 5,500,000 Accrued Interest Payable --- 26,005 Unearned Revenue 19,049 39,198 Security Deposit Liability 276,108 203,659 Other Liability 686,169 290,331 ------------ ------------ Total Liabilities 18,215,288 15,428,790 ------------ ------------ Minority Interest in Consolidated Partnerships 579,151 214,849 Shareholders' Equity Shares of Beneficial Interest, No Par Value, Unlimited Authorization; 11,993,751 Shares Issued 106,662,313 106,662,313 Accumulated Deficit (41,393,748) (40,855,652) Treasury Shares at Cost, 1,522,649 Shares (7,365,949) (7,365,949) ------------ ------------ Total Shareholders' Equity 57,902,616 58,440,712 ------------ ------------ Total Liabilities and Share- holders' Equity $ 76,697,055 $ 74,084,351 ============ ============ Book Value Per Share of Bene- ficial Interest (10,471,102 Shares Outstanding) $ 5.53 $ 5.58 ============ ============ The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION) JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED) Supplemental Information Investment Investment Activities Activities ASSETS 1995 1994 Cash and Cash Equivalents $ 13,893,541 $ 13,077,182 Interest Receivable on Investments 242,216 58,422 Interest Receivable on Mortgage Loans 55,073 55,106 Accounts Receivable 161,586 107,672 Due from Affiliates --- --- Investment Securities --- 1,017,236 ------------ ------------ 14,352,416 14,315,618 ------------ ------------ Mortgage Loans Receivable (Net of unamortized discount of $1,631,204 and $1,808,716, respectively) 5,275,977 5,136,229 Investment in Real Estate, at cost: Land 7,144,994 6,182,494 Building 36,108,019 33,152,589 Building Improvements 2,070,993 1,863,219 ------------ ------------ 45,324,006 41,198,302 Less: Accumulated Depreciation (1,529,115) (1,036,890) ------------ ------------ 43,794,891 40,161,412 ------------ ------------ Investment in Real Estate Ventures --- --- Deferred Financing Costs (Net of Accumulated Amortization of $118,484 and $21,411, respectively) 794,847 793,649 Other Assets 628,632 408,353 ------------ ------------ Total Assets $ 64,846,763 $ 60,815,261 ============ ============ LIABILITIES Liabilities Accounts Payable and Accrued Expenses $ 337,481 $ 621,966 Accrued Real Estate Taxes 695,607 666,567 Mortgage Loans Payable 10,475,040 7,900,695 Bond Payable 5,500,000 5,500,000 Accrued Interest Payable --- 26,005 Unearned Revenue 19,049 39,198 Security Deposit Liability 276,108 203,659 Other Liability --- --- ------------ ------------ Total Liabilities 17,303,285 14,958,090 ------------ ------------ Minority Interest in Consolidated Partnerships 579,151 214,849 The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION) JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED) Supplemental Information Foreclosed Foreclosed Activities Activities ASSETS 1995 1994 Cash and Cash Equivalents $ 2,445,401 $ 1,691,988 Interest Receivable on Investments 69,225 23,758 Interest Receivable on Mortgage Loans --- --- Accounts Receivable --- --- Due from Affiliates --- 730,229 Investment Securities --- --- ------------ ------------ 2,514,626 2,445,975 ------------ ------------ Mortgage Loans Receivable --- --- Investment in Real Estate, at cost: Land --- --- Building --- --- Building Improvements --- --- ------------ ------------ --- --- Less: Accumulated Depreciation --- --- ------------ ------------ --- --- ------------ ------------ Investment in Real Estate Ventures 9,204,834 10,697,791 Deferred Financing Costs --- --- Other Assets 130,832 125,324 ------------ ------------ Total Assets $ 11,850,292 $ 13,269,090 ============ ============ LIABILITIES Liabilities Accounts Payable and Accrued Expenses $ 225,834 $ 180,369 Accrued Real Estate Taxes --- --- Mortgage Loans Payable --- --- Bond Payable --- --- Accrued Interest Payable --- --- Unearned Revenue --- --- Security Deposit Liability --- --- Other Liability 686,169 290,331 ------------ ------------ Total Liabilities 912,003 470,700 ------------ ------------ Minority Interest in Consolidated Partnerships --- --- The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Consolidated Consolidated INCOME 1995 1994 Income From Property Operating Activities: Industrial $ 1,195,056 $ 1,021,901 Residential 1,639,134 1,555,386 Commercial 1,416,068 776,350 ----------- ----------- Total Income From Property Operating Activities 4,250,258 3,353,637 ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans 501,077 471,234 Income on Investments 416,237 187,321 ----------- ----------- Total Income From Lending and Investing Activities 917,314 658,555 ----------- ----------- Total Income 5,167,572 4,012,192 ----------- ----------- EXPENSES Expenses from Property Operating Activities: Operating Property Expenses 227,727 151,048 Repairs and Maintenance 489,478 358,595 Real Estate Taxes 456,427 384,008 Interest Expense 437,138 158,481 Property Management Fees 174,837 128,876 Payroll Expense 200,280 231,976 Utilities Expense 319,677 246,371 Depreciation and Amortization 507,484 383,230 ----------- ----------- Total Expenses From Property Operating Activities 2,813,048 2,042,585 ----------- ----------- Other Expenses: Shareholder Expenses 115,904 124,027 Trustees' Fees, Expenses and Insurance 217,945 204,868 Other Professional Fees 101,472 109,117 General and Administrative 773,650 612,573 Amortization of Deferred Loan Fees and Financing Costs 112,796 24,548 Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses (155,834) (134,986) ----------- ----------- Total Other Expenses 1,165,933 940,147 ----------- ----------- Total Expenses 3,978,981 2,982,732 ----------- ----------- Income (Loss) Before Minority Interest and Income (Loss) from Operations of Real Estate Ventures 1,188,591 1,029,460 Minority Interest in Consolidated Partnerships (24,463) (18,646) Income (Loss) from Operations of Real Estate Ventures 392,600 (25,151) ----------- ----------- Net Income (Loss) $ 1,556,728 $ 985,663 =========== =========== Earnings (Loss) Per Share of Beneficial Interest (10,471,102 Shares Outstanding) $ 0.15 $ 0.09 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Supplemental Information Investment Investment Activities Activities 1995 1994 INCOME Income From Property Operating Activities: Industrial $1,195,056 $1,021,901 Residential 1,639,134 1,555,386 Commercial 1,416,068 776,350 ----------- ---------- Total Income From Property Operating Activities 4,250,258 3,353,637 ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans 501,077 471,234 Income on Investments 317,250 121,284 ----------- ----------- Total Income From Lending and Investing Activities 818,327 592,518 ----------- ----------- Total Income 5,068,585 3,946,155 ----------- ----------- EXPENSES Expenses From Property Operating Activities: Operating Property Expenses 227,727 151,048 Repairs and Maintenance 489,478 358,595 Real Estate Taxes 456,427 384,008 Interest Expense 437,138 158,481 Property Management Fees 174,837 128,876 Payroll Expense 200,280 231,976 Utilities Expense 319,677 246,371 Depreciation and Amortization 507,484 383,230 ----------- ----------- Total Expenses From Property Operating Activities 2,813,048 2,042,585 ----------- ----------- Other Expenses: Shareholder Expenses 25,271 18,125 Trustees' Fees, Expenses and Insurance 13,000 12,312 Other Professional Fees 62,236 72,931 General and Administrative 540,981 447,273 Amortization of Deferred Loan Fees and Financing Costs 112,796 24,548 Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- --- ----------- ----------- Total Other Expenses 754,284 575,189 ----------- ----------- Total Expenses 3,567,332 2,617,774 ----------- ----------- Income (Loss) Before Minority Interest and Income (Loss) from Operations of Real Estate Ventures 1,501,253 1,328,381 Minority Interest in Consolidated Partnerships (24,463) (18,646) Income (Loss) from Operations of Real Estate Ventures --- --- ----------- ----------- Net Income (Loss) $ 1,476,790 $ 1,309,735 =========== =========== Earnings (Loss) Per Share of Beneficial Interest (10,471,102 Shares Outstanding) $ 0.14 $ 0.12 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Supplemental Information Foreclosed Foreclosed Activities Activities 1995 1994 INCOME Income From Property Operating Activities: Industrial $ --- $ --- Residential --- --- Commercial --- --- ----------- ----------- Total Income From Property Operating Activities --- --- ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans --- --- Income on Investments 98,987 66,037 ----------- ----------- Total Income From Lending and Investing Activities 98,987 66,037 ----------- ----------- Total Income 98,987 66,037 ----------- ----------- EXPENSES Expenses From Property Operating Activities: Operating Property Expenses --- --- Repairs and Maintenance --- --- Real Estate Taxes --- --- Interest Expense --- --- Property Management Fees --- --- Payroll Expenses --- --- Utilities Expense --- --- Depreciation and Amortization --- --- ----------- ----------- Total Expenses From Property Operating Activities --- --- ----------- ----------- Other Expenses: Shareholder Expenses 90,633 105,902 Trustees' Fees, Expenses and Insurance 204,945 192,556 Other Professional Fees 39,236 36,186 General and Administrative 232,669 165,300 Amortization of Deferred Loan Fees and Financing Costs --- --- Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses (155,834) (134,986) ----------- ----------- Total Other Expenses 411,649 364,958 ----------- ----------- Total Expenses 411,649 364,958 ----------- ----------- Income (Loss) Before Minority Interest and Income (Loss) from Operations of Real Estate Ventures (312,662) (298,921) Minority Interest in Consolidated Partnerships --- --- Income (Loss) from Operations of Real Estate Ventures 392,600 (25,151) ----------- ----------- Net Income (Loss) $ 79,938 $ (324,072) =========== ============ Earnings (Loss) Per Share of Beneficial Interest (10,471,102 Shares Outstanding) $ 0.01 $ (0.03) ============ ============ The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Consolidated Consolidated INCOME 1995 1994 Income From Property Operating Activities: Industrial $ 608,659 $ 524,937 Residential 848,911 810,592 Commercial 729,940 701,677 ----------- ----------- Total Income From Property Operating Activities 2,187,510 2,037,206 ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans 254,257 237,284 Income on Investments 216,330 64,768 ----------- ----------- Total Income From Lending and Investing Activities 470,587 302,052 ----------- ----------- Total Income 2,658,097 2,339,258 ----------- ----------- EXPENSES Expenses from Property Operating Activities: Operating Property Expenses 129,281 76,691 Repairs and Maintenance 318,819 209,101 Real Estate Taxes 244,444 200,410 Interest Expense 215,911 79,030 Property Management Fees 82,468 72,410 Payroll Expense 92,679 111,181 Utilities Expense 153,469 145,219 Depreciation and Amortization 256,125 236,365 ----------- ----------- Total Expenses From Property Operating Activities 1,493,196 1,130,407 ----------- ----------- Other Expenses: Shareholder Expenses 72,356 66,082 Trustees' Fees, Expenses and Insurance 108,376 102,874 Other Professional Fees 42,949 34,477 General and Administrative 370,348 287,167 Amortization of Deferred Loan Fees and Financing Costs 56,995 12,324 Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- --- ----------- ----------- Total Other Expenses 651,024 502,924 ----------- ----------- Total Expenses 2,144,220 1,633,331 ----------- ----------- Income (Loss) Before Minority Interest and Income (Loss) from Operations of Real Estate Ventures 513,877 705,927 Minority Interest in Consolidated Partnerships (7,521) (13,722) Income (Loss) from Operations of Real Estate Ventures 365,977 (25,923) ----------- ----------- Net Income (Loss) $ 872,333 $ 666,282 =========== =========== Earnings (Loss) Per Share of Beneficial Interest (10,471,102 Shares Outstanding) $ 0.08 $ 0.06 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Supplemental Information Investment Investment Activities Activities 1995 1994 INCOME Income From Property Operating Activities: Industrial $ 608,659 $ 524,937 Residential 848,911 810,592 Commercial 729,940 701,677 ----------- ---------- Total Income From Property Operating Activities 2,187,510 2,037,206 ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans 254,257 237,284 Income on Investments 199,536 40,216 ----------- ----------- Total Income From Lending and Investing Activities 453,793 277,500 ----------- ----------- Total Income 2,641,303 2,314,706 ----------- ----------- EXPENSES Expenses From Property Operating Activities: Operating Property Expenses 129,281 76,691 Repairs and Maintenance 318,819 209,101 Real Estate Taxes 244,444 200,410 Interest Expense 215,911 79,030 Property Management Fees 82,468 72,410 Payroll Expense 92,679 111,181 Utilities Expense 153,469 145,219 Depreciation and Amortization 256,125 236,365 ----------- ----------- Total Expenses From Property Operating Activities 1,493,196 1,130,407 ----------- ----------- Other Expenses: Shareholder Expenses 17,686 9,205 Trustees' Fees, Expenses and Insurance 7,000 5,687 Other Professional Fees 31,754 20,977 General and Administrative 267,816 221,941 Amortization of Deferred Loan Fees and Financing Costs 56,995 12,324 Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- --- ----------- ----------- Total Other Expenses 381,251 270,134 ----------- ----------- Total Expenses 1,874,447 1,400,541 ----------- ----------- Income (Loss) Before Minority Interest and Income (Loss) from Operations of Real Estate Ventures 766,856 914,165 Minority Interest in Consolidated Partnerships (7,521) (13,722) Income (Loss) from Operations of Real Estate Ventures --- --- ----------- ----------- Net Income (Loss) $ 759,335 $ 900,443 =========== =========== Earnings (Loss) Per Share of Beneficial Interest (10,471,102 Shares Outstanding) $ 0.07 $ 0.08 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Supplemental Information Foreclosed Foreclosed Activities Activities 1995 1994 INCOME Income From Property Operating Activities: Industrial $ --- $ --- Residential --- --- Commercial --- --- ----------- ----------- Total Income From Property Operating Activities --- --- ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans --- --- Income on Investments 16,794 24,552 ----------- ----------- Total Income From Lending and Investing Activities 16,794 24,552 ----------- ----------- Total Income 16,794 24,552 ----------- ----------- EXPENSES Expenses From Property Operating Activities: Operating Property Expenses --- --- Repairs and Maintenance --- --- Real Estate Taxes --- --- Interest Expense --- --- Property Management Fees --- --- Payroll Expenses --- --- Utilities Expense --- --- Depreciation and Amortization --- --- ----------- ----------- Total Expenses From Property Operating Activities --- --- ----------- ----------- Other Expenses: Shareholder Expenses 54,670 56,877 Trustees' Fees, Expenses and Insurance 101,376 97,187 Other Professional Fees 11,195 13,500 General and Administrative 102,532 65,226 Amortization of Deferred Loan Fees and Financing Costs --- --- Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- --- ----------- ----------- Total Other Expenses 269,773 232,790 ----------- ----------- Total Expenses 269,773 232,790 ----------- ----------- Income (Loss) Before Minority Interest and Income (Loss) from Operations of Real Estate Ventures (252,979) (208,238) Minority Interest in Consolidated Partnerships --- --- Income (Loss) from Operations of Real Estate Ventures 365,977 (25,923) ----------- ----------- Net Income (Loss) $ 112,998 $ (234,161) =========== ============ Earnings (Loss) Per Share of Beneficial Interest (10,471,102 Shares Outstanding) $ 0.01 $ (0.02) ============ ============ The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
Shares of Beneficial Interest Accumulated Treasury Shares Amount Deficit Shares Total Shareholders' Equity, December 31, 1994 11,993,751 $106,662,313 $(40,855,652) $(7,365,949) $58,440,712 Net Income --- --- 1,556,728 --- 1,556,728 Dividends Paid --- --- (2,094,824) --- (2,094,824) ----------- ------------ ------------ ----------- ----------- Shareholders' Equity, June 30, 1995 11,993,751 $106,662,313 $(41,393,748) $(7,365,949) $57,902,616 =========== ============ ============ =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Consolidated Consolidated 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 1,556,728 $ 985,663 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Amortization of Premium on Investment Securities 10,596 66,474 Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses (155,834) --- Depreciation and Amortization 620,280 407,778 Amortization of Discount on Mortgage Loans Receivable (177,512) (147,364) Net (Income) Loss From Operation of Real Estate Ventures (392,600) 25,151 Minority Interest Participation in Consolidated Partnerships 24,463 18,646 Net Change In: Interest Receivable on Mortgage Loans and Investments (229,228) 67,136 Accounts Receivable (53,914) 125,517 Due from Affiliates --- --- Other Assets (220,062) (70,295) Accounts Payable and Accrued Expenses (239,020) (188,604) Accrued Interest Payable (26,005) (280) Accrued Real Estate Tax Payable (25,509) 366,214 Unearned Revenue (20,149) 15,705 Security Deposit Liability 11,050 16,533 ----------- ----------- Net Cash Provided By (Used In) Operating Activities 683,284 1,688,274 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Real Estate Asset (3,917,930) (18,710,083) Proceeds From Sale of Investment in Real Estate Venture 1,940,039 --- Additions to Investment in Real Estate (207,774) (284,472) Payment of Liabilities Assumed at Acquisition of Real Estate Asset 94,964 (367,375) Other Liability 395,838 --- Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses 155,834 --- Purchase of Investment Securities (1,493,360) --- Proceeds From Sale and Maturities of Investment Securities 2,500,000 14,363,649 Principal Collections on Mortgage Loans Receivable 22,041 15,806 Investment in Mortgage Loans Receivable --- (4,770) Due from Affiliates 730,229 (258,026) Distribution From (Investment In) Real Estate Ventures (54,482) (25,436) Transfer of Equity From Sale of Investment in Real Estate Venture --- --- Minority Interest Share of Real Estate Investments 339,839 (37,178) ----------- ----------- Net Cash Provided By (Used In) Investing Activities 505,238 (5,307,885) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Mortgage Loan Payable 2,650,000 Deferred Financing Costs (98,271) --- Reductions to Deferred Financing Costs --- 5,864 Principal Payments on Mortgage Loans Payable (75,655) (41,985) Dividends Paid to Shareholders (2,094,824) (2,094,220) ----------- ----------- Net Cash Provided By (Used In) Financing Activities 381,250 (2,130,341) ----------- ----------- Net Increase (Decrease) In Cash and Cash Equivalents 1,569,772 (5,749,952) Cash and Cash Equivalents at Beginning of Period 14,769,170 13,621,820 ----------- ----------- Cash and Cash Equivalents at End of Period $16,338,942 $ 7,871,868 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Investment Investment Activities Activities 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 1,476,790 $ 1,309,735 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Amortization of Premium on Investment Securities 10,596 66,474 Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- --- Depreciation and Amortization 620,280 407,778 Amortization of Discount on Mortgage Loans Receivable (177,512) (147,364) Net (Income) Loss From Operation of Real Estate Ventures --- --- Minority Interest Participation in Consolidated Partnerships 24,463 18,646 Net Change In: Interest Receivable on Mortgage Loans and Investments (183,761) 67,094 Accounts Receivable (53,914) 125,517 Due From Affiliates --- --- Other Assets (214,554) (72,273) Accounts Payable and Accrued Expenses (284,485) (186,155) Accrued Interest Payable (26,005) (280) Accrued Real Estate Tax Payable (25,509) 366,214 Unearned Revenue (20,149) 15,705 Security Deposit Liability 11,050 16,533 ------------ ----------- Net Cash Provided By (Used In) Operating Activities 1,157,290 1,987,624 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Real Estate Asset (3,917,930) (18,710,083) Proceeds from Sale of Invest- ment in Real Estate Venture --- --- Additions to Investment in Real Estate (207,774) (284,472) Payment of Liabilities Assumed at Acquisition of Real Estate Asset 94,964 (367,375) Other Liability --- --- Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- --- Purchase of Investment Securities (1,493,360) --- Proceeds From Sale and Maturities of Investment Securities 2,500,000 14,363,649 Principal Collections on Mortgage Loans Receivable 22,041 15,806 Investment in Mortgage Loans Receivable --- (4,770) Due from Affiliates --- --- Distribution From (Investment In) Real Estate Ventures --- --- Transfer of Equity From Sale of Investment in Real Estate Venture 1,940,039 --- Minority Interest Share of Real Estate Investments 339,839 (37,178) ----------- ----------- Net Cash Provided By (Used In) Investing Activities (722,181) (5,024,423) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Mortgage Loan Payable 2,650,000 --- Deferred Financing Costs (98,271) --- Reductions to Deferred Financing Costs --- 5,864 Principal Payments on Mortgage Loans Payable (75,655) (41,985) Dividends Paid to Shareholders (2,094,824) (2,094,220) ----------- ----------- Net Cash Provided By (Used In) Financing Activities 381,250 (2,130,341) ----------- ----------- Net Increase (Decrease) In Cash and Cash Equivalents 816,359 (5,167,140) Cash and Cash Equivalents at Beginning of Period 13,077,182 10,332,184 ----------- ----------- Cash and Cash Equivalents at End of Period $13,893,541 $ 5,165,044 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) Foreclosed Foreclosed Activities Activities 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 79,938 $ (324,072) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Amortization of Premium on Investment Securities --- --- Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses (155,834) --- Depreciation and Amortization --- --- Amortization of Discount on Mortgage Loans Receivable --- --- Net (Income) Loss From Operation of Real Estate Ventures (392,600) 25,151 Minority Interest Participation in Consolidated Partnerships --- --- Net Change In: Interest Receivable on Mortgage Loans and Investments (45,467) 42 Accounts Receivable --- --- Due from Affiliates --- --- Other Assets (5,508) 1,978 Accounts Payable and Accrued Expenses 45,465 (2,449) Accrued Interest Payable --- --- Accrued Real Estate Tax Payable --- --- Unearned Revenue --- --- Security Deposit Liability --- --- ----------- ----------- Net Cash Provided By (Used In) Operating Activities (474,006) (299,350) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Real Estate Asset --- --- Proceeds From Sale of Investment in Real Estate Venture 1,940,039 --- Additions to Investment in Real Estate --- --- Payment of Liabilities Assumed at Acquisition of Real Estate Asset --- --- Other Liability 395,838 --- Recovery of Losses on Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses 155,834 --- Purchase of Investment Securities --- --- Proceeds From Sale and Maturities of Investment Securities --- --- Principal Collections on Mortgage Loans Receivable --- --- Investment in Mortgage Loans Receivable --- --- Due from Affiliates 730,229 (258,026) Distribution From (Investment In) Real Estate Ventures (54,482) (25,436) Transfer of Equity From Sale of Investment in Real Estate Venture (1,940,039) --- Minority Interest Share of Real Estate Investments --- --- ----------- ----------- Net Cash Provided By (Used In) Investing Activities 1,227,419 (283,462) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgage Loan Payable --- --- Deferred Financing Costs --- --- Reductions to Deferred Financing Costs --- --- Principal Payments on Mortgage Loans Payable --- --- Dividends Paid to Shareholders --- --- ----------- ----------- Net Cash Provided By (Used In) Financing Activities --- --- ----------- ----------- Net Increase (Decrease) In Cash and Cash Equivalents 753,413 (582,812) Cash and Cash Equivalents at Beginning of Period 1,691,988 3,289,636 ----------- ----------- Cash and Cash Equivalents at End of Period $2,445,401 $ 2,706,824 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1995 (UNAUDITED) Readers of this quarterly report should refer to Banyan Strategic Realty Trust's (the "Trust's") audited consolidated financial statements for the year ended December 31, 1994 which are included in the Trust's 1994 Annual Report and Form 10-K, as certain footnote disclosures which would substantially duplicate those contained in such audited statements have been omitted from this report. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Trust, its wholly-owned subsidiaries and its controlled partnerships. All intercompany balances and transactions have been eliminated in consolidation. Investment in Real Estate Ventures are accounted for on the equity method. FINANCIAL STATEMENT PRESENTATION Effective January 1, 1993, the Trust elected to provide supplemental financial information in a format that segregates financial condition, results of operations and cash flows between the Trust's new investments in real estate assets (the "Investment Activities") and the management of the real estate assets acquired in prior years through foreclosure (the "Foreclosed Activities"). Certain reclassifications have been made to the previously reported 1994 financial statements in order to provide comparability with the 1995 consolidated financial statements. These reclassifications have not changed the 1994 operating results. In the opinion of management, all adjustments necessary for a fair presentation have been made to the accompanying consolidated financial statements as of June 30, 1995 and for the three and six months ended June 30, 1995 and 1994. These adjustments made to the financial statements, as presented, are all of a normal recurring nature to the Trust. 2. INVESTMENT IN REAL ESTATE WILLOWBROOK INDUSTRIAL COURT PROPERTY On June 16, 1995, Banyan/Morgan Milwaukee Limited Partnership ("BMMLP"), a joint venture between a subsidiary of the Trust, which is the general partner, and Morgan Realty Partners ("Morgan"), acquired the Willowbrook Industrial Court property (the "Willowbrook Property") which consists of a three-building office/warehouse complex with a total of approximately 85,000 square feet of leasable space located in the metropolitan Chicago area for a purchase price of $4,050,000, including liabilities assumed at acquisition of approximately $132,000. The Trust and Morgan contributed additional capital of approximately $1,030,000 and $370,000 to BMMLP for their 85% and 15% ownership interest in BMMLP, respectively, including $75,000 in reserves for property improvements and lease-up. The acquisition was made subject to a nonrecourse first mortgage loan collateralized by the property in the amount of $2,650,000 which bears interest at a fixed rate of 8.5%, matures on July 1, 2002, and requires monthly payments of principal and interest based upon a twenty-two and a half year amortization schedule. The loan requires a balloon payment for the remaining unpaid principal balance upon its maturity. Upon acquisition, the Willowbrook Property was 93% leased. The terms of the BMMLP Partnership Agreement as originally established pursuant to the acquisitions of the Milwaukee Industrial and the Elmhurst Metro Court properties were modified effective July 1, 1995 as a result of the Willowbrook Property acquisition by BMMLP. Pursuant to the revised terms of the modified BMMLP Partnership Agreement, any excess cash flow from operations, after the Trust and Morgan each receives their 12% and 11% preferred return, respectively, on contributed equity, will then be split 85% to the Trust and 15% to Morgan. The modification to the Trust's excess cash flow percentage is the result of the increase in additional equity due to Morgan's contribution of approximately $370,000 pursuant to the Willowbrook Property acquisition. The results of operations for the Willowbrook Property are included in the Trust's investment activities for financial reporting purposes. The BMMLP ownership percentage changes which occurred upon acquisition of the Willowbrook Property, as mentioned above, will become effective July 1, 1995 for financial reporting purposes. NORTHLAKE TOWER SHOPPING CENTER On July 28, 1995, BSRT/M&J Northlake Limited Partnership ("BMJNLP"), a joint venture between a subsidiary of the Trust and M&J Wilkow Retail Ltd. ("Wilkow"), acquired a shopping center known as the Northlake Tower Shopping Center ("Northlake Property") located in northeast suburban Atlanta, Georgia for a purchase price of approximately $17,250,000. The Northlake Property consists of six structures containing approximately 322,000 rentable square feet which was built in 1984. The Trust contributed $6,000,000 to BMJNLP for an approximate 80% interest, while Wilkow contributed approximately $1,500,000 for the remaining 20% interest, including approximately $600,000 in reserves held by BMJNLP for property improvements, lease-up and other closing prorations. The Northlake Property was acquired pursuant to a ground lease with a remaining term of sixty-two years. The ground lease requires annual lease payments of $600,000 through October 4, 2007 plus 7% of annual gross rental income in excess of $2,000,000 from the operations of the Northlake Property. The ground lease also requires the payment of expenses incurred on the Northlake site, including real estate taxes. The Northlake Property was acquired by BMJNLP pursuant to a non-recourse first mortgage loan provided for by the seller in the amount of $10,350,000. The mortgage loan requires monthly payments of interest only at a fixed rate of 8.5% per annum. The mortgage loan matures on July 1, 2005 and may be repaid at any time during its term without any prepayment penalty. Pursuant to the terms of the BMJNLP partnership agreement, cash flow from operations will be distributed first to the Trust until it has received a 12% cumulative return on its equity contribution and then Wilkow will receive a 12% cumulative return on its contributed equity. Any excess cash flow will then be split pro-rata to the Trust and Wilkow based on their respective capital contributions. Proceeds from the sale or refinancing of the Northlake Property, after the payment of any debt or expense associated with the sale or refinancing, will be first distributed to the Trust to the extent that the 12% annual preferred return has not been received. Next, to the Trust and Wilkow on a pro-rata basis in an amount equal to their respective equity contributions. Thereafter, to Wilkow to the extent that its 12% annual preferred return has not been received. In the event there are any remaining proceeds and the average annual return to the Trust during the period that the BMJNLP owned the Northlake Property is equal to or greater than 15%, Wilkow will then receive an additional 10% increase on their capital percentage regarding the distribution of the remaining proceeds. The results of operations for the Northlake Property will be included in the Trust's Investment Activities for financial reporting purposes. 3. INVESTMENT IN JOINT VENTURES The summary income statement information for the H Street Assemblage and Plaza at Westminster unconsolidated ventures for the six months ended June 30, 1995 and 1994 is as follows: 1995 1994 Total Revenues $ 578,253 $ 745,934 ========== =========== Net Income $1,371,455 $ 84,495 ========== =========== The increase in the net income for the six months ended June 30, 1995 as compared to the same period in 1994 is primarily due to the sale of the Trust's interest in the Plaza at Westminster ("Westminster") property on June 22, 1995 which resulted in an estimated gain on disposition of approximately $1,363,000. (See below for further details). PLAZA AT WESTMINSTER The Trust owned a 30.7% participation interest in the Westminster property. On June 22, 1995, the Westminster property was sold to an unaffiliated third party for a sales price of $7,525,000 which resulted in an estimated net gain of approximately $1,363,000 after prorations for closing costs of approximately $1,206,000. The Trust's share of the cash proceeds was approximately $1,940,000 which resulted in the Trust's share of the estimated net gain of approximately $419,000. 4. DUE FROM AFFILIATES The Trust has entered into a partnership agreement with Banyan Strategic Land Fund II ("BSLFII") regarding the ownership and operation of the H Street Assemblage (the "H Street Venture"). Under the terms of this Agreement, the Trust has the right, but is not obligated, to advance expenditures on behalf of BSLFII. During 1994 and 1993, the Trust advanced to the H Street Venture all funds expended on the H Street Assemblage, including BSLFII's portion. As provided in the H Street partnership agreement, all advances made by the Trust for BSLFII's share of the H Street Venture's expenses bore interest at a rate of prime plus 2% per annum until repaid. As of December 31, 1994, the Trust's total receivable from BSLFII was approximately $730,000. On March 24, 1995, BSLFII repaid the December 31, 1994 outstanding balance of approximately $730,000 to the Trust. As of June 30, 1995, the H Street advances, and all interest thereon, made by the Trust have been repaid in full by BSLFII. 5. TRANSACTIONS WITH AFFILIATES Administrative costs, primarily salaries and general and administrative expenses, are reimbursed by the Trust to Banyan Management Corp. ("BMC"). These costs are allocated to the Fund and other entities to which BMC provides administrative services based upon the actual number of hours spent by BMC personnel on matters related to that Fund. The Trust's costs for the six months ended June 30, 1995 and 1994 aggregated $601,114 and $523,980 respectively. As one of its administrative services, BMC serves as the paying agent for general and administrative costs of the Trust. As part of providing this payment service, BMC maintains a bank account on behalf of the Trust. As of June 30, 1995, the Trust had a net payable due to BMC of $35,817. The Trust's allocated charges related to Investment Activities and Foreclosed Activities for the six months ended June 30, 1995 were $427,429 and $173,685, respectively. The Trust's allocated charges related to Investment Activities and Foreclosed Activities for the six months ended June 30, 1994 were $389,905 and $134,075, respectively. 6. RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE AND CLASS ACTION SETTLEMENT COSTS AND EXPENSES On February 9, 1995, the Trust received a cash distribution of $551,672 related to its interest in a liquidating trust established for the benefit of the unsecured creditors of VMS Realty Partners and its affiliates ("VMS"). For the six months ended June 30, 1995, the Trust recorded a $155,834 recovery of losses on mortgage loans, notes and interest receivable on its consolidated statement of income and expenses related to the distribution received from the liquidating trust. The $155,834 net recovery recorded in 1995 represents the $551,672 distribution received net of an estimated $395,838 due to the Class Action Settlement Fund representing the Trust's share of amounts due per the terms of the previously settled VMS securities litigation. As of June 30, 1995, the Trust has recorded $686,169 as an Other Liability as the total estimated amount due to the Class Action Settlement Fund per the terms of the settlement. On January 25, 1994, the Trust received net proceeds of $134,986 relating to a recovery of payments previously made into an escrow established as part of the 1992 Class Action Settlement of the VMS securities litigation. The escrow was established to provide trustees of the Trust with monies to fund the cost of any litigation in which they were named as defendants following settlement of the class action. Subsequently, the trustees have released the proceeds from the escrow and the Trust has purchased an insurance policy to cover the officers and trustees. 7. DIVIDEND AND DISTRIBUTIONS PAID On July 7, 1995, the Trust declared a cash dividend for the quarter ended June 30, 1995 of $0.10 per share payable August 18, 1995 to shareholders of record on July 20, 1995. On July 5, 1995, the Trust issued 6,036 shares of its beneficial interest ("Award Shares") to Leonard G. Levine, its president, pursuant to Mr. Levine's amended employment agreement representing 20% of Mr. Levine's 1994 incentive compensation. All incentive amounts are due Mr. Levine on or before March 15, of the year following the period for which the incentive is earned. The Award Shares are held for Mr. Levine by the Trust subject to certain vesting requirements as stipulated under his amended employment agreement. With respect to the Award Shares, Mr. Levine is entitled to receive any cash distributions of the Trust with respect to his share of beneficial interest between the date earned of March 15, and the date that any Award Shares are sold or forfeited by Mr. Levine. Therefore, the distribution paid by the Trust on May 20, 1995 represents $0.10 per share based on 10,477,138 shares for a total cash distribution by the Fund of $1,047,714. The Award Shares will be included in the total shares outstanding of the Trust effective July 5, 1995. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Banyan Strategic Realty Trust (the "Trust") was originally established to make mortgage loans principally to entities affiliated with VMS Realty Partners which planned to acquire and develop strategically located properties not then at their highest and best use. The Trust has ceased funding such mortgage loans. The current business plan of the Trust is to invest its cash and cash equivalents into additional real estate assets and to manage these real estate assets in a manner which will increase the Trust's cash flow over time. From May 1993 through August 1, 1995, the Trust obtained a line of credit, completed mortgage financing on the Elmhurst, Milwaukee, Willowbrook and Northlake properties (see Results of Operations below for details regarding the acquisition and financing of Willowbrook and Northlake properties) and secured enhancement of a bond financing on the Colonial Courts property. The cash proceeds generated pursuant to these transactions provide the Trust with additional capital for the continued acquisition of income producing properties, the potential acquisition of mortgage loans and for general corporate needs. On June 22, 1995, the Trust sold its interest in the Plaza at Westminster property (see Results of Operations for details). The Trust will reinvest the net sales proceeds of approximately $1,940,000 into new real estate investments. The Trust further intends to liquidate its interest in the H Street Assemblage which was acquired through foreclosure and to reinvest the proceeds from its liquidation into additional real estate investments as well. Effective January 1, 1993, the Trust elected to provide supplemental financial information in a format that presents the financial condition, results of operations and cash flows from the investment of the Trust's cash and investment securities into new real estate opportunities (the "Investment Activities") and the management of the real estate assets acquired through foreclosure (the "Foreclosed Activities"). Returns on Investment Activities include the interest earned on investment securities and cash and cash equivalents and the new real estate assets acquired from May 1993 through June 30, 1995 which are offset by the incremental costs associated with the investment efforts. Returns on Foreclosed Activities include the results of managing the foreclosed real estate assets plus the costs associated with maintaining the Trust. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents consist of cash and short-term investments. The Trust's cash and cash equivalents balance at June 30, 1995 and December 31, 1994 was $16,338,942 and $14,769,170, respectively. In addition, the Trust, at December 31, 1994 held $1,017,236 in investment securities which were immediately convertible to cash. The increase in total cash, cash equivalents and investment securities of approximately $553,000 is primarily due to the Trust's receipt of cash proceeds from the sale of the Trust's interest in the Plaza at Westminster property on June 22, 1995 of approximately $1,940,000, a $551,672 cash distribution received relating to the Trust's interest in the liquidating trust (see below), a $730,229 repayment from Banyan Strategic Land Fund II ("BSLFII") for advances made on behalf of BSLFII for H Street Assemblage expenditures (see below), the Trust's receipt of interest income from lending and investing activities of approximately $917,000 as well as cash receipts from property operations totalling approximately $4,250,000. Partially offsetting these cash receipts was the Trust's acquisition of its Willowbrook property interest on June 16, 1995 for approximately $1,268,000, payment of distributions to shareholders of $2,094,824, additions to investment in real estate of $207,774, principal payments on mortgage loans payable of $75,655, deferred financing costs of $98,271 and the payment of the Trust's operating expenses totalling approximately $4,135,000. See Results of Operations for further details regarding the sale of the Plaza at Westminster property and the acquisition of the Willowbrook property. The Trust has entered into a partnership agreement with Banyan Strategic Land Fund II ("BSLFII") regarding the ownership and operation of the H Street Assemblage (the "H Street Venture"). Under the terms of this Agreement, the Trust has the right, but is not obligated, to advance expenditures on behalf of BSLFII. During 1994 and 1993, the Trust advanced to the H Street Venture all funds expended on the H Street Assemblage, including BSLFII's portion. As provided in the H Street partnership agreement, all advances made by the Trust for BSLFII's share of the H Street Venture's expenses bore interest at a rate of prime plus 2% per annum until repaid. As of December 31, 1994, the Trust's total receivable from BSLFII was approximately $730,000. On March 24, 1995, BSLFII repaid the December 31, 1994 outstanding balance of approximately $730,000 to the Trust. As of June 30, 1995, the H Street advances, and all interest thereon, made by the Trust have been repaid in full by BSLFII. On February 9, 1995, the Trust received a cash distribution of $551,672 related to its interest in a liquidating trust established for the benefit of the unsecured creditors of VMS Realty Partners and its affiliates ("VMS"). For the six months ended June 30, 1995, the Trust recorded a $155,834 recovery of losses on mortgage loans, notes and interest receivable on its consolidated statement of income and expenses related to the distribution received from the liquidating trust. The $155,834 net recovery recorded in 1995 represents the $551,672 distribution received net of an estimated $395,838 due to the Class Action Settlement Fund representing the Trust's share of amounts due per the terms of the previously settled VMS securities litigation. As of June 30, 1995, the Trust has recorded $686,169 as an Other Liability as the total estimated amount due to the Class Action Settlement Fund per the terms of the settlement. The Trust's future liquidity is expected to be generated by the operating cash flow from Investment Activities, the sale or refinancing of the remaining asset acquired through foreclosure, interest earned on the Trust's short-term investments and to a lesser extent the potential receipt of distributions from the liquidating trust. Cash may be expended to maintain, operate and dispose of the remaining "Foreclosed Activity" property. The Trust's cash and cash equivalents, as well as cash flow from "Investment Activity" properties, are expected to be sufficient to meet its reasonably anticipated needs for liquidity and capital resources in the near future. During 1995, the Trust anticipates to continue making additional investments in operating properties which could have an effect on future liquidity of the Trust. In addition, the Trust anticipates continuing the $0.10 per share quarterly distribution for the remainder of 1995. As of June 30, 1995 and December 31, 1994, the Trust's mortgage loan portfolio consisted of five mortgage loans receivable with aggregate carrying values totaling $5,275,977 and $5,136,229, respectively, net of $1,631,204 and $1,808,716 of unamortized discounts, respectively. During the six months ended June 30, 1995, the Trust received principal and interest totalling $22,041 and $323,598, respectively. During the six months ended June 30, 1994, the Trust received principal and interest totalling $15,806 and $325,605, respectively. Management reviews the properties held by the Trust on a quarterly basis and, when it has been determined that a permanent impairment in the value of a given property has occurred, the property's carrying value is then written down to its fair value. On a quarterly basis, management also reviews each mortgage loan in the Trust's portfolio and provides allowances as deemed necessary. The estimate of the aggregate allowances is based upon a number of factors, including analysis of the value of the collateral and, in certain cases, evaluation of the disposition strategy which includes ongoing negotiations regarding the disposition of this collateral as well as consideration of the general business conditions affecting the Trust's portfolio. Management has determined not to take any write downs for the quarter ended June 30, 1995. The Trust's ability to make distributions to its shareholders is dependent upon, among other things: (i) the operating performance of the existing and new real estate investments; (ii) the ability to redeploy cash proceeds in new investments derived from the sale of the remaining Foreclosed Activities asset; (iii) increases in the eventual sales price of the Trust's properties; (iv) the potential receipt of cash distributions from the liquidating trust; (v) the Trust's ability to control its operating expenses; and (vi) the general improvement of conditions in the real estate markets where the Trust's properties are located. RESULTS OF OPERATIONS Total income for the six months ended June 30, 1995 increased to $5,167,572 from $4,012,192 for the six months ended June 30, 1994. The increase for the six months ended June 30, 1995 as compared to the same period in 1994 is due primarily to increases in property operating revenue of approximately $897,000 (see below) and interest income on investments of approximately $229,000. Interest income on investments at June 30, 1995 increased when compared to the prior year's period due to the increase in cash available for investment relating to the December 1994 financing proceeds from the Elmhurst and Colonial Courts properties. Industrial property operating revenue increased by approximately $173,000, which is primarily the result of an increase in rental income at the Trust's Elmhurst Metro Court property ("Elmhurst"). Rental income at Elmhurst increased by approximately $127,000 due to an increase in occupancy to 95% at June 30, 1995 as compared to 87% for the same period in 1994. This increase in occupancy is the result of the execution of approximately 10,000 square feet of new leases pursuant to its business plan to re-market the available space at Elmhurst. The rental income and occupancy level for the Milwaukee Industrial properties remained unchanged with occupancy at 98% for June 30, 1995, when compared to the same period in 1994. In addition, the acquisition of the Willowbrook property on June 16, 1995 resulted in an increase in rental income of approximately $29,000. The occupancy level for the Willowbrook property was 93% at June 30, 1995. Residential property operating revenue increased by approximately $84,000 resulting primarily from increases in income at the Hallmark Village Apartments property ("Hallmark") of approximately $58,000 and at the Colonial Courts of Westland Apartments ("Colonial Courts") property of approximately $26,000. These increases were due primarily to increases in rental income at the Hallmark and Colonial Courts properties was achieved as a result of the Trust's aggressive collection efforts in 1995 which reduced delinquent rental payments. The occupancy level as of June 30, 1995 and 1994 for the Hallmark property was 92% and 93%, respectively. The Colonial Courts occupancy level at June 30, 1995 and 1994 was 87% and 88%, respectively. Commercial property operating revenue increased by approximately $640,000 which is primarily attributable to the acquisition of the Colonial Penn and Florida Power and Light office buildings in late March of 1994. Occupancy levels at the Colonial Penn and Florida Power and Light office buildings remained unchanged at June 30, 1995 of 100% and 90%, respectively, when compared to the same period in 1994. Total expenses for the six months ended June 30, 1995 increased to $3,978,981 from $2,982,732 for the six months ended June 30, 1994. This increase is due to increases in expenses from property operating activities of approximately $770,000 and an increase in total other expenses of approximately $226,000. The increase in total expenses from property operating activities for 1995 is primarily attributable to the acquisition of the Trust's properties during 1994 as discussed above and the June 1995 acquisition of the Willowbrook property (as discussed below) which contributed to approximately $305,000 of this increase. In addition, total expenses from property operating activities increased in 1995 due to an increase in interest expense of approximately $279,000 relating primarily to the Trust's financing of the Elmhurst and Colonial Courts properties in December 1994. Excluding the Trust's acquisitions during 1994 and 1995, total expenses from property operating activities increased further as a result of an increase of approximately $56,000 in operating property expenses and an increase of approximately $67,000 in repairs and maintenance expense. Property operating expenses and repair and maintenance costs increased due to an increase in general and administrative costs and higher unit turnover costs at the Hallmark and Colonial Courts properties. Total other expenses increased due primarily to an increase in general and administrative expenses and an increase in amortization of deferred loan fees and financing costs. The increase in general and administrative expenses is attributable to an increase in hours allocated to the Trust by Banyan Management Corp. personnel related to the Trust's Investment Activities and supervision of its newly-acquired assets. Amortization of deferred loan fees and financing costs increased as a result of the financing of the Elmhurst and Colonial Courts properties during the fourth quarter of 1994. The factors discussed above resulted in consolidated net income of $1,556,728 ($0.15 per share) for the six months ended June 30, 1995 as compared to a consolidated net income of $985,663 ($0.09 per share) for the six months ended June 30, 1994. Total income for the three months ended June 30, 1995 increased to $2,658,097 from $2,339,258 for the three months ended June 30, 1994. The increase for the three months ended June 30, 1995 as compared to the same period in 1994 is due primarily to increases in property operating revenue of approximately $150,000 and interest income on investments of approximately $152,000. Interest income on investments at June 30, 1995 increased when compared to the prior year's period due to the increase in cash available for investment relating to the December 1994 financing of the Elmhurst and Colonial Courts properties. Industrial property operating revenue increased by approximately $84,000 which is the result of an increase in rental income at the Trust's Elmhurst property as well as the acquisition of the Willowbrook property in June 1995. Rental income at Elmhurst increased by approximately $55,000 due to an increase in occupancy as mentioned above. The acquisition of the Willowbrook property contributed to the increase in rental income in the amount of approximately $29,000. Residential property operating revenue increased by approximately $38,000 resulting primarily from an increase in rental income at the Hallmark property. An increase in rental income at the Hallmark property was achieved as a result of the Trust's aggressive collection efforts in 1995 which reduced delinquent rental payments. Commercial property operating revenue increased by approximately $28,000 which is attributable to an increase in rental income at the Colonial Penn and Florida Power and Light Office buildings. The increase in rental income at both properties was due to annual rent adjustments in 1995 made pursuant to the tenants lease agreements. Total expenses for the three months ended June 30, 1995 increased to $2,144,220 from $1,633,331 for the three months ended June 30, 1994. This increase is due to increases in expenses from property operating activities of approximately $363,000 and an increase in total other expenses of approximately $148,000. The increase in property operating expenses for the quarter ended June 30, 1995 is primarily attributable to an increase in interest expense of approximately $137,000 relating primarily to the Trust's financing of the Elmhurst and Colonial Courts properties in December 1994. In addition, total expenses from property operating activities increased due to increases of approximately $53,000 in operating property expenses and approximately $110,000 in repairs and maintenance. Operating property expenses increased due to higher general and administrative costs related to turnover of management personnel at the Hallmark and Colonial Courts properties. Repairs and maintenance costs increased due primarily to higher unit turnover costs at the Colonial Courts and Hallmark properties. Total other expenses increased due primarily to increases in general and administrative expenses and amortization of deferred loan fees and financing costs. The increase in general and administrative expenses is attributable to an increase in hours allocated to the Trust by Banyan Management Corp. personnel related to the Trust's Investment Activities and supervision of its newly-acquired assets. Amortization of deferred loan fees and financing costs increased as a result of the financing of the Elmhurst and Colonial Courts properties in December 1994. For the six months ended June 30, 1995, the Trust recognized net income from operations of real estate ventures of $392,600 as compared to a net loss of $(25,151) for the same period in 1994. For the three months ended June 30, 1995, the Trust recognized net income of $365,977 as compared to a net loss of $(25,923) for the same period in 1994. The operations of real estate ventures for the six months ended June 30, 1995 resulted in income from operations on the Plaza at Westminster property of $460,184 which was offset by a loss from operations of $(67,584) on the H Street Assemblage. The increase in the net income from the operations of real estate ventures for the six months ended June 30, 1995 as compared to the same period in 1994 is primarily due to the June 22, 1995 sale of the Plaza at Westminster property which resulted in the Trust's share of the total estimated net gain of approximately $419,000 as discussed below. The Trust's share of the net loss for the six months ended June 30, 1995 as compared to the same period in 1994 relating to the H Street property decreased by approximately $54,000. This decrease in net loss for the H Street property is due primarily to a reduction in legal costs paid in 1994. These legal costs related to the successful real estate tax appeal which reduced the property's assessed taxable value in 1994. In addition, legal and entitlement costs for 1995 were further reduced when compared to 1994 due to the nonrecurring payment of professional services associated with obtaining the historic preservation rights in 1994. The Trust has completed and obtained the zoning, entitlement and historic preservation rights for the H Street Assemblage. The H Street Venture has not made any significant capital expenditures on this asset and is allowing occupancy to decline by selectively retenanting the Victor building at the H Street Assemblage with short term leases so that the building will be more marketable to a potential buyer which would need to vacate the Victor building before its redevelopment. The H Street Venture is currently marketing the H Street Assemblage for sale. The current market for the sale of undeveloped land where the H Street Assemblage is located is very limited. Further contributing to the decline in demand for commercial development sites in the Washington, D.C. market was the recent government decision to downsize various departments and agencies and place a freeze on leasing of any additional office space. Therefore, the H Street Venture currently anticipates its marketing efforts could proceed slower than originally anticipated. Operations of real estate ventures resulted in income from operations on the Plaza at Westminster property of $96,276 which was offset by a loss from operations of $121,427 on the H Street property for the six months ended June 30, 1994. The factors discussed above resulted in consolidated net income of $872,333 ($0.08 per share) for the quarter ended June 30, 1995 as compared to a consolidated net income of $666,282 ($0.06 per share) for the quarter ended June 30, 1994. The Trust owned a 30.7% participation interest in the Plaza at Westminster ("Westminster") property. On June 22, 1995 the Westminster property was sold to an unaffiliated third party for a sales price of $7,525,000 which resulted in an estimated net gain of approximately $1,363,000 after prorations for closing costs of approximately $1,206,000. The Trust's share of the cash proceeds was approximately $1,940,000 which resulted in the Trust's share of the estimated net gain of approximately $419,000. On June 16, 1995, Banyan/Morgan Milwaukee Limited Partnership ("BMMLP"), a joint venture between a subsidiary of the Trust, which is the general partner, and Morgan Realty Partners ("Morgan"), acquired the Willowbrook Industrial Court property (the "Willowbrook Property") which consists of a three-building office/warehouse complex with a total of approximately 85,000 square feet of leasable space located in the metropolitan Chicago area for a purchase price of $4,050,000, including liabilities assumed at acquisition of approximately $132,000. The Trust and Morgan contributed additional capital of approximately $1,030,000 and $370,000 to BMMLP for their 85% and 15% ownership interest in BMMLP, respectively, including $75,000 in reserves for property improvements and lease-up. The acquisition was made subject to a nonrecourse first mortgage loan collateralized by the property in the amount of $2,650,000 which bears interest at a fixed rate of 8.5%, matures on July 1, 2002, and requires monthly payments of principal and interest based upon a twenty-two and a half year amortization schedule. The loan requires a balloon payment for the remaining unpaid principal balance upon its maturity. Upon acquisition, the Willowbrook Property was 93% leased. The overall market vacancy rate for comparable properties ranges from 3% to 8%. The terms of the BMMLP Partnership Agreement as originally established pursuant to the acquisitions of the Milwaukee Industrial and the Elmhurst Metro Court properties were modified effective July 1, 1995 as a result of the Willowbrook Property acquisition by BMMLP. Pursuant to the revised terms of the modified BMMLP Partnership Agreement, any excess cash flow from operations, after the Trust and Morgan each receives their 12% and 11% preferred return, respectively, on contributed equity, will then be split 85% to the Trust and 15% to Morgan. The modification to the Trust's excess cash flow percentage is the result of the increase in additional equity due to Morgan's contribution of approximately $370,000 pursuant to the Willowbrook Property acquisition. The results of operations for the Willowbrook Property are included in the Trust's reinvestment activities for financial reporting purposes. The BMMLP ownership percentage changes which occurred upon acquisition of the Willowbrook Property, as mentioned above, will become effective July 1, 1995 for financial reporting purposes. On July 28, 1995, BSRT/M&J Northlake Limited Partnership ("BMJNLP"), a joint venture between a subsidiary of the Trust and M&J Wilkow Retail Ltd. ("Wilkow"), acquired a shopping center known as the Northlake Tower Shopping Center ("Northlake Property") located in northeast suburban Atlanta, Georgia for a purchase price of approximately $17,250,000. The Northlake Property consists of six structures containing approximately 322,000 rentable square feet which was built in 1984. The Trust contributed $6,000,000 to BMJNLP for an approximate 80% interest, while Wilkow contributed approximately $1,500,000 for the remaining 20% interest including approximately $600,000 in reserves held by BMJNLP for property improvements, lease-up and other closing prorations. The Northlake Property was acquired pursuant to a ground lease with a remaining term of sixty-two years. The ground lease requires annual lease payments of $600,000 through October 4, 2007 plus 7% of annual gross rental income in excess of $2,000,000 from the operations of the Northlake Property. The ground lease also requires the payment of expenses incurred on the Northlake site, including real estate taxes. The Northlake Property was acquired by BMJNLP pursuant to a non-recourse first mortgage loan provided for by the seller in the amount of $10,350,000. The mortgage loan requires monthly payments of interest only at a fixed rate of 8.5% per annum. The mortgage loan matures on July 1, 2005 and may be repaid at any time during its term without any prepayment penalty. Upon acquisition, the property was 97% leased with sixteen national and regional credit tenants leasing 84% of the leased space. Pursuant to the terms of the BMJNLP partnership agreement, cash flow from operations will be distributed first to the Trust until it has received a 12% cumulative return on its equity contribution and then Wilkow will receive a 12% cumulative return on its contributed equity. Any excess cash flow will then be split pro-rata to the Trust and Wilkow based on their respective capital contributions. Proceeds from the sale or refinancing of the Northlake Property, after the payment of any debt or expense associated with the sale or refinancing, will be first distributed to the Trust to the extent that the 12% annual preferred return has not been received. Next, to the Trust and Wilkow on a pro-rata basis in an amount equal to their respective equity contributions. Thereafter, to Wilkow to the extent that its 12% annual preferred return has not been received. In the event there are any remaining proceeds and the average annual return to the Trust during the period that the BMJNLP owned the Northlake Property is equal to or greater than 15%, Wilkow will then receive an additional 10% increase on their capital percentage regarding the distribution of the remaining proceeds. The results of operations for the Northlake Property will be included in the Trust's Investment Activities for financial reporting purposes. An objective of the Trust is to provide cash distributions to the shareholders from cash generated from the Trust's operations as discussed above. Cash generated from operations is generally not equivalent to the Trust's net operating income as determined under generally accepted accounting principles. Due to certain unique operating characteristics of real estate companies, the real estate investment trust ("REIT") industry has adopted a standard for comparing operating performance within the industry. Funds from operations ("FFO") is defined as net operating income excluding extraordinary items plus depreciation and amortization from real property and after adjustments for consolidated entities in which the REIT holds an interest. FFO is not intended to be a measure of the cash generated by a REIT nor its dividend paying capacity. However, a REIT's dividend can be analyzed in comparison to FFO in a similar manner as a company that is not a REIT would compare its dividend to net operating income. The Trust provides supplemental information on the results from the Investment Activities as well as on the consolidated results. For the six months ended June 30, 1995 and 1994, the Trust's Investment Activities, including interest received on the Karfad Loan Portfolio, generated FFO of $1,953,139 ($0.19 per share) and $1,671,654 ($0.16 per share), respectively. For the six months ended June 30, 1995 and 1994, the Trust's consolidated activities generated FFO of $1,493,816 ($0.14 per share) and $1,247,467 ($0.12 per share), respectively. For the quarter ended June 30, 1995 and 1994, the Trust's Investment Activities, including interest received on the Karfad Loan Portfolio, generated FFO of $999,771 ($0.10 per share) and $1,126,824 ($0.11 per share), respectively. For the quarter ended June 30, 1995 and 1994 the Trust's consolidated activities generated FFO of $711,906 ($0.07 per share) and $910,511 ($0.09 per share), respectively. Excluding the effect of the 1994 and 1995 property acquisitions, FFO related to Investment Activities decreased by approximately $177,000 for the six months ended June 30, 1995 as compared to the same period in 1994. This decrease in FFO is primarily due to the increase in interest expense and amortization of deferred loan fees and financing costs for the six months ended June 30, 1995 of approximately $367,000 as a result of the December 1994 financing of the Elmhurst and Colonial Courts properties and obtaining the Trust's line of credit. The decrease in FFO related to reinvestment activities was partially offset by increased operating performance of the Trust's properties. Excluding the effect of interest expense, amortization of deferred loan fees and financing costs and the 1994 and 1995 acquisitions, FFO relating to reinvestment activities increased by approximately $190,000 for the six months ended June 30, 1995 as compared to the same period in 1994. FFO for the six months ended June 30, 1995 is calculated as follows: Investment Consolidated Net Income $1,476,790 $1,556,728 Plus: Depreciation expense 492,225 492,225 Depreciation inclu- ded in Operations of Real Estate Ventures --- 35,145 Lease Commission Amortization 15,259 15,259 Less: Minority Interest Share of Depre- ciation Expense (29,609) (29,609) Minority Interest Share of Lease Commission Amortization (1,526) (1,526) Recovery of Losses on Mortgage Loans, Notes and Interest Receivable --- (155,834) Gain on Disposition of Investment in Real Estate Venture --- (418,572) --------- --------- Funds From Operations $1,953,139 $1,493,816 ========= ========= The Trust paid dividends equal to $0.10 per share on May 20, 1995 and May 20, 1994 for the first quarter of 1995 and 1994, respectively. On July 7, 1995, the Trust declared a cash dividend for the second quarter of 1995 of $0.10 per share payable August 18, 1995 to shareholders of record on July 20, 1995. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Trust held its 1994 Annual Meeting of Shareholders on June 27, 1995. There were three proposals considered at the Meeting. Proposal #1 was to elect three Class A Trustees to hold office for one year or otherwise as provided in the Trust's amended and restated Declaration of Trust. Proposal #2 was to concur in the selection of Ernst & Young L.L.P. as the Trust's independent public accountants for the fiscal year ended December 31, 1995. Proposal #3 was to authorize and ratify the issuance of Award Shares to Mr. Leonard G. Levine pursuant to the terms of his Employment Agreement and to authorize the future issuance of Award Shares to Mr. Levine subject to satisfaction of conditions relevant to the issuance contained in the Employment Agreement. The following votes were cast or abstained from voting in connection with the proposals in the manner as set forth: PROPOSAL #1 SLATE OF TRUSTEES ELECTED FOR AGAINST ABSTAIN Walter E. Auch, Sr. 5,939,552 1,047,610 0 Norman M. Gold 5,941,016 1,046,146 0 Marvin A. Sotoloff 5,946,324 1,040,838 0 PROPOSAL #2 FOR AGAINST ABSTAIN 6,770,752 49,791 166,619 PROPOSAL #3 FOR AGAINST ABSTAIN 5,166,812 1,381,041 439,309 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are included with this Report. (b) No current reports on Form 8-K were filed during the quarter ended June 30, 1995. SIGNATURES 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. BANYAN STRATEGIC REALTY TRUST By: /s/ Leonard G. Levine Date: August __, 1995 Leonard G. Levine, President By: /s/ Joel L. Teglia Date: August __, 1995 Joel L. Teglia, Vice President Finance and Administration, Chief Financial and Accounting Officer EX-27 2
5 "This schedule contains summary financial information extracted from Banyan Strategic Realty Trust's Form 10Q for the six months ended June 30, 1995 and is qualified in its entirety by reference to such Form 10Q." 6-MOS DEC-31-1995 JUN-30-1995 16,338,942 0 528,100 0 0 16,867,042 45,324,006 (1,529,115) 76,697,055 1,964,140 5,500,000 57,902,616 0 0 0 76,697,055 0 5,167,572 0 0 3,697,677 (155,834) 437,138 1,556,728 0 1,556,728 0 0 0 1,556,728 0.15 0.15