-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A8OsFt3jmmkl8Tfm7MFGHJ97hk8r+x6k5q7uOFuA+6o5/m0l8oFFuqNlAROuYSWR u88DLUUFPi9cueeKrwc7LQ== 0000950137-96-000448.txt : 19960409 0000950137-96-000448.hdr.sgml : 19960409 ACCESSION NUMBER: 0000950137-96-000448 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960408 SROS: NASD 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-15465 FILM NUMBER: 96544977 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-K405 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 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 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest (Title of Class) 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 . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. [ X ] Shares of beneficial interest outstanding as of March 18, 1996: 10,477,138 The aggregate market value of the Registrant's shares of beneficial interest held by non-affiliates on such date was approximately $42,476,399. DOCUMENTS INCORPORATED BY REFERENCE Exhibit index located on page 34 of sequentially numbered pages. 2 TABLE OF CONTENTS PART I ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 7 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . 26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . 26 PART III ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3 PART I ITEM 1. BUSINESS GENERAL The Registrant, Banyan Strategic Realty Trust (the "Trust"), is a Massachusetts business trust, organized pursuant to a Declaration of Trust filed March 14, 1986 under the name VMS Strategic Land Trust. The Trust amended its Declaration of Trust to change its name to Banyan Strategic Realty Trust during 1993. The Trust was originally established to invest primarily in short-term, junior and pre-construction mortgage loans to borrowers which planned to acquire and develop strategically located properties not then at their highest and best use. In early 1990, the Trust, in response to the majority of its borrowers' decision to cease making payments on their mortgage loans due to their liquidity problems, ceased funding such mortgage loans. The trustees established the Principal Recovery Plan and implemented its initial steps to preserve and protect the Trust's assets. Subsequently, the independent trustees authorized management to begin reinvestment of the cash generated by the Principal Recovery Plan. As of December 31, 1995, the Trust owns interests in various industrial, residential, commercial and retail real estate assets throughout the Midwestern and Southeastern portion of the United States. In particular, the Trust's real estate interests include six industrial complexes aggregating 1,046,400 square feet of gross leaseable area, two apartment complexes comprised of a total of 822 units, four commercial office sites consisting of 484,100 square feet of gross leaseable area, one retail center which contains 321,800 square feet of gross leaseable area and a portfolio of five mortgage loans in the aggregate principal amount of approximately $6,900,000. The Trust has elected to be taxed as a real estate investment trust ("REIT") under Internal Revenue Code Sections 856-860 and therefore, does not generally incur a Trust level tax liability so long as 95% of its taxable income is distributed to shareholders and it meets certain asset and income tests as well as other requirements. The Trust has made distributions equal to $0.10 per share for the last nineteen consecutive quarters as of December 31, 1995. BUSINESS The Trust's current business plan is to invest its remaining cash and cash equivalents and cash proceeds generated from the financing of certain of its current property interests 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. During the year ended December 31, 1995, the Trust acquired ownership interests in the Willowbrook Industrial Court, Northlake Tower Shopping Center, Bluegrass Corporate Center, Lexington Business Center, Newtown Distribution Center and Woodcrest Office Park. See Item 7, "Management's Discussion and Analysis" for further details regarding these acquisitions. From 1993 through 1995, the Trust acquired its thirteen property interests and mortgage loan portfolio, as described above, obtained a $30,000,000 line of credit and completed other mortgage and bond financing on its various property interests. See Item 2, "Properties," for a detailed listing of the Trust's property 1 4 ITEM 1. BUSINESS (CONTINUED) interests. The cash proceeds generated pursuant to these financing transactions, financing of the Trust's remaining unencumbered properties, financing of future acquisitions and cash flow generated from the Trust's various property interests, provide the Trust with cash proceeds necessary for the continued acquisition of income producing properties, to provide quarterly cash dividends to its shareholders, meet its operating expenses and for other general corporate needs. Based on the Trust's current business plan, proceeds to be generated from its property financings are anticipated to enable the Trust to acquire approximately $30,000,000 in additional real estate investments. The additional property financings are expected to be at terms and rates consistent with existing market conditions. In the event additional financings are not obtained, the Trust's ability to make future real estate acquisitions would be impaired. As of December 31, 1995, the Trust's carrying value in its thirteen operating properties, net of accumulated deprecation, totals $96,758,648. The Trust's current mortgage loan portfolio consists of five mortgage loans receivable with an aggregate carrying value of $5,433,094, net of a $1,436,587 unamortized discount. In addition, the Trust holds a 7% ownership interest in a liquidating trust, established for the benefit of a group of unsecured creditors of a previous borrower of the Trust, which holds interests in various real estate assets. During the year ended December 31, 1995, the Trust received cash distributions from the liquidating trust aggregating $562,337. See Item 7, "Management's Discussion and Analysis," for further details regarding the Trust's investment in the liquidating trust. OTHER INFORMATION The Trust's real property investments are subject to competition regarding rental rates and building construction of similar types of properties in the vicinities in which they are located. Approximate occupancy levels for the properties are set forth on a quarterly basis in the table in Item 2 to which reference is hereby made. The Trust has no real property investments located outside the United States. The Trust does not segregate revenue or assets by geographic region, and such a presentation is not applicable and would not be significant to an understanding of the Trust's business taken as a whole. The Trust has five employees who serve as executive officers. The Trust reviews and monitors compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of material into the environment, or otherwise relating to the protection of the environment. For the year ended December 31, 1995, the Trust did not incur any material capital expenditures for environmental control facilities nor does it anticipate making any such expenditures for the year ended December 31, 1996. 2 5 ITEM 2. PROPERTIES As of December 31, 1995, the Trust owned interests, directly or indirectly through its wholly owned subsidiaries, in the properties as set forth in the table below:
Name and Location Date Property of Property Size Acquired Description Type H Street Assemblage, Washington D.C. - Land 17,000 06/05/92 Fee ownership of Land Parcel parcel sq. ft. land (through a 53% interest in a partnership which has equitable title to this property (a) - Victor 55,900 Fee ownership of Commercial Building sq. ft. land and improve- g.l.a. ments (subject to a partnership agreement)(a) Milwaukee 235,800 04/30/93 Fee ownership of Industrial Industrial sq. ft. land and improve- Properties g.l.a. ments (through a Metropolitan joint venture Milwaukee, WI partnership)(b) Colonial Courts 350 06/17/93 Fee ownership of Residential of Westland Units land and improve- Apartments ments (through a Columbus, OH joint venture partnership)(b) Hallmark Village 472 09/28/93 Fee ownership of Residential Apartments Units land and improve- Clarksville, IN ments (through a joint venture partnership) (b) Elmhurst Metro 140,800 11/30/93 Fee ownership of Industrial Court sq. ft. land and improve- Elmhurst, IL g.l.a. ments (through a joint venture partnership) (b) Colonial Penn 79,200 03/22/94 Fee ownership of Commercial Buildings sq. ft. land and improve- Tampa Bay, FL g.l.a. ments (b)
3 6 ITEM 2. PROPERTIES (CONTINUED)
Name and Location Date Property of Property Size Acquired Description Type Florida Power and 83,100 03/22/94 Fee ownership of Commercial Light Building sq. ft. land and improve- Sarasota, FL g.l.a. ments (b) Willowbrook 84,300 06/16/95 Fee ownership of Industrial Industrial sq. ft. land and improvements Court g.l.a. (through a joint Willowbrook, IL venture partnership) (b) Northlake Tower 321,800 07/28/95 Leasehold interest Retail Shopping Center sq. ft. pursuant to a ground Atlanta, GA g.l.a. lease and ownership of improvements (through a joint venture partnership) (b) Bluegrass 182,200 09/26/95 Fee ownership of land Industrial Corporate Center sq. ft. and improvements (b) Louisville, KY g.l.a. Lexington 316,200 12/05/95 Fee ownership of land Industrial Business Center sq. ft. and improvements (b) Lexington, KY g.l.a. Newtown 87,100 12/05/95 Fee ownership of land Industrial Distribution sq. ft. and improvements (b) Center g.l.a. Lexington, KY Woodcrest 265,900 sq. 12/19/95 Fee ownership of land Commercial Office Park ft. g.l.a. and improvements Tallahassee, FL (through a joint venture partnership) (b)
(a) Reference is made to Note 7, "Investment in Joint Ventures", of Notes to Consolidated Financial Statements filed with this annual report for a description of the joint venture partnership through which the Trust has acquired this real property. (b) Reference is made to Note 5, "Investment in Real Estate", of Notes to Consolidated Financial Statements filed with this annual report for additional description of these real property investments. 4 7 ITEM 2. PROPERTIES (CONTINUED) The following is a list of occupancy levels at the end of each quarter for 1995 and 1994 at each of the Trust's operating properties:
1995 1994 at at at at at at at at 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 Victor Building, 50% 56% 55% 55% 40% 42% 41% 45% Office Building Washington, D.C. Milwaukee Industrial 98% 98% 95% 100% 100% 98% 95% 97% Properties, Metro Milwaukee, WI Colonial Courts of 89% 87% 91% 94% 93% 88% 90% 87% Westland Apartments Columbus, OH Hallmark Village 85% 92% 96% 88% 93% 91% 88% 80% Apartments Clarksville, IN Elmhurst Metro Court 94% 95% 91% 92% 75% 87% 96% 90% Elmhurst, IL Colonial Penn Bldg. 100% 100% 100% 100% 100% 100% 100% 100% Tampa Bay, FL Florida Power & Light 90% 90% 90% 93% 90% 90% 90% 90% Building Sarasota, FL Willowbrook Industrial Court N/A 93% 83% 76% N/A N/A N/A N/A Willowbrook, IL Northlake Tower N/A N/A 98% 98% N/A N/A N/A N/A Shopping Center Atlanta, GA Bluegrass Corporate N/A N/A 91% 93% N/A N/A N/A N/A Center Louisville, KY Lexington Business Center N/A N/A N/A 79% N/A N/A N/A N/A Lexington, KY Newtown Distribution Center N/A N/A N/A 97% N/A N/A N/A N/A Lexington, KY Woodcrest Office Park N/A N/A N/A 95% N/A N/A N/A N/A Tallahassee, FL
An "N/A" indicates that the property was not owned by the Trust at the end of the quarter. The occupancy levels are based on the total number of units for the apartment complexes and the gross leasable area occupied at each commercial, industrial and retail property space as of the end of each quarter. Historically, occupancy levels generally do not fluctuate significantly during the quarter. 5 8 ITEM 3. LEGAL PROCEEDINGS Subsequent to December 31, 1995, Karfad Associates (the "Borrower"), which is indebted to the Trust pursuant to Karfad's loan in the original face value amount of $5,849,266 (the "Loan"), failed to make the required interest payment due on January 1, 1996. The Trust has provided proper notice to the Borrower and all grace and cure periods regarding the Loan have subsequently lapsed. In an effort to assert its rights and protect its interest, the Trust declared the Loan in default on January 30, 1996, and the repayment of the principal balance has been accelerated. A notice of foreclosure sale was published, and the sale was set for February 28, 1996. In addition, a separate action has been initiated against the Borrower's general partners who are guarantors of the Loan. On February 26, 1996, the Borrower was placed in involuntary bankruptcy which forced a cancellation of the foreclosure sale. The Trust's lawsuit against the guarantor partners is not affected by the bankruptcy. The guarantors are required to answer or otherwise plead on or before April 5, 1996. Management expects to fully recover all monetary obligations due under the Loan from either repayment by the Borrower and/or its guarantors or a sale of the underlying collateral. The Trust purchased the Loan for approximately $4,000,000 in 1993. The Loan has a current face value, including accrued interest, of approximately $5,900,000. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Trust did not submit any matter to a vote of its shareholders during the fourth quarter of 1995. 6 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS The Trust's shares are included for quotation on the NASDAQ National Market (symbol - VLANS). The table below shows the quarterly high and low bid prices reported by NASDAQ and the amount of cash distributions paid per share for the years ended December 31, 1995 and 1994: 1995
Per Share Declaration Share Distri- Date Quarter Price butions 3/31 High $4.500 $0.10 4/6/95 Low $4.125 6/30 High $4.625 $0.10 7/7/95 Low $4.125 9/30 High $5.000 $0.10 10/5/95 Low $4.125 12/31 High $4.625 $0.10 1/5/96 Low $4.000
1994
Per Share Decla- Share Distri- ration Quarter Price butions Date 3/31 High $5.125 $0.10 4/06/94 Low $4.000 6/30 High $4.750 $0.10 7/08/94 Low $3.875 9/30 High $5.063 $0.10 10/13/94 Low $4.125 12/31 High $5.000 $0.10 1/11/95 Low $4.125
The Trust anticipates continuing the $0.10 per share quarterly distribution at this time. During 1995 and 1994, $0.28 and $0.23, respectively, of the distributions declared represented a return of capital. The Trust's ability to make distributions to its shareholders is dependent upon, among other things: (i) the operating performance of the existing and future real estate investments; (ii) the ability to redeploy cash proceeds derived from the sale of its interest in the H Street property into new investments; (iii) increases in the underlying value realized upon the sale 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. As of March 18, 1995, there were 4,430 record holders of shares of beneficial interest. 7 10 ITEM 6. SELECTED FINANCIAL DATA
For the Year Ended December 31,(1) 1995 1994 1993 1992 1991 Cash and Cash Equivalents $ 5,500,215 $14,769,170 $13,505,944 $14,824,476 $ 2,043,452 ============ =========== =========== =========== =========== Investment Securities $ --- $ 1,017,236 $14,430,123 $39,656,854 $63,765,759 ============ =========== =========== ============ =========== Mortgage Loans Receivable, Net (2) $ 5,433,094 $ 5,136,229 $ 4,891,462 $ --- $ --- ============ =========== =========== =========== =========== Number of Loans Outstanding 5 5 5 --- --- ============ =========== =========== =========== =========== Investment in Real Estate, Net $ 87,862,970 $40,161,412 $21,769,471 $ --- $11,440,104 ============ =========== =========== =========== =========== Number of Property Interests Owned 13 8 6 2 2 ============ =========== =========== =========== =========== Investment in Real Estate Ventures $ 8,895,678 $10,697,791 $13,668,332 $14,920,215 $ 1,837,455 ============ =========== =========== =========== =========== Total Assets $110,764,772 $74,084,351 $69,360,043 $69,934,583 $80,495,801 ============ =========== =========== =========== =========== Mortgage Loans and Bond Payable $ 49,022,181 $13,400,695 $ 3,986,373 $ --- $ --- ============ =========== =========== =========== =========== Total Income From Property Operating Activities $ 11,231,858 $ 7,493,075 $ 2,000,264 $ 138,954 $ 416,987 ============ =========== =========== =========== =========== Total Income From Lending and Investing Activities $ 1,670,511 $ 1,340,726 $ 2,126,885 $ 3,825,379 $5,456,556 ============ =========== =========== =========== =========== Total Income $ 12,902,369 $ 8,833,801 $ 4,127,149 $ 3,964,333 $ 5,873,543 ============ =========== =========== =========== =========== Total Expenses From Property Operating Activities $ 7,823,972 $ 4,431,956 $ 1,184,964 $ 526,481 $ 743,500 ============ =========== =========== =========== =========== Total Other Expenses $ 2,772,241 $ 2,310,366 $ 1,903,913 $ 1,466,073 $ 686,713 ============ =========== =========== =========== ===========
8 11 ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
For the Year Ended December 31,(1) 1995 1994 1993 1992 1991 Total Expenses $ 10,596,213 $ 6,742,322 $ 3,088,877 $ 1,992,554 $ 1,430,213 ============ =========== =========== =========== =========== Net Income (Loss) $ 2,600,045 $ (912,492) $ (617,272) $ 1,517,453 $ 4,638,992 ============ =========== =========== =========== =========== Net Income (Loss) Per Share of Beneficial Interest (3) $ 0.25 $ (0.09) $ (0.06) $ 0.13 $ 0.39 ============ =========== =========== =========== =========== Cash Distributions Declared $ 4,190,252 $ 4,188,441 $ 4,221,927 $ 4,708,030 $ 3,598,125 ============ =========== =========== =========== =========== Cash Distributions Declared Per Share of Beneficial Interest (3) $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.30 ============ =========== =========== =========== ===========
(1) The above selected financial data should be read in conjunction with the consolidated financial statements and the related notes appearing elsewhere in this annual report. (2) Represents the carrying amount of the mortgage loans, which is equal to the face amount of the loan less unamortized loan fees, net of loan discounts of $1,436,587, $1,808,716 and $2,116,636 for 1995, 1994 and 1993, respectively. See Note 2, Mortgage Loans Receivable, of Notes to Consolidated Financial Statements for further details. (3) Based on 10,474,079 weighted average shares outstanding for 1995, 10,471,102 weighted average shares outstanding for 1994, 10,518,047 weighted average shares outstanding for 1993, 11,537,364 shares outstanding for 1992 and 11,993,751 shares outstanding for 1991. 9 12 ITEM 6. SELECTED FINANCIAL DATA (CONTINUED) QUARTERLY RESULTS OF OPERATIONS The following is a summary of the quarterly results of operations for the years ended December 31, 1995 and 1994.
1995 For the three months ended: March 31 June 30 September 30 December 31 Total Income $ 2,509,475 $ 2,658,097 $ 3,453,623 $ 4,281,174 Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses 155,834 --- --- 9,124 Operating Expenses (2,010,811) (2,228,171) (2,801,724) (3,720,465) ---------- ---------- ----------- ----------- Operating Income 654,498 429,926 651,899 569,833 Minority Interest in Consolidated Partnerships (16,942) (7,521) (55,896) (97,755) Income (Loss) of Real Estate Ventures 26,623 365,977 256,674 (177,271) ---------- ----------- ----------- ----------- Net Income $ 664,179 $ 788,382 $ 852,677 $ 294,807 ========== =========== =========== =========== Earnings Per Share of Beneficial Interest $ 0.06 $ 0.08 $ 0.08 $ 0.03 ========== =========== =========== ===========
Net income for the three months ended March 31, June 30 and September 30, 1995 has been reduced by $20,216, $83,951 and $104,425, respectively, from amounts originally reported to reflect adjusted allocation of administration costs from Banyan Management Corp.
1994 For the three months ended: March 31 June 30 September 30 December 31 Total Income $1,672,934 $ 2,339,258 $ 2,380,376 $ 2,441,233 Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses 134,986 --- --- 57,226 Operating Expenses (1,484,387) (1,633,331) (1,780,811) (2,036,005) ---------- ---------- ----------- ----------- Operating Income 323,533 705,927 599,565 462,454 Minority Interest in Consolidated Partnerships (4,924) (13,722) (9,368) (27,704) Income (Loss) of Real Estate Ventures 772 (25,923) (20,913) (2,948,297) Gain on Disposition of Property --- --- --- 46,108 ---------- ----------- ----------- ----------- Net Income (Loss) $ 319,381 $ 666,282 $ 569,284 $(2,467,439) ========== =========== =========== =========== Earnings (Loss) Per Share of Beneficial Interest $ 0.03 $ 0.06 $ 0.05 $ (0.23) ========== =========== =========== ===========
10 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Banyan Strategic Realty Trust (the "Trust") is a Massachusetts business trust which owns interests in various industrial, residential, commercial and retail real estate assets throughout the Midwestern and Southeastern portion of the United States. In particular, the Trust's real estate interests include six industrial complexes aggregating 1,046,400 square feet of gross leaseable area, two apartment complexes comprised of a total of 822 units, four commercial office sites consisting of 484,100 square feet of gross leaseable area, one retail center which contains 321,800 square feet of gross leaseable area and a portfolio of five mortgage loans. See Results of Operations below for further details regarding 1995 acquisitions made by the Trust. The current business plan of the Trust is to invest its remaining cash and cash equivalents and cash proceeds generated from the financing of certain of its current property interests 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. The cash proceeds generated pursuant to these financing transactions, as well as cash flow generated from the Trust's various property interests, provide the Trust with cash proceeds necessary for the continued acquisition of income producing properties, to provide quarterly cash distributions to its shareholders, meet its operating expenses and for other general corporate needs. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents consist of cash and short-term investments. The Trust's cash and cash equivalents balance at December 31, 1995 and 1994 was $5,500,215 and $14,769,170, respectively. In addition, the Trust, at December 31, 1994, owned $1,017,236 in investment securities which were immediately convertible to cash. The decrease in total cash, cash equivalents and investment securities of approximately $10,286,000 is primarily attributable to the use of approximately $10,200,000 to acquire the Willowbrook, Northlake, Bluegrass, Lexington, Newtown and Woodcrest properties (See Property Acquisitions and Other Information below for further details); payment of distributions to shareholders of $4,190,252; additions to investment in real estate of $1,183,619 relating to investment activities; principal payments on mortgage loans payable of $185,321; payment of $680,058 of other liabilities (see below); payment of $597,134 of deferred financing costs primarily related to the Trust's line of credit and financing of the Willowbrook and Northlake properties (see Property Acquisitions and Other Information below for further details); and the payment of the Trust's operating expenses, excluding depreciation and amortization, totalling approximately $9,192,000. Partially offsetting these cash outflows was the Trust's receipt of approximately $2,218,000 in cash proceeds from the sale of its interest in the Westminster property (see Property Acquisitions and Other Information below for further details), a total of $562,337 in cash distributions in respect of the Trust's interest in the liquidating trust, a $730,229 repayment from 11 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Banyan Strategic Land Fund II ("BSLFII") for advances made on behalf of BSLFII for H Street Assemblage expenditures, net income from operations of real estate ventures of approximately $63,000, the receipt of interest income from lending and investing activities of approximately $1,298,000 and cash receipts from property operations totalling approximately $11,232,000. See Property Acquisitions and Other Information for further details regarding the Trust's acquisitions and financings completed during the year ended December 31, 1995. On December 15, 1995, the Trust modified its line of credit (the "Modified Line") with American National Bank (the "Bank"). The line of credit was originally established on December 13, 1994 (the "Original Line"). Under the Modified Line the Trust may borrow up to $30,000,000, an increase of $15,000,000 when compared to the Original Line. The Modified Line continues to provide for a one year extension subsequent to the initial two year term with a balloon payment of principal required upon maturity, December 14, 1997. In order to increase the cash available for borrowing pursuant to the Modified Line, the Trust provided the Bank, as additional collateral, mortgages on its Florida Power and Light Building, Newtown Distribution Center and Lexington Business Center as well as pledges of the stock or partnership interest of the Trust's subsidiary owning these properties. The Trust had previously pledged its ownership interest in the entities owning the Colonial Penn Office Building, Colonial Courts Apartments, Hallmark Village Apartments and Karfad Loan Portfolio as well as providing mortgage liens against these properties as collateral per the terms of the Original Line. The Trust also paid a loan fee upon execution of the Modified Line in the amount of $75,000, or .5% of the increase in the Original Line. All other terms, as provided for under the Original Line, remain unchanged. The Modified Line remains subject to review for renewal on an annual basis. The purpose of the Modified Line is to provide the Trust with an additional source of cash for the acquisition of income producing properties, capital expenditures for its existing properties and general and corporate needs. Payment of interest pursuant to the terms of the Modified Line is the obligation of the Trust. The Trust's ability to pay debt service on the line is partially dependent on the performance of the Trust's properties which serve as collateral under the Modified Line; however, there is no preferred obligation or senior loan on the properties which would preclude the Trust from first receiving any cash proceeds generated by the properties operations. As of December 31, 1995, the Trust had utilized approximately $25,725,000 of the $30,000,000 available under the Modified Line. As of December 31, 1995, the Trust had approximately $4,275,000 remaining available under the Modified Line. Of the $25,725,000, approximately $5,625,000 serves as collateral in the form of a letter of credit issued by the Bank for the tax-exempt bond financing sponsored by Franklin County, Ohio in the amount of $5,500,000 on its Colonial Courts Apartments property. Of the remaining $20,100,000 in cash proceeds drawn under the Modified Line by the Trust, $8,900,000 and $11,200,000 were drawn on November 30, 1995 and December 18, 1995, respectively, and have been utilized by the Trust for its acquisitions of the Lexington Business 12 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Center/Newtown Distribution Center and the Woodcrest Office Park, respectively. Draws under the Modified Line require monthly payment of interest only until maturity and currently bear interest at a blend of thirty, sixty and one hundred and twenty-day Libor rates plus 2.25% or approximately 7.5% to 8.5% per annum as of December 31, 1995. The Trust is required to pay the Bank an unused facility fee of .5% per annum multiplied by the average portion of the Modified Line that is undrawn from time-to-time. The facility fee is required to be determined and payable monthly on a non-cumulative basis. The Trust is working to obtain permanent long-term third party financing within the next 12 months for its various property interests and utilizing these financing proceeds to repay amounts drawn under the Modified Line. In the event that the Trust is not successful in the completion of its individual property financing in the near term as discussed above, the Trust will continue to utilize its Modified Line through December 31, 1997. The Trust currently engaged in conversation with several lenders on providing individual property financing which will be used to repay its line of credit, discussed above, as well as providing additional capital for continued property acquisitions. As of December 31, 1995 and 1994, the Trust's mortgage loan portfolio consisted of five mortgage loans receivable with aggregate carrying values totaling $5,433,094 and $5,136,229, respectively, net of $1,436,587 and $1,808,716 of unamortized discounts, respectively. During the year ended December 31, 1995, the Trust received principal and interest payments totalling $43,817 and $658,249, respectively. During the year ended December 31, 1994, the Trust received principal and interest payments totalling $36,742 and $651,939, respectively. Subsequent to December 31, 1995, Karfad Associates (the "Borrower"), which is indebted to the Trust pursuant to Karfad's loan in the original face value amount of $5,849,266 (the "Loan"), failed to make the required interest payment due on January 1, 1996. The Trust has provided proper notice to the Borrower and all grace and cure periods regarding the Loan have subsequently lapsed. In an effort to assert its rights and protect its interest, the Trust declared the Loan in default on January 30, 1996, and the repayment of the principal balance has been accelerated. A notice of foreclosure sale was published, and the sale was set for February 28, 1996. In addition, a separate action has been initiated against the Borrower's general partners who are guarantors of the Loan. On February 26, 1996, the Borrower was placed in involuntary bankruptcy which forced a cancellation of the foreclosure sale. The Trust's lawsuit against the guarantor partners is not affected by the bankruptcy. The guarantors are required to answer or otherwise plead on or before April 5, 1996. Management expects to fully recover all monetary obligations due under the Loan from either repayment by the Borrower and/or its guarantors or a sale of the underlying collateral. The Trust purchased the Loan for approximately $4,000,000 in 1993. The Loan has a current face value, including accrued interest, of approximately $5,900,000. 13 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) On February 9 and December 21, 1995, the Trust received cash distributions of $551,672 and $10,665, respectively, with respect 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 year ended December 31, 1995, the Trust treated $164,958 of these distributions as a recovery of losses on mortgage loans, notes and interest receivable on its consolidated statement of income and expenses. The $164,958 net recovery recorded in 1995 represents the total distributions received of $562,337 net of an estimated $397,379 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. During 1994 and 1993, the Trust recorded $57,226 and $57,072, respectively, on its Statement of Income and Expenses as a recovery of losses on mortgage loans, notes and interest receivable related to the distributions received from the liquidating trust. The $57,226 net recovery recorded in 1994 includes the recognition of a $347,557 distribution received net of the estimated $290,331 due to the Class Action Settlement Fund. On December 28, 1995, the Trust made a payment of $680,058 against the total outstanding liability to the Class Action Settlement Fund. As of December 31, 1995, the Trust has recorded $7,652 as other liabilities representing the total estimated amount remaining due to the Class Action Settlement Fund per the terms of the settlement. During 1994, the Trust received net proceeds of $134,986 as a recovery of payments previously made into an escrow established as part of the 1992 Class Action Settlement of the VMS securities litigation. The Trust has entered into a partnership agreement with 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 advances 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. As of December 31, 1995, the H Street advances, and all interest thereon, made by the Trust have been repaid in full by BSLFII. The Trust's future liquidity needs are expected to be funded from 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 will be expended to maintain, operate and dispose of the Trust's interest in the H Street property. The Trust's cash and cash equivalents, as well as cash flow from its operating properties, are expected to be sufficient to meet its reasonably anticipated needs for liquidity and capital resources in the near future and provide cash 14 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) proceeds for distributions to shareholders. The cash flow of the Trust could be negatively impacted by factors and risks commonly associated with the ownership of real estate investments such as changes in interest rates, market conditions, rental rates where the Trust's properties are located, leasing and occupancy risks, capital expenditures, and general economic conditions in the real estate markets. During 1996, the Trust anticipates that it will likely continue making additional investments in operating properties as a result of cash proceeds to be provided from its continued efforts to complete additional property level financing of its existing properties as well as its future property acquisitions. It is anticipated by the Trust that its continued financing and investment in additional operating properties will have a positive effect on future liquidity and earnings of the Trust. Based on the Trust's current business plan, proceeds to be generated from its property financings are anticipated to enable the Trust to acquire approximately $30,000,000 in additional real estate investments. The additional property financings are expected to be at terms and rates consistent with existing market conditions. In the event additional financings are not obtained, the Trust's ability to make future real estate acquisitions would be impaired. The Trust anticipates continuing the $0.10 per share quarterly distribution during 1996. RESULTS OF OPERATIONS GENERAL Effective January 1, 1993, the Trust decided 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 short term investments into new real estate opportunities (the "Investment Activities") and the management of the real estate assets acquired in connection with the work-out through foreclosure of loans originally made by the Trust (the "Foreclosed Activities"). Returns on Investment Activities include the new real estate assets acquired during 1995, 1994 and 1993 (see below for further details regarding the assets acquired during 1995) and the interest earned on cash and investment securities offset by the incremental costs associated with the investment efforts. Returns on Foreclosed Activities include the results of managing the foreclosed real estate offset by the costs associated with maintaining the Trust. Effective January 1, 1996, the Trust will no longer provide detailed supplemental financial results segregating foreclosed activities from investment activities. The elimination of the supplemental disclosure is the result of the Trust's significant reinvestment activities which have been achieved through December 31, 1995. Total income for the years ended December 31, 1995, 1994 and 1993 was $12,902,369, $8,833,801 and $4,127,149, respectively. The increases in total income are due primarily to increases in property operating revenue (see below). Interest income on investments at December 31, 1995 increased when compared to 1994 due to the increase in cash available for investment derived from the proceeds received 15 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) on financing of the Elmhurst and Colonial Courts properties which were held as cash reserves until the 1995 acquisitions by the Trust of the Willowbrook, Northlake, Bluegrass, Lexington, Newtown and Woodcrest properties. The Trust anticipates that interest income from cash, cash equivalents and investment securities will decrease in the future as it continues to utilize excess cash reserves for the continued investment in operating properties. A further increase in cash available for investment resulted from the Trust's receipt of net proceeds from its share of the Westminster sale in June 1995. (See below for further details of the 1995 acquisitions and sale of the Westminster property). The increase in total income for 1994 as compared to 1993 is partially offset by a decrease in interest income on investments due to decreases in cash available for investment. The decrease in cash available for investment is attributable to the acquisition of the Milwaukee Industrial properties, the Colonial Courts of Westland Apartments, the Hallmark Village Apartments and the Elmhurst Metro Court in 1993 and the acquisition of Colonial Penn and Florida Power and Light office buildings in March 1994. Interest income on mortgage loans represents interest income earned relating to the Karfad Loan Portfolio acquisition during September 1993 which also contributed to a decrease in cash available for investment for 1994 as compared to 1993. Industrial property operating income increased by approximately $842,000 for 1995 as compared to 1994 and approximately $1,250,000 for 1994 as compared to 1993. The 1995 increase as compared to 1994 is primarily the result from the acquisitions of the Willowbrook Industrial Court ("Willowbrook"), Bluegrass Corporate Center ("Bluegrass"), Lexington Business Center ("Lexington") and Newtown Distribution Center ("Newtown") properties during 1995 and an increase in income at the Trust's Elmhurst Metro Court ("Elmhurst") property. Income at Elmhurst increased by approximately $181,000 due primarily to nonrecurring rental abatements of approximately $36,000 with the remainder attributable to annual rent adjustments in 1995 made pursuant to tenant lease agreements. The acquisitions of the Willowbrook, Bluegrass, Lexington and Newtown properties during 1995 contributed to an increase in income of approximately $319,000, $205,000, $105,000 and $53,000, respectively. See below for further details regarding these transactions. Income at the Milwaukee Industrial properties remained relatively stable for 1995 when compared to 1994. The increase in income from industrial properties for 1994 as compared to 1993 is attributable to including a full year of operating results of the Milwaukee Industrial and Elmhurst properties which were acquired in April 1993 and November 1993, respectively. Subsequent to the acquisition of the Willowbrook property, its occupancy decreased from 93% upon acquisition to 76% as of December 31, 1995. The decrease in occupancy at Willowbrook was anticipated pursuant to the plan of acquisition for the property. Upon acquisition, the Trust anticipated that leases occupying approximately 27,300 square feet of space would be vacated during the last six months of 1995. It is the Trust's intent to reconfigure, renovate and re-lease the vacated space at increased rental rates. 16 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Residential property income increased by approximately $186,000 for 1995 as compared to 1994 and approximately $2,043,000 for 1994 as compared to 1993. The 1995 increase as compared to 1994 is primarily the result of an increase in income at the Hallmark Village Apartments ("Hallmark") property. Income at Hallmark increased by approximately $150,000 due primarily to the Trust's aggressive collection efforts in 1995 which reduced delinquent rental payments and an increase in occupancy to 88% at December 31, 1995 as compared to 80% for the same period in 1994. In addition, income at the Colonial Courts of Westland Apartments ("Colonial Courts") property increased by approximately $36,000 due primarily to an increase in occupancy to 94% at December 31, 1995 as compared to 87% for the same period in 1994. The increase in residential property operating revenue for 1994 as compared to 1993 is primarily attributable to including a full year of operating results of the Colonial Courts and Hallmark properties which were acquired in June 1993 and September 1993, respectively. Commercial property operating income increased by approximately $872,000 for 1995 as compared to 1994 which is primarily attributable to the fact that 1995 included a full year of operating results of the Colonial Penn and Florida Power and Light office buildings which were acquired in late March of 1994 and the acquisition of the Woodcrest Office Park ("Woodcrest") property in December 1995. The acquisition of the Woodcrest property on December 19, 1995 contributed to an increase in total income of approximately $121,000. Retail property operating income represents income generated by the Northlake Tower Shopping Center ("Northlake") from July 28, 1995, the acquisition date, through December 31, 1995. The Trust anticipates further increases in property operating income during 1996 due to i) continued acquisitions of real estate investments and ii) continued operating performance at certain of its existing properties. During 1996, the Trust will continue its efforts to aggressively lease vacant space or units at the Hallmark, Willowbrook and Lexington properties which would have a positive impact on rental income. Also anticipated to enhance operating revenues projected for 1996 will be the effect of a full year of operations of the Trust's 1995 acquisitions. See Property Acquisitions below for a detailed list of assets acquired. It is currently anticipated that rental rates and occupancy at the Trust's remaining properties will remain consistent during 1996 when compared to 1995. The Trust's business and real estate property operations are not seasonal and are subject to competition regarding rental rates and property operations of similar types of properties in the vicinities in which they are located. See Item 2, "Properties", for approximate occupancy levels for the properties which are set forth on a quarterly basis. Total expenses for the year ended December 31, 1995 increased to $10,596,213 from $6,742,322 and $3,088,877 for the years ended December 31, 1994 and 1993, respectively. The increases in total 17 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) expenses are due primarily to increases in expenses from property operating activities and other expenses. Total expenses from property operating activities increased by approximately $3,392,000 for 1995 as compared to 1994 and approximately $3,247,000 from 1994 to 1993. The increase in total expenses from property operating activities for 1995 is primarily attributable to the acquisitions of the Trust's properties during 1994 (as discussed above) and the acquisitions in 1995 of the Willowbrook, Northlake, Bluegrass, Lexington, Newtown and Woodcrest properties (as discussed below) which accounted for approximately $2,304,000 of this change. In addition, total expenses from property operating activities, excluding the effect of the 1994 and 1995 acquisitions, increased in 1995 due to an increase in interest expense of approximately $551,000 relating primarily to mortgage loans collateralized by the Elmhurst and Colonial Courts properties in December 1994. Total expenses from property operating activities increased further for 1995 from 1994 as a result of an increase of approximately $125,000 in operating property expenses and an increase of approximately $221,000 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. The remaining $191,000 increase in property operating expenses for 1995 from 1994 resulted from an increase in real estate tax expense and other miscellaneous property expenses. The increase in property operating activities for 1994 compared to 1993 is attributable to the acquisition of the Trust's properties during 1993 and 1994 as discussed above. Total other expenses increased by approximately $462,000 for 1995 as compared to 1994 and approximately $406,000 from 1994 to 1993. Total other expenses increased during 1995 due primarily to an increase in general and administrative expenses and an increase in amortization of deferred loan fees and financing costs. The change in general and administrative expenses is attributable to additional expenses associated with the Trust's acquisition and financing activity in 1995 (as discussed below). Amortization of deferred loan fees and financing costs increased primarily as a result of the financing of the Elmhurst and Colonial Courts properties as discussed above and costs associated with obtaining the Trust's line of credit which occurred during the fourth quarter of 1994. Further contributing to the increase in total other expenses is a decrease in recovery of losses on loans, notes, interest receivable and class action settlement costs and expenses of $164,958 in 1995 as compared to $192,212 recorded in 1994. See Liquidity and Capital Resources for additional information regarding the Trust's recoveries. Total other expenses increased during 1994 as compared to 1993 due primarily to an increase in general and administrative expenses which was attributable to an increase in the amount of expenses incurred on the Trust's behalf by BMC in connection with purchasing and supervising the newly acquired assets. Partially offsetting this increase in general and administrative expenses is a decrease in other professional fees and the elimination of mortgage loan commitment settlement costs resulting from a nonrecurring payment made in 1993 18 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) in connection with the VMS/MCL Dearborn Park II Venture litigation settled by the Trust during the third quarter of 1993. In addition, during 1994, $192,212 was recorded by the Trust as a recovery of losses on loans, notes, interest receivable and class action settlement costs and expenses as compared to $57,072 recorded in 1993. See Liquidity and Capital Resources for details regarding the Trust's recoveries. For the year ended December 31, 1995, the Trust recorded net income from operations of real estate ventures (included in foreclosed activities) of $472,003 as compared to a net loss of $2,994,361 for the same period in 1994. The increase in net income from the results of operations for the year ended December 31, 1995 is the result of income from the Plaza at Westminster and H Street Assemblage properties of $434,240 and $37,763, respectively. The net loss for the year ended December 31, 1994 is the result of a loss on the H Street Assemblage of $3,184,938 which was partially offset by income from operations of $190,577 on the Plaza at Westminster property. Property operations for the year ended December 31, 1995 are not comparable to the same period in 1994 for the Westminster property because the property was sold on June 22, 1995 which resulted in a net gain to the Trust of approximately $409,000. The Trust's share of income generated from the operations of Westminster for the year ended December 31, 1995 was $24,950 prior to sale. Net income from operations of real estate ventures include the Trust's 53% interest in the real estate venture known as the H Street Assemblage located in Washington, D.C. The H Street Assemblage consists of an approximately 55,900 square foot office building (the "Victor Building") and an adjacent land parcel consisting of 17,000 square feet. The Trust's share of the net income from the H Street property for 1995 compared to 1994 increased by $3,222,701 due primarily to a write-down in the value of the H Street Assemblage during 1994 in the amount of $5,500,000 of which $2,915,000 is the Trust's share. This write-down was due to the Venture revising its strategy from holding the property in anticipation of potential development to marketing the property for immediate sale. This increase in net income for the H Street property for 1995 as compared to 1994 is due further to a reduction in legal costs compared to 1994 relating to the completion of a real estate tax appeal which reduced the property's assessed taxable value. During 1995, the Venture recorded approximately $433,000 in real estate tax refunds and interest, thereon, relating to taxes paid in 1992 and 1993, resulting in a decrease in real estate tax expense of approximately $457,000 for the year ended December 31, 1995 when compared to the same period in 1994. In addition, legal and entitlement costs for 1995 decreased when compared to 1994 since the costs incurred during 1994 included nonrecurring payments for professional services associated with obtaining the historic preservation rights. During 1994, the H Street Venture completed and obtained the zoning, entitlement and historic preservation rights for the development of an approximately 330,000 square foot commercial building on the H Street site. The H Street Venture has not made any 19 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) significant capital expenditures on the H Street property 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 based upon its current assessment of the Washington D.C. office market. The current market for the sale of undeveloped land where the H Street Assemblage is located is currently limited because of the decline in demand for commercial development sites in the Washington, D.C. market resulting from 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. The Venture will continue to try to find ways to limit holding costs at the H Street Assemblage while attempting to find a buyer. Upon the sale of the H Street Assemblage, it is the Trust's intent to redeploy its portion of all cash proceeds derived from its sale into new real estate investments. For the year ended December 31, 1993, operations of real estate ventures resulted in a loss on the H Street Assemblage of $1,809,167 which was partially offset by income from operations on the Plaza at Westminster property of $195,785. The H Street Assemblage generated losses in 1993 due primarily to the H Street Venture write off of a $2,300,000 nonrefundable deposit on the option parcels in the second quarter of 1993. The Trust's share of this write off was $1,219,000. This increase in net loss for 1994 as compared to 1993 was offset by a reduction in real estate tax expense. Real estate tax expense decreased as the H Street Venture was no longer required to pay real estate taxes on the option parcels due to the termination of the option in the second quarter of 1993. In addition, real estate tax expense decreased resulting from a successful real estate tax appeal which reduced the property's assessed value when compared to the same period in 1993. Management reviews the properties owned 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 market value. During the year ended December 31, 1994, the Trust recorded a $2,915,000 valuation allowance relating to the H Street Assemblage, pursuant to its decision to liquidate its interest rather than to pursue the redevelopment of the property. The Trust did not record any valuation allowances regarding its mortgage loans or operating properties for the year ended December 31, 1995. These changes, as discussed above, for the year ended December 31, 1995 resulted in net income of $2,600,045 ($0.25 per share) as compared to net losses of $912,492 ($0.09 per share) and $617,272 ($0.06 per share) in 1994 and 1993, respectively. An objective of the Trust is to provide cash distributions to the shareholders from cash generated from the Trust's consolidated 20 23 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) operations as discussed above. Cash generated from operations is 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 reflecting operating property performance and comparing operating performance within the industry. Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trust as net income computed in accordance with generally accepted accounting principles, excluding extraordinary, unusual and nonrecurring items, excluding gains (or losses) from debt restructuring and sales of property plus depreciation and amortization from real property and after adjustments for unconsolidated partnerships and joint ventures in which the REIT holds an interest. FFO is not intended to be a measure of the cash generated by a REIT nor its distribution paying capacity. However, a REIT's distribution can be analyzed in comparison to FFO in a similar manner as a company that is not a REIT would compare its distribution 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 year ended December 31, 1995 and 1994, the Trust's Investment Activities, including interest received on the Karfad Loan Portfolio, generated FFO of $4,032,754 ($0.39 per share) and $3,568,601 ($0.34 per share), respectively. For the year ended December 31, 1995 and 1994, the Trust's consolidated activities generated FFO of $3,066,490 ($0.29 per share) and $2,711,544 ($0.26 per share), respectively. Excluding the effect of the 1994 and 1995 property acquisitions, FFO related to Investment Activities decreased by approximately $920,000 for the year ended December 31, 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 year ended December 31, 1995 of approximately $731,000 as a result of the December 1994 financing of the Elmhurst and Colonial Courts properties and obtaining the Trust's line of credit. 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 decreased by approximately $189,000 for the year ended December 31, 1995 as compared to the same period in 1994. 21 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) FFO for the year ended December 31, 1995 is calculated as follows:
Reinvestment Consolidated Net Income $2,812,993 $2,600,045 Plus: Depreciation expense 1,300,205 1,300,205 Depreciation inclu- ded in Operations of Real Estate Ventures --- 50,382 Lease Commission Amortization 34,787 34,787 Less: Minority Interest Share of Depre- ciation Expense (110,813) (110,813) Minority Interest Share of Lease Commission Amortization (4,418) (4,418) Recovery of Losses on Mortgage Loans, Notes and Interest Receivable and Class Action Settlement Costs and Expenses --- (164,958) Gain on Disposition of Investment in Real Estate Venture --- (409,290) Real Estate Tax Rebates from Operations of Real Estate Venture --- (229,450) ---------- ---------- Funds From Operations $4,032,754 $3,066,490 ========== ==========
22 25 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Trust paid regular quarterly distributions during 1995 and 1994 as follows:
1995 1994 Per Share Per Share Quarter Distribution Date Paid Distribution Date Paid 4 $ 0.10 02/24/95 $ 0.10 02/25/94 1 $ 0.10 05/20/95 $ 0.10 05/20/94 2 $ 0.10 08/18/95 $ 0.10 08/15/94 3 $ 0.10 11/17/95 $ 0.10 11/15/94
On January 5, 1996, the Trust declared a cash distribution for the quarter ended December 31, 1995 of $0.10 per share payable February 20, 1996 to shareholders of record on January 15, 1996. PROPERTY ACQUISITIONS AND OTHER INFORMATION On June 16, 1995, Banyan/Morgan Milwaukee Limited Partnership ("BMMLP"), a joint venture between a subsidiary of the Trust 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 84,300 square feet of gross leasable area located in the metropolitan Chicago area for a purchase price, including liabilities assumed at acquisition, of approximately $3,924,000. 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. The total of the contributions made by the Trust and Morgan in the amount of $1,400,000 included $200,000 in reserves held by BMMLP for property improvements and lease-up. The acquisition was made subject to a nonrecourse first mortgage loan collateralized by the property in the original principal amount of $2,650,000 which bears interest at a fixed rate of 8.5%, matures on July 1, 2002, and requires monthly payments based upon a twenty-two and a half year amortization schedule. The loan requires a balloon payment for the remaining unpaid principal balance at maturity. Upon acquisition, the Willowbrook Property was 93% leased. The terms of the BMMLP partnership agreement, as established at the time of its acquisitions of the Milwaukee Industrial and Elmhurst Metro Court properties, was amended effective July 1, 1995 upon the acquisition of the Willowbrook Property by BMMLP. Pursuant to the amended BMMLP partnership agreement, any excess cash flow from operations, after each of the Trust and Morgan receives its 12% and 11% preferred return, respectively, on contributed equity, will be allocated 85% to the Trust and 15% to Morgan. The amendment was adopted as a result of the increase in additional equity contributed 23 26 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) by Morgan of $370,000. The BMMLP partnership agreement had provided for BSRT and Morgan to be allocated cash flow after satisfaction of the above preferred returns 90% and 10%, respectively, before the July 1, 1995 amendment. 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 leasehold interest in a regional shopping center known as the Northlake Tower Shopping Center ("Northlake Property") located in northeast suburban Atlanta, Georgia for a purchase price, including liabilities assumed at acquisition, of approximately $17,144,000. The Northlake Property consists of six structures containing approximately 321,800 gross leasable area built in 1983-1984. The Trust is to contribute in total $6,000,000 to BMJNLP for an approximate 80% interest, while Wilkow is to contribute in total approximately $1,500,000 for the remaining 20% interest. In addition to equity for the acquisition of the property of the combined $7,500,000, capital contributions included approximately $550,000 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 total annual gross rental income commencing once gross rental income exceeds $2,000,000 from the operations of the Northlake Property. For the year ended December 31, 1996, the Trust estimates 7% of the total annual gross rental income due under the ground lease will be approximately $280,000. The ground lease also requires that BMJNLP pay for expenses incurred on the Northlake site, including real estate taxes. The Northlake Property was financed by BMJNLP utilizing a non-recourse leasehold mortgage loan from 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 leasehold mortgage loan matures on August 1, 2005. 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 capital contribution and then to Wilkow until it has received a 12% cumulative return on its capital contribution. Any excess cash flow will be allocated 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 distributed first to the Trust to the extent that the 12% annual preferred return has not been received. Next, distributions will be made to the Trust and Wilkow on a pro-rata basis in an amount equal to their respective equity contributions. Thereafter, distributions will be made to Wilkow to the extent that its 12% annual preferred return has not been received. In the event there are any remaining proceeds to be distributed and the average annual return to the Trust during the period that BMJNLP owned the Northlake Property is equal to or greater than 15%, Wilkow will receive 30% of any remaining proceeds. 24 27 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) On September 26, 1995, a subsidiary of the Trust acquired a 100% ownership interest in a seven building office/industrial complex known as the Bluegrass Corporate Center (the "Bluegrass Property") located in Jefferson County, Kentucky (suburban Louisville), for a purchase price, including liabilities assumed at acquisition, of approximately $5,067,000. The seven buildings contain approximately 182,200 gross leasable area. The Bluegrass Property was built during 1976-77 and 1979-80 and was 91% leased with 43 tenants upon acquisition. The acquisition was made subject to a nonrecourse first mortgage loan collateralized by the property in the original principal amount of approximately $2,707,000. The loan bears interest at a fixed rate of 8%, matures on April 25, 2001, and requires monthly payments based upon a twenty year amortization schedule with a balloon payment of approximately $2,320,000 upon maturity. On December 5, 1995, a subsidiary of the Trust acquired a 100% ownership interest in the Lexington Business Center (the "Lexington Property") located in southeastern Lexington, Kentucky for a purchase price, including liabilities assumed at acquisition, of approximately $7,080,000. The Lexington Property was built in 1985 and consists of three office buildings and one distribution facility containing approximately 316,200 gross leasable area situated on 21.4 acres of land. The Trust utilized approximately $1,170,000 of cash reserves for the acquisition with the remaining balance of the acquisition price being provided for by the Trust's $30,000,000 line of credit. See Liquidity and Capital Resources for details regarding the Trust's line of credit. Management is working to obtain permanent long term third party financing during 1996 or early 1997 to repay the amount drawn under the line of credit. Upon acquisition, the Lexington Property had fourteen tenants which leased approximately 74% of the gross leasable area. On December 5, 1995, a subsidiary of the Trust acquired a 100% ownership interest in the Newtown Distribution Center (the "Newtown Property") located in northern Lexington, Kentucky for a purchase price, including liabilities assumed at acquisition, of approximately $3,586,000. The Newtown Property was built in 1981 - 1982 and consists of three office buildings and one warehouse/distribution facility containing approximately 87,100 gross leasable area situated on 6.6 acres of land. The Trust utilized approximately $596,000 of cash reserves for the acquisition with the remaining balance of the acquisition price being provided for by a draw of cash proceeds pursuant to the Trust's $30,000,000 line of credit. See Liquidity and Capital Resources for details regarding the Trust's line of credit. Management is working to obtain permanent long term third party financing during 1996 or early 1997 to repay the amount drawn under the line of credit. Upon acquisition, the Newtown Property had eighteen tenants which occupied approximately 97% of the gross leaseable area. On December 19, 1995, BSRT Woodcrest Office Park Limited Partnership ("BWOPLP"), a joint venture between a subsidiary of the Trust, which is the general partner, and Mr. Daniel Smith ("Smith"), as limited partner, acquired the Woodcrest Office Park (the "Woodcrest 25 28 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Property") located in Tallahassee, Florida for a purchase price, including liabilities assumed at acquisition, of approximately $11,017,000. The Woodcrest Property consists of eighteen buildings containing approximately 265,900 gross leasable area covering 25.1 acres, of which 20.6 acres are developed. The remaining 4.5 acres the Trust believes are suitable for development of up to an additional 96,000 square feet of commercial office space. The property was built over a twenty-two year period between 1967 and 1989. Upon acquisition, the aggregate occupancy of the property was 95%. The Trust contributed approximately $3,750,000 in equity to the partnership for its 85% interest, while Mr. Smith contributed $250,000 for his 15% interest. Pursuant to the terms of the BWOPLP partnership agreement, cash flow from operations will be first distributed to the Trust in an amount equal to a cumulative preferred return of 12% compounded annually on its total capital contribution and then Mr. Smith is entitled to a cumulative compounded 12% preferred return on his capital contribution. Any excess cash proceeds from the property's operation after payment of the required preferred returns is then distributed 85% to the Trust and 15% to Mr. Smith in accordance with the partners' ownership interests in the partnership. Upon the sale or refinancing of the property, cash proceeds shall be distributed as follows: a) repayment of debt and any expenses associated with the sale or refinancing of the property; b) to the Trust for any unpaid cumulative preferred return; c) repayment of the Trust's total equity contribution to the partnership; d) to the Trust in the amount that cumulative distributions of cash flow from operations of the property are less than the equivalent of a 15% per annum return on its contributed equity on a non-compounded basis; e) to Mr. Smith for any unpaid cumulative preferred return; f) repayment of Mr. Smith's total net equity contribution; and g) any remaining proceeds are to be distributed pro-rata, 85% to the Trust and 15% to Mr. Smith. The Trust funded its equity contribution pursuant to a draw of cash proceeds under the Trust's line of credit. See Liquidity and Capital Resources for further details on the Trust's line of credit. Effective February 27, 1995, Lincoln Properties Co. ("Lincoln"), an unaffiliated third party, took over the management of the day to day operations and leasing of the Colonial Courts and Hallmark properties. Lincoln receives 4% of gross rental receipts on the Colonial Courts property as a management fee. The management fee on the Hallmark property was 4.5% through August 31, 1995 and 4% thereafter of gross rental receipts. The former management company, Lake Realty Management Co. ("Lake Realty"), owns a 10% limited partnership interest in both of these properties. The termination of Lake Realty as the management company did not affect Lake Realty's rights as a partner in either property. On June 22, 1995, the Plaza at Westminster property was sold to an unaffiliated third party for $7,525,000 which resulted in a net gain of approximately $1,333,000 after prorations for closing costs of approximately $300,000. The Trust's share of the cash proceeds was 26 29 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) approximately $2,218,000 which resulted in the Trust's share of the net gain of approximately $409,000. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Consolidated Financial Statements on Page F-1 of this Report. See Item 6, Selected Financial Data, for the supplemental financial information specified by Item 302 of Regulation S-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in, or disagreements with, the accountants on any matter of accounting principles, practices or financial statement disclosure. 27 30 PART III ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT The trustees and executive officers of the Trust are as follows: Walter E. Auch, Sr. Trustee Norman M. Gold Trustee Marvin A. Sotoloff Trustee Leonard G. Levine President Neil D. Hansen First Vice President Robert G. Higgins Vice President and Secretary/ General Counsel Joel L. Teglia Vice President/Chief Financial Officer Jay E. Schmidt Vice President/Acquisitions WALTER E. AUCH, SR., age 74, was the chairman and chief executive officer of the Chicago Board Options Exchange. Prior to that time, he was executive vice president, director and a member of the executive committee of PaineWeber. Mr. Auch is a director of Pimco L.P., Geotek Industries, Smith Barney Concert Series Funds, Smith Barney Trak Fund, Nicholas Applegate Funds and Fort Dearborn Fund, and a trustee of Hillsdale College and the Arizona Heart Institute. Mr. Auch has been a trustee of the Trust since 1986. Mr. Auch is also a director of Banyan Strategic Land Fund II, Banyan Mortgage Investment Fund and Banyan Management Corp. NORMAN M. GOLD, age 65, is a senior partner in the law firm of Altheimer & Gray and has actively practiced law for over 40 years, specializing in taxation, corporate and real estate law. Mr. Gold is also a trustee of Banyan Short Term Income Trust and director of Banyan Management Corp. and a trustee of New Plan Realty Trust. Mr. Gold has been a trustee of the Trust since 1986. Mr. Gold is a certified public accountant and a member of the Chicago and American Bar Associations. MARVIN A. SOTOLOFF, age 52, is regional vice president of Premisys Marketing Services, Inc., effective July 1993, a division of Premisys Real Estate Services, Inc.. Prior to joining Premisys Marketing Services, Inc., Mr. Sotoloff was executive vice president of The Palmer Group Ltd., a company involved in real estate brokerage, development and property management, concentrating on commercial real estate. He is a past president of the Chicago Office Leasing Brokers Association, a licensed real estate broker and a member of the Illinois and Pennsylvania Bar Associations. Mr. Sotoloff has been a trustee of the Trust since 1986. Mr. Sotoloff is also a trustee of Banyan Short Term Income Trust and a director of Banyan Management Corp. 28 31 ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED) LEONARD G. LEVINE, age 49, has been president of the Trust as well as Banyan Management Corp., Banyan Short Term Income Trust, Banyan Strategic Land Fund II and Banyan Mortgage Investment Fund since 1990. He received a B.S./B.A. Degree in Accounting from Roosevelt University and a Masters Degree in Taxation from DePaul University. His areas of specialization include real estate syndications, estate planning and taxation of closely-held corporations. Mr. Levine is also a certified public accountant and a licensed real estate broker. NEIL D. HANSEN, age 49, has been first vice president of the Trust as well as Banyan Management Corp., Banyan Mortgage Investment Fund, Banyan Short Term Income Trust and Banyan Strategic Land Fund II since 1991. He received a B.S. Degree in Finance from the University of Illinois and a Master of Management Degree from Northwestern University. He is a certified public accountant. ROBERT G. HIGGINS, age 44, has been vice president and general counsel of the Trust as well as Banyan Management Corp., Banyan Mortgage Investment Fund, Banyan Short Term Income Trust and Banyan Strategic Land Fund II since 1992, and secretary of these entities since 1995. From 1990 to 1992, Mr. Higgins was a contract partner at the law firm of Chapman and Cutler. Mr. Higgins' legal experience has concentrated in the areas of real estate development, finance, acquisition, land use, sales, lending, syndications, general corporate and business practice. Mr. Higgins is admitted to the bar in the States of Illinois, Minnesota and Texas. He received a B.A. Degree in Government from the University of Notre Dame and a J.D. from Loyola University of Chicago. JOEL L. TEGLIA, age 34, has been vice president and chief financial officer of the Trust, as well as Banyan Management Corp., Banyan Mortgage Investment Fund, Banyan Short Term Income Trust and Banyan Strategic Land Fund II since 1994. Prior to assuming the responsibilities of his current position, Mr. Teglia held the position of Controller for Banyan Management Corp. from 1991 to 1994. He received a B.B.A. Degree in Accounting from the University of Notre Dame. Mr. Teglia is a certified public accountant. JAY E. SCHMIDT, age 44, became vice president of the Trust in 1995. Prior to being appointed as a vice president of the Trust, Mr. Schmidt served as vice president of acquisitions for Banyan Management since 1992 as an acquisition executive on behalf of the Trust. Prior to 1992, Mr. Schmidt had been an independent real estate consultant and broker. He received a B.A. degree in Government from Franklin & Marshall College and a J.D. from the University of Wisconsin. Mr. Schmidt is admitted to the bar in the State of Wisconsin and is a licensed real estate broker. 29 32 ITEM 11. EXECUTIVE COMPENSATION A. TRUSTEE COMPENSATION The Trustees are paid an annual fee of $15,000, payable quarterly, plus $875 for each board meeting, including meetings of the audit committee, attended in person and $250 an hour for each board meeting, including meetings of the audit committee, attended via telephonic conference call. In addition, each Trustee is reimbursed for out-of-pocket expenses incurred in attending meetings of the board. B. EXECUTIVE COMPENSATION Compensation paid to executive officers of the Trust for the years ended December 31, 1995, 1994 and 1993 are as follows:
Annual Compensation(1) Other Annual Compen- Year Salary Bonus sation Leonard G. Levine, 1995 $184,812 $111,739 n/a President and Chief 1994 $179,900 $ --- n/a Executive Officer 1993 $175,000 $ --- n/a (2) Jay E. Schmidt, 1995 $148,136 $ 27,000 n/a Vice President/ 1994 n/a n/a n/a Acquisitions (3) 1993 n/a n/a n/a
Long-Term Compensation(1) Awards Payouts Restricted All Other Stock Options/ LTIP Compen- Year Award(s) SARs (#) Payouts sation Leonard G. Levine, 1995 $24,899 n/a n/a n/a President and Chief 1994 n/a n/a n/a n/a Executive Officer 1993 n/a n/a n/a n/a (2) Jay E. Schmidt, 1995 n/a n/a n/a n/a Vice President/ 1994 n/a n/a n/a n/a Acquisitions (3) 1993 n/a n/a n/a n/a
(1) Compensation for all other executives of the Trust for 1995, 1994 and 1993 was less than $100,000 per individual. (2) See incentive compensation program disclosure below. (3) Mr. Schmidt's 1995 bonus was discretionary and based upon job performance pursuant to an annual review by Mr. Levine and the Board of Trustees. Mr. Schmidt is not awarded any other compensation by the Trust or Banyan Management Corp. 30 33 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Mr. Levine serves as Chief Executive Officer of the Trust pursuant to an employment agreement entered into with the Trust by Mr. Levine on January 1, 1990. The Agreement expires on December 31, 1997. Under the contract, Mr. Levine is paid a salary equal to $184,812 per year. His base salary is adjusted on January 1 of each year based on increases in the "consumer price index". Mr. Levine is eligible to receive compensation under an incentive program included in his contract. Effective January 1, 1993, Mr. Levine earns incentive compensation based on the recovery on foreclosed real estate assets owned by the Trust as of December 31, 1992 and on the performance of the Trust's reinvestment activities. See Item 7, Management's Discussion and Analysis, for further details regarding the Trust's foreclosed and reinvestment activities. In particular, Mr. Levine will earn incentive compensation on foreclosed real estate assets equal to: (i) 1% of the amount of the Trust's collateralized claims which are converted to cash, and (ii) 3% of the Trust's unsecured claims which are converted to cash. Mr. Levine is paid incentive compensation earned on the Trust's foreclosed activities as soon as practical after the end of each calendar year without regard to whether he is employed by the Trust on the date of payment. Mr. Levine's annual incentive compensation earnings from reinvestment activities are based on reinvestment returns, adjusted for unrealized losses, to the Trust in excess of a set index, based on the annual yield of five-year Treasury Rate plus 100 basis points as of January 1 of each year, according to the following: (i) $500 for each basis point by which the Trust's rate of return from reinvestment activities exceeds the above index up to 500 basis points, and (ii) $250 per each basis point by which the rate of return from reinvestment activities exceeds the above index plus 500 basis points. The index for the year ended December 31, 1995 was 8.88%. Incentive compensation earned on reinvestment activities is paid 80% in cash and 20% in shares ("Award Shares") of the Trust on March 15 of the year following the period for which the incentive was earned. The Award Shares are subject to forfeiture and certificates representing the Award Shares are held by the Trust pending satisfaction of the vesting requirements, for the benefit of Mr. Levine until the earlier of (i) December 31, 1997; (ii) the termination of Mr. Levine's employment by the Trust without just cause; or (iii) the permanent disability or death of Mr. Levine. For the year ended December 31, 1995, Mr. Levine's incentive compensation earned on recovery of foreclosed activities and returns on reinvestment activities was $36,185 and $38,500, respectively. The $36,185 in incentive compensation earned by Mr. Levine during 1995 on recovery of foreclosed assets is broken down as follows: $19,315 pursuant to item (i) and $16,870 pursuant to item (ii) as discussed above. In 1996, Mr. Levine will be paid $66,985 representing 80% of his 1995 incentive in cash and 1,833 Award Shares valued at $4.20 per share or $7,700 representing 20% in Award Shares of the Trust. As of December 31, 1994, Mr. Levine's incentive compensation earned on recovery of foreclosed activities and return on reinvestment activities was $12,139 and $124,500, respectively. The $12,139 incentive compensation earned by Mr. Levine during 1994 on recovery of foreclosed assets is pursuant to item (ii) as discussed above. Payment of Mr. Levine's 1994 incentive compensation occurred during the second quarter of 1995 with the payment of $111,740 representing 31 34 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) 80% of his incentive in cash and 6,036 Award Shares valued at $4.125 per share or $24,899 representing 20% in Award Shares of the Trust pursuant to his employment contract. For the year ended December 31, 1993, Mr. Levine did not earn any incentive compensation from foreclosed activities or reinvestment activities. Either Mr. Levine or the Trust can terminate the employment agreement at any time upon 90 days written notice. If the Trust terminates the agreement for cause, or Mr. Levine voluntarily terminates, the Trust will pay all salary and incentive compensation earned through the date of termination. In the event of Mr. Levine's death or permanent disability, he is entitled to all incentive compensation earned through the date of his disability or death plus any disability or life insurance proceeds in the amount of two times his annual salary which is consistent with standard insurance benefits of all Banyan Management Corp. personnel, but he is not entitled to any other severance payments. If his employment is terminated without cause following a change of control (as defined in the employment agreement) the Trust is obligated to pay Mr. Levine's salary during the remainder of the employment period and must pay him all incentive compensation which he would have earned if all the Trust's assets had been converted into cash and all proceeds were distributed. If Mr. Levine is terminated without cause but no change of control has occurred, he will receive a severance payment equal to one year's salary plus all incentive compensation earned through the date of his termination (including incentive compensation based upon assets converted into cash within one year following his termination of the Trust had he received an "expression of interest" prior to Mr. Levine's termination), plus an amount equal to the full cost of continuing Mr. Levine's health benefits for one year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following entities are known by the Trust to be the beneficial owners of more than 5% of the outstanding shares of beneficial interest as of March 18, 1996.
Amount of Title of Class Name and Address of Beneficial Percentage Beneficial Owners Ownership of Shares Shares of Fidelity Management & 1,150,550 10.98% Beneficial Research Corp. Interest 82 Devonshire Street Boston, MA 02109 Shares of Magten Asset Management Corp. 1,232,000 11.76% Beneficial 350 East 21st Street Interest New York, NY 10010
32 35 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTINUED) The following table sets forth the ownership of shares owned directly and indirectly by the trustees and officers of the Trust as of March 18, 1996:
Amount of Title of Beneficial Percentage Class Beneficial Owner Ownership of Interest Shares of Leonard G. Levine, 15,036 Shares Less than 1% Beneficial President Interest Shares of Neil D. Hansen, 4,373 Shares Less than 1% Beneficial First Vice President Interest Shares of Jay E. Schmidt 2,000 Shares Less than 1% Beneficial Vice President Interest Shares of All Trustees and 21,409 Shares Less than 1% Beneficial Officers of the Trust, Interest as a group (8 persons)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Administrative costs, primarily salaries and general and administrative expenses, are reimbursed by the Trust to Banyan Management Corp. ("BMC"). BMC is owned by the Trust, Banyan Strategic Land Fund II, Banyan Mortgage Investment Fund and Banyan Short Term Income Trust (the "Banyan Funds"). Mr. Levine is the president of BMC for which he receives no compensation. Messrs. Teglia, Hansen, Higgins and Schmidt are employees of the Trust but are actually paid by BMC. The portion of their time which is allocable to the Trust is included in the administrative costs for which BMC is reimbursed by the Trust. The directors/trustees of all Banyan Funds serve as directors of BMC but receive no additional compensation. All costs incurred on behalf of BMC for the Trust are allocable to the Trust and other Banyan Funds to which BMC provides administrative services based upon the actual number of hours spent by BMC personnel on matters related to that particular entity. The Trust's allocated share of costs for the years ended December 31, 1995, 1994 and 1993, aggregated $1,443,434, $1,185,409 and $783,922, 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 December 31, 1995, the Trust had a net payable due to BMC of $176,527. Reference is made to Note 10, "Transactions with Affiliates," of Notes to the Consolidated Financial Statements for the amount of administrative costs paid to, and a description of various transactions with, BMC. 33 36 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: (1)(2) The financial statements indicated in Part II, Item 8, Financial Statements and Supplementary Data. (3) Exhibits The following exhibits are incorporated by reference from the Trust's Registration Statement on Form S-11 (file number 33- 4169), referencing the exhibit number used in such Registration Statement. Exhibit Number Description (3)(b) By-Laws (3)(c) Amended and Restated Declaration of Trust Exhibit Number Description Exhibit (10) Material Contracts (i) Second Amendment of Leonard G. Levine's Employment Contract dated December 31, 1992. (ii) Amendment to Loan Agreement dated December 1, 1994; Second Amendment to Loan Agreement dated December 21, 1994; and Third Amendment to Loan Agreement dated December 18, 1995 regarding the Registrant's $30,000,000 Revolving Line of Credit with American National Bank of Chicago. (iii) First Amendment to Note dated December 18, 1995 regarding the Registrant's $30,000,000 Revolving Line of Credit with American National Bank of Chicago. Exhibit (21) Subsidiaries of the Trust 34 37 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) (b) The following report on Form 8-K was filed during the quarter ended December 31, 1995: A current report on Form 8-K was filed on December 20, 1995 wherein Item 2 disclosed the Registrant's acquisition of the Newtown Distribution Center and Lexington Business Center property. (c) See Item 14(a)(3) above. (d) None. An annual report will be sent to the shareholders subsequent to this filing and the Trust will furnish copies of such reports to the Commission at that time. 35 38 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: April 4, 1996 Leonard G. Levine, President PURSUANT to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Leonard G. Levine Date: April 4, 1996 Leonard G. Levine, President By: /s/ Joel L. Teglia Date: April 4, 1996 Joel L. Teglia, Vice President of Finance and Administration, Chief Financial and Accounting Officer By: /s/ Norman M. Gold Date: April 4, 1996 Norman M. Gold, Trustee By: /s/ Walter E. Auch, Sr. Date: April 4, 1996 Walter E. Auch, Sr., Trustee By: /s/ Marvin A. Sotoloff Date: April 4, 1996 Marvin A. Sotoloff, Trustee 36 39 BANYAN STRATEGIC REALTY TRUST INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pages Report of Independent Auditors F-2 Consolidated Balance Sheets, December 31, 1995 and 1994 F-3 to F-8 Consolidated Statements of Income and Expenses For the Years Ended December 31, 1995, 1994 and 1993 F-9 to F-14 Consolidated Statements of Shareholders' Equity For the Years Ended December 31, 1995, 1994 and 1993 F-15 Consolidated Statements of Cash Flows For the Years Ended December 31, 1995, 1994 and 1993 F-16 to F-24 Notes to Consolidated Financial Statements F-25 to F-44 All schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and notes thereto. F-1 40 REPORT OF INDEPENDENT AUDITORS TO THE SHAREHOLDERS OF BANYAN STRATEGIC REALTY TRUST We have audited the accompanying consolidated balance sheets of Banyan Strategic Realty Trust as of December 31, 1995 and 1994, and the related consolidated statements of income and expenses, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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 consolidated financial position of Banyan Strategic Realty Trust at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The supplemental information segregating the Trust's investment and foreclosed activities appearing in conjunction with the consolidated financial statements is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information has been subjected to the auditing procedures applied in our audits of the consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole. ERNST & YOUNG LLP Chicago, Illinois February 15, 1996 F-2 41 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994
Consolidated Consolidated 1995 1994 ASSETS Cash and Cash Equivalents $ 5,500,215 $ 14,769,170 Interest Receivable on Investments 70,352 82,180 Interest Receivable on Mortgage Loans 60,780 55,106 Accounts Receivable 528,029 107,672 Due from Affiliates --- 730,229 Investment Securities --- 1,017,236 ------------ ------------ 6,159,376 16,761,593 ------------ ------------ Mortgage Loans Receivable (Net of Unamortized Discount of $1,436,587 and $1,808,716, Respectively) 5,433,094 5,136,229 Investment in Real Estate, at cost: Land 12,809,994 6,182,494 Building 74,343,233 33,152,589 Building Improvements 3,046,838 1,863,219 ------------ ------------ 90,200,065 41,198,302 Less: Accumulated Depreciation (2,337,095) (1,036,890) ------------ ------------ 87,862,970 40,161,412 ------------ ------------ Investment in Real Estate Ventures 8,895,678 10,697,791 Deferred Financing Costs (Net of Accumulated Amortization of $224,020 and $21,411, Respectively) 1,188,174 793,649 Other Assets 1,225,480 533,677 ------------ ------------ Total Assets $110,764,772 $ 74,084,351 ============ ============
F-3 42 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (Continued)
Consolidated Consolidated 1995 1994 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts Payable and Accrued Expenses $ 1,339,056 $ 821,804 Accrued Real Estate Taxes 703,919 666,567 Mortgage Loans Payable 43,522,181 7,900,695 Bond Payable 5,500,000 5,500,000 Accrued Interest Payable 93,325 26,005 Unearned Revenue 94,002 19,729 Security Deposit Liabilities 439,135 203,659 Other Liabilities 7,652 290,331 ------------ ------------ Total Liabilities 51,699,270 15,428,790 ------------ ------------ Minority Interest in Consolidated Partnerships 2,190,098 214,849 Shareholders' Equity Shares of Beneficial Interest, No Par Value, Unlimited Authorization; 11,999,787 and 11,993,751 Shares Issued, Respectively 106,687,212 106,662,313 Accumulated Deficit (42,445,859) (40,855,652) Treasury Shares at Cost, 1,522,649 Shares (7,365,949) (7,365,949) ------------ ------------ Total Shareholders' Equity 56,875,404 58,440,712 ------------ ------------ Total Liabilities and Share- holders' Equity $110,764,772 $ 74,084,351 ============ ============ Book Value Per Share of Bene- ficial Interest (10,477,138 and 10,471,102 Shares Outstanding, respectively) $ 5.43 $ 5.58 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-4 43 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995 AND 1994
Supplemental Information Investment Investment Activities Activities 1995 1994 ASSETS Cash and Cash Equivalents $ 4,052,692 $ 13,077,182 Interest Receivable on Investments 30,080 58,422 Interest Receivable on Mortgage Loans 60,780 55,106 Accounts Receivable 528,029 107,672 Due from Affiliates --- --- Investment Securities --- 1,017,236 ------------ ------------ 4,671,581 14,315,618 ------------ ------------ Mortgage Loans Receivable (Net of Unamortized Discount of $1,436,587 and $1,808,716, Respectively) 5,433,094 5,136,229 Investment in Real Estate, at cost: Land 12,809,994 6,182,494 Building 74,343,233 33,152,589 Building Improvements 3,046,838 1,863,219 ------------- ------------ 90,200,065 41,198,302 Less: Accumulated Depreciation (2,337,095) (1,036,890) ------------- ------------ 87,862,970 40,161,412 -------------- ------------ Investment in Real Estate Ventures --- --- Deferred Financing Costs (Net of Accumulated Amortization of $224,020 and $21,411 Respectively) 1,188,174 793,649 Other Assets 737,593 408,353 ------------ ------------ Total Assets $ 99,893,412 $ 60,815,261 ============ ============
F-5 44 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995 AND 1994 (Continued)
Supplemental Information Investment Investment Activities Activities 1995 1994 LIABILITIES Liabilities Accounts Payable and Accrued Expenses $ 1,120,751 $ 641,435 Accrued Real Estate Taxes 703,919 666,567 Mortgage Loans Payable 43,522,181 7,900,695 Bond Payable 5,500,000 5,500,000 Accrued Interest Payable 93,325 26,005 Unearned Revenue 94,002 19,729 Security Deposit Liabilities 439,135 203,659 Other Liabilities --- --- ------------ ------------ Total Liabilities 51,473,313 14,958,090 ------------ ------------ Minority Interest in Consolidated Partnerships 2,190,098 214,849
The accompanying notes are an integral part of the consolidated financial statements. F-6 45 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995 AND 1994
Supplemental Information Foreclosed Foreclosed Activities Activities 1995 1994 ASSETS Cash and Cash Equivalents $ 1,447,523 $ 1,691,988 Interest Receivable on Investments 40,272 23,758 Interest Receivable on Mortgage Loans --- --- Accounts Receivable --- --- Due from Affiliates --- 730,229 Investment Securities --- --- ------------ ------------ 1,487,795 2,445,975 ------------ ------------ Mortgage Loans Receivable --- --- Investment in Real Estate, at cost: Land --- --- Building --- --- Building Improvements --- --- ------------ ------------ --- --- Less: Accumulated Depreciation --- --- ------------ ------------ --- --- ------------ ------------ Investment in Real Estate Ventures 8,895,678 10,697,791 Deferred Financing Costs --- --- Other Assets 487,887 125,324 ------------ ------------ Total Assets $ 10,871,360 $ 13,269,090 ============ ============
F-7 46 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995 AND 1994 (Continued)
Supplemental Information Foreclosed Foreclosed Activities Activities 1995 1994 LIABILITIES Liabilities Accounts Payable and Accrued Expenses $ 218,305 $ 180,369 Accrued Real Estate Taxes --- --- Mortgage Loans Payable --- --- Bond Payable --- --- Accrued Interest Payable --- --- Unearned Revenue --- --- Security Deposit Liabilities --- --- Other Liabilities 7,652 290,331 ------------ ------------ Total Liabilities 225,957 470,700 ------------ ------------ Minority Interest in Consolidated Partnerships --- ---
The accompanying notes are an integral part of the consolidated financial statements. F-8 47 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Consolidated Consolidated Consolidated 1995 1994 1993 INCOME Income From Property Operating Activities: Industrial $ 3,009,068 $ 2,166,804 $ 916,543 Residential 3,312,687 3,126,833 1,083,721 Commercial 3,071,831 2,199,438 --- Retail 1,838,272 --- --- ------------ ------------ ------------ Total Income From Property Operating Activities 11,231,858 7,493,075 2,000,264 ------------ ----------- ----------- Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans 1,036,052 959,565 229,167 Income on Investments 634,459 381,161 1,897,718 ------------ ----------- ----------- Total Income From Lending and Investing Activities 1,670,511 1,340,726 2,126,885 ------------ ----------- ----------- Total Income 12,902,369 8,833,801 4,127,149 ------------ ----------- ----------- EXPENSES Expenses From Property Operating Activities: Operating Property Expenses 680,912 339,291 94,305 Repairs and Maintenance 1,256,444 823,669 137,675 Real Estate Taxes 1,153,797 723,857 299,862 Interest Expense 1,535,787 342,700 80,753 Ground Lease Expense 256,452 --- --- Property Management Fees 414,139 277,300 67,814 Payroll Expense 469,083 497,547 202,993 Utilities Expense 722,366 551,643 114,109 Depreciation and Amortization 1,334,992 875,949 187,453 ------------ ----------- ----------- Total Expenses From Property Operating Activities 7,823,972 4,431,956 1,184,964 ------------ ----------- -----------
F-9 48 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Consolidated Consolidated Consolidated 1995 1994 1993 Other Expenses: Shareholder Expenses 184,292 174,668 160,956 Trustees' Fees, Expenses and Insurance 397,245 425,467 438,304 Other Professional Fees 229,551 207,402 351,028 General and Administrative 1,892,055 1,645,680 779,258 Amortization of Deferred Loan Fees and Financing Costs 234,056 49,361 11,439 Mortgage Loan Commitment Settlement Costs --- --- 220,000 Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses (164,958) (192,212) (57,072) ------------ ----------- ----------- Total Other Expenses 2,772,241 2,310,366 1,903,913 ------------ ----------- ----------- Total Expenses 10,596,213 6,742,322 3,088,877 ------------ ----------- ----------- Income (Loss) Before Minority Interest, Income (Loss) from Real Estate Ventures and Gain on Disposition of Property 2,306,156 2,091,479 1,038,272 Minority Interest in Con- solidated Partnerships (178,114) (55,718) (42,162) Income (Loss) from Real Estate Ventures 472,003 (2,994,361) (1,613,382) Gain on Disposition of Property --- 46,108 --- ------------ ----------- ----------- Net Income (Loss) $ 2,600,045 $ (912,492) $ (617,272) ============ =========== =========== Earnings (Loss) Per Share of Beneficial Interest (10,474,079, 10,471,102 and 10,518,047 Weighted Average Shares Out- standing, respectively) $ 0.25 $ (0.09) $ (0.06) ============ =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-10 49 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Supplemental Information Investment Investment Investment Activities Activities Activities 1995 1994 1993 INCOME Income From Property Operating Activities: Industrial $ 3,009,068 $ 2,166,804 $ 916,543 Residential 3,312,687 3,126,833 1,083,721 Commercial 3,071,831 2,199,438 --- Retail 1,838,272 --- --- ------------ ------------ ------------ Total Income From Property Operating Activities 11,231,858 7,493,075 2,000,264 ------------ ------------ ------------ Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage Loans 1,036,052 959,565 229,167 Income on Investments 495,368 235,738 1,782,450 ------------ ----------- ----------- Total Income From Lending and Investing Activities 1,531,420 1,195,303 2,011,617 ------------ ----------- ----------- Total Income 12,763,278 8,688,378 4,011,881 ------------ ----------- ----------- EXPENSES Expenses From Property Operating Activities: Operating Property Expenses 680,912 339,291 94,305 Repairs and Maintenance 1,256,444 823,669 137,675 Real Estate Taxes 1,153,797 723,857 299,862 Interest Expense 1,535,787 342,700 80,753 Ground Lease Expense 256,452 --- --- Property Management Fees 414,139 277,300 67,814 Payroll Expense 469,083 497,547 202,993 Utilities Expense 722,366 551,643 114,109 Depreciation and Amortization 1,334,992 875,949 187,453 ------------ ----------- ----------- Total Expenses From Property Operating Activities 7,823,972 4,431,956 1,184,964 ------------ ----------- -----------
F-11 50 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Supplemental Information Investment Investment Investment Activities Activities Activities 1995 1994 1993 Other Expenses: Shareholder Expenses 55,805 26,559 14,782 Trustees' Fees, Expenses and Insurance 28,664 24,813 3,250 Other Professional Fees 168,886 116,519 62,743 General and Administrative 1,460,788 1,292,464 523,254 Amortization of Deferred Loan Fees and Financing Costs 234,056 49,361 11,439 Mortgage Loan Commitment Settlement Costs --- --- --- Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses --- --- --- ------------ ----------- ----------- Total Other Expenses 1,948,199 1,509,716 615,468 ------------ ----------- ----------- Total Expenses 9,772,171 5,941,672 1,800,432 ------------ ----------- ----------- Income (Loss) Before Minority Interest, Income (Loss) from Real Estate Ventures and Gain on Disposition of Property 2,991,107 2,746,706 2,211,449 Minority Interest in Conso- lidated Partnerships (178,114) (55,718) (42,162) Income (Loss) from Real Estate Ventures --- --- --- Gain on Disposition of Property --- 46,108 --- ------------ ----------- ----------- Net Income (Loss) $ 2,812,993 $ 2,737,096 $ 2,169,287 ============ ============ ============ Earnings (Loss) Per Share of Beneficial Interest (10,474,079, 10,471,102 and 10,518,047 Weighted Average Shares Outstanding, respectively) $ 0.27 $ 0.26 $ 0.21 ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-12 51 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Supplemental Information Foreclosed Foreclosed Foreclosed Activities Activities Activities 1995 1994 1993 INCOME Income From Property Operating Activities: Industrial $ --- $ --- $ --- Residential --- --- --- Commercial --- --- --- Retail --- --- --- ------------ ------------ ------------ Total Income From Property Operating Activities --- --- --- ------------ ------------ ------------ Income From Lending and Investing Activities: Interest and Amortized Discount on Mortgage --- --- --- Loans Income on Investments 139,091 145,423 115,268 ------------ ------------ ------------ Total Income From Lending and Investing Activities 139,091 145,423 115,268 ------------ ------------ ------------ Total Income 139,091 145,423 115,268 ------------ ------------ ------------ EXPENSES Expenses From Property Operating Activities: Operating Property Expenses --- --- --- Repairs and Maintenance --- --- --- Real Estate Taxes --- --- --- Interest Expense --- --- --- Ground Lease Expense --- --- --- Property Management Fees --- --- --- Payroll Expense --- --- --- Utilities Expense --- --- --- Depreciation and Amortization --- --- --- ------------ ------------ ------------ Total Expenses From Property Operating Activities --- --- --- ------------ ------------ ------------
F-13 52 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES (SUPPLEMENTAL INFORMATION) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Supplemental Information Foreclosed Foreclosed Foreclosed Activities Activities Activities 1995 1994 1993 Other Expenses: Shareholder Expenses 128,487 148,109 146,174 Trustees' Fees, Expenses and Insurance 368,581 400,654 435,054 Other Professional Fees 60,665 90,883 288,285 General and Administrative 431,267 353,216 256,004 Amortization of Deferred Loan Fees and Financing Costs --- --- 220,000 Mortgage Loan Commitment Settlement Costs --- --- --- Recovery of Losses on Loans, Notes, Interest receivable and Class Action Settlement Costs and Expenses (164,958) (192,212) (57,072) -------------- ------------- ------------ Total Other Expenses 824,042 800,650 1,288,445 ------------- ------------ ------------ Total Expenses 824,042 800,650 1,288,445 ------------- ----------- ----------- Income (Loss) Before Minority Interest, Income (Loss) from Real Estate Ventures and Gain on Disposition of Property (684,951) (655,227) (1,173,177) Minority Interest in Consolidated Partnerships --- --- --- Income (Loss) from Real Estate Ventures 472,003 (2,994,361) (1,613,382) Gain on Disposition of Property --- --- --- ------------ ------------ ------------ Net Income (Loss) $ (212,948) $ (3,649,588) $ (2,786,559) ============ ============ ============ Earnings (Loss) Per Share of Beneficial Interest (10,474,079, 10,471,102 and 10,518,047 Weighted Average Shares Outstanding, respectively) $ (0.02) $ (0.35) $ (0.26) ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-14 53 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Shares of Beneficial Interest Accumulated Treasury Shares Amount Deficit Shares Total Shareholders' Equity, December 31, 1992 11,993,751 $106,662,313 $(30,915,520) $(6,156,368) $ 69,590,425 Acquisition of 258,265 Shares of Treasury Shares, at cost --- --- --- (1,209,581) (1,209,581) Net Loss --- --- (617,272) --- (617,272) Dividends Declared --- --- (4,221,927) --- (4,221,927) ----------- ----------- ------------ ----------- ------------ Shareholders' Equity, December 31, 1993 11,993,751 106,662,313 (35,754,719) (7,365,949) 63,541,645 Net Loss --- --- (912,492) --- (912,492) Dividends Declared --- --- (4,188,441) --- (4,188,441) ---------- ------------ ------------ ----------- ------------ Shareholders' Equity, December 31, 1994 11,993,751 106,662,313 (40,855,652) (7,365,949) 58,440,712 Award Shares Issued 6,036 24,899 --- --- 24,899 Net Income --- --- 2,600,045 --- 2,600,045 Dividends Declared --- --- (4,190,252) --- (4,190,252) ----------- ------------ ------------ ----------- ------------ Shareholders' Equity, December 31, 1995 11,999,787 $106,687,212 $(42,445,859) $(7,365,949) $ 56,875,404 =========== ============ ============ =========== ============
The accompanying notes are an integral part of the consolidated financial statements. F-15 54 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Consolidated Consolidated Consolidated 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 2,600,045 $ (912,492) $ (617,272) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses (164,958) (57,226) (57,072) Gain on Disposition of Property --- (46,108) --- Amortization of Premium on Investment Securities 10,596 66,474 432,193 Depreciation and Amortization 1,569,048 925,310 198,892 Amortization of Discount on Mortgage Loans Receivable (372,129) (307,920) (65,914) Net (Income) Loss From Real Estate Ventures (472,003) 2,994,361 1,613,382 Minority Interest Participation in Consolidated Partnerships 178,114 55,718 42,162 Incentive Compensation Expense 3,500 28,300 --- Net Change In: Interest Receivable on Mortgage Loans and Investments 6,154 88,074 130,901 Accounts Receivable (420,357) 91,281 (197,184) Other Assets (213,082) (323,072) (58,819) Accounts Payable and Accrued Expenses 239,718 93,961 413,265 Accrued Interest Payable 67,320 (571) 26,576 Accrued Real Estate Tax Payable 10,753 368,469 299,029 Unearned Revenue 70,709 2,271 12,935 Security Deposit Liabilities 16,479 16,361 20,981 ----------- ----------- ----------- Net Cash Provided By (Used In) Operating Activities 3,129,907 3,083,191 2,194,055 ----------- ----------- -----------
F-16 55 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Continued) Consolidated Consolidated Consolidated 1995 1994 1993 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Real Estate Assets (47,818,144) (18,650,295) (20,738,967) Proceeds From Sale of Investment in Real Estate Venture 2,217,558 --- --- Distributions From (Investment In) Real Estate Ventures, Net 56,558 (23,820) (361,499) Additions to Investment in Real Estate (1,183,619) (647,367) (1,215,852) Payment of Liabilities Assumed at Acquisition of Real Estate Assets 34,585 (374,519) 573,345 Other Liabilities (282,679) 290,331 --- Proceeds From Sale of Real Estate --- 97,435 --- Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses 164,958 114,298 --- Principal Payments of Investment Securities --- 12,991,276 49,289,961 Proceeds from Sale and Maturities of Invest- ment Securities 2,500,000 --- --- Purchase of Investment Securities (1,493,360) (1,017,236) (24,495,423) Investment Securities Sold to Affiliates --- 1,372,373 --- Principal Collections on Mortgage Loans Receivable 43,817 36,742 6,907 Investment in Mortgage Loans Receivable --- (4,771) (4,840,662) Due from Affiliates 730,229 (442,354) (287,875) ----------- ----------- ----------- Net Cash (Used In) Provided By Investing Activities (45,030,097) (6,257,907) (2,070,065) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Bond and Mortgage Loans Payable 35,806,807 9,500,000 4,000,000
F-17 56 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Consolidated Consolidated Consolidated 1995 1994 1993 Minority Interest Share of Real Estate Investments 1,797,135 (69,840) 186,809 Deferred Financing Costs (597,134) (718,099) (96,961) Principal Payments on Mortgage Loans Payable (185,321) (85,678) (13,627) Acquisition of Treasury Shares --- --- (1,296,816) Dividends Paid to Shareholders (4,190,252) (4,188,441) (4,221,927) ----------- ----------- ----------- Net Cash Provided By (Used In) Financing Activities 32,631,235 4,437,942 (1,442,522) ----------- ----------- ----------- Net (Decrease) Increase In Cash and Cash Equivalents (9,268,955) 1,263,226 (1,318,532) Cash and Cash Equivalents at Beginning of Year 14,769,170 13,505,944 14,824,476 ----------- ----------- ----------- Cash and Cash Equivalents at End of Year $ 5,500,215 $14,769,170 $13,505,944 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-18 57 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995, 1994 AND 1993
Investment Investment Investment Activities Activities Activities 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 2,812,993 $ 2,737,096 $ 2,169,287 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses --- --- --- Gain on Disposition of Property --- (46,108) --- Amortization of Premium on Investment Securities 10,596 66,474 432,193 Depreciation and Amortization 1,569,048 925,310 198,892 Amortization of Discount on Mortgage Loans Receivable (372,129) (307,920) (65,914) Net (Income) Loss From Real Estate Ventures --- --- --- Minority Interest Partici- pation in Consolidated Partnerships 178,114 55,718 42,162 Incentive Compensation Expense 3,500 28,300 --- Net Change In: Interest Receivable on Mortgage Loans and Investments 22,668 78,898 163,835 Accounts Receivable (420,357) 91,281 (197,184) Other Assets 149,481 (285,300) (146,786) Accounts Payable and Accrued Expenses 201,782 134,741 449,039 Accrued Interest Payable 67,320 (571) 26,576 Accrued Real Estate Tax Payable 10,753 368,469 299,029 Unearned Revenue 70,709 2,271 12,935 Security Deposit Liabilities 16,479 16,361 20,981 ----------- ----------- ----------- Net Cash Provided By (Used In) Operating Activities 4,320,957 3,865,020 3,405,045 ----------- ----------- -----------
F-19 58 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Investment Investment Investment Activities Activities Activities 1995 1994 1993 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Real Estate Assets (47,818,144) (18,650,295) (20,738,967) Proceeds from Sale of Investment in Real Estate Venture --- --- --- Distributions From (Investment In) Real Estate Ventures, Net --- --- --- Additions to Investment in Real Estate (1,183,619) (647,367) (1,215,852) Payment of Liabilities Assumed at Acquisition of Real Estate Assets 34,585 (374,519) 573,345 Other Liabilities --- --- --- Proceeds From Sale of Real Estate --- 97,435 --- Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses --- --- --- Principal Payments of Investment Securities --- 12,991,276 49,289,961 Proceeds from Sale and Maturities of Investment Securities 2,500,000 --- --- Purchase of Investment Securities (1,493,360) (1,017,236) (24,495,423) Investment Securities Sold to Affiliates --- 1,372,373 --- Principal Collections on Mortgage Loans Receivable 43,817 36,742 6,907 Investment in Mortgage Loans Receivable --- (4,771) (4,840,662) Due from Affiliates --- --- --- Transfer of Cash From Foreclosed Activities to Investment Activities 1,940,039 --- --- ----------- ----------- ----------- Net Cash (Used In) Provided By Investing Activities (45,976,682) (6,196,362) (1,420,691) ----------- ----------- -----------
F-20 59 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Investment Investment Investment Activities Activities Activities 1995 1994 1993 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Bond and Mortgage Loans Payable 35,806,807 9,500,000 4,000,000 Minority Interest Share of Real Estate Investments 1,797,135 (69,840) 186,809 Deferred Financing Costs (597,134) (718,099) (96,961) Principal Payments on Mortgage Loans Payable (185,321) (85,678) (13,627) Acquisition of Treasury Shares --- --- (1,296,816) Dividends Paid to Shareholders (4,190,252) (3,434,167) (4,221,927) ----------- ----------- ----------- Net Cash Provided By (Used In) Financing Activities 32,631,235 5,192,216 (1,442,522) ----------- ----------- ----------- Net (Decrease) Increase In Cash and Cash Equivalents (9,024,490) 2,860,874 541,832 Cash and Cash Equivalents at Beginning of Year 13,077,182 10,216,308 9,674,476 ----------- ----------- ----------- Cash and Cash Equivalents at End of Year $ 4,052,692 $13,077,182 $10,216,308 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-21 60 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995, 1994 AND 1993
Foreclosed Foreclosed Foreclosed Activities Activities Activities 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ (212,948) $(3,649,588) $(2,786,559) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used In) Operating Activities: Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses (164,958) (57,226) (57,072) Gain on Disposition of Property --- --- --- Amortization of Premium on Investment Securities --- --- --- Depreciation and Amortization --- --- --- Amortization of Discount on Mortgage Loans Receivable --- --- --- Net (Income) Loss From Real Estate Ventures (472,003) 2,994,361 1,613,382 Minority Interest Participation in Consolidated Partnerships --- --- --- Incentive Compensation Expense --- --- --- Net Change In: Interest Receivable on Mortgage Loans and Investments (16,514) 9,176 (32,934) Accounts Receivable --- --- --- Other Assets (362,563) (37,772) 87,967 Accounts Payable and Accrued Expenses 37,936 (40,780) (35,774) Accrued Interest Payable --- --- --- Accrued Real Estate Tax Payable --- --- --- Unearned Revenue --- --- --- Security Deposit Liabilities --- --- --- ----------- ----------- ----------- Net Cash Provided By (Used In) Operating Activities (1,191,050) (781,829) (1,210,990) ----------- ----------- -----------
F-22 61 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Foreclosed Foreclosed Foreclosed Activities Activities Activities 1995 1994 1993 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Real Estate Assets --- --- --- Proceeds From Sale of Investment in Real Estate Venture 2,217,558 --- --- Distributions From (Investment In) Real Estate Ventures, Net 56,558 (23,820) (361,499) Additions to Investment in Real Estate --- --- --- Payment of Liabilities Assumed at Acquisition of Real Estate Assets --- --- --- Other Liabilities (282,679) 290,331 --- Proceeds From Sale of Real Estate --- --- --- Recovery of Losses on Loans, Notes, Interest Receivable and Class Action Settlement Costs and Expenses 164,958 114,298 --- Principal Payments of Investment Securities --- --- --- Proceeds from Sale and Maturities of Investment Securities --- --- --- Purchase of Investment Securities --- --- --- Investment Securities Sold to Affiliates --- --- --- Principal Collections on Mortgage Loans Receivable --- --- --- Investment in Mortgage Loans Receivable --- --- --- Due from Affiliates 730,229 (442,354) (287,875) Transfer of Cash From Foreclosed Activities to Investment Activities (1,940,039) --- --- ---------- ------- -------- Net Cash (Used In) Provided By Investing Activities 946,585 (61,545) (649,374) ---------- ------- --------
F-23 62 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (SUPPLEMENTAL INFORMATION) DECEMBER 31, 1995, 1994 AND 1993 (Continued)
Foreclosed Foreclosed Foreclosed Activities Activities Activities 1995 1994 1993 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Bond and Mortgage Loans Payable --- --- --- Minority Interest Share of Real Estate Investments --- --- --- Deferred Financing Costs --- --- --- Principal Payments on Mortgage Loans Payable --- --- --- Acquisition of Treasury Shares --- --- --- Dividends Paid to Shareholders --- (754,274) --- ----------- ----------- ----------- Net Cash Provided By (Used In) Financing Activities --- (754,274) --- ----------- ----------- ----------- Net (Decrease) Increase In Cash and Cash Equivalents (244,465) (1,597,648) (1,860,364) Cash and Cash Equivalents at Beginning of Year 1,691,988 3,289,636 5,150,000 ----------- ----------- ----------- Cash and Cash Equivalents at End of Year $ 1,447,523 $ 1,691,988 $ 3,289,636 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-24 63 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PRESENTATION Banyan Strategic Realty Trust (the "Trust") was organized as a business trust under the laws of the Commonwealth of Massachusetts, pursuant to a Declaration of Trust filed March 14, 1986 under the name VMS Strategic Land Trust. 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. 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 real estate assets acquired in prior years through foreclosure (the "Foreclosed Activities"). Investment Activities assets include (1) interests in real estate assets comprised of six industrial buildings, two apartment complexes, four commercial office buildings, a retail center and a portfolio of mortgage loans, (2) the Trust's investment securities and (3) the portion of the Trust's cash and cash equivalents not allocated to Foreclosed Activities as described below. Foreclosed Activities assets include (1) the Trust's investments in real estate joint ventures comprised of the 53 percent interest in the H Street Assemblage and the 30.7 percent interest in the Plaza at Westminster (sold in June 1995) and (2) an allocated portion of the Trust's cash and cash equivalents considered sufficient for costs associated with the ongoing operation of the real estate joint ventures as well as costs and expenses associated with maintaining the Trust. The supplemental information on the accompanying consolidated statements of income and expenses reflects the specifically identifiable income and expenses of each activity and an allocation of the Trust's other expenses. Other expenses allocated to Investment Activities represent the incremental costs of managing the related assets. Other expenses allocated to Foreclosed Activities represent all such expenses not allocated to Investment Activities. The Trust accounts for the Investment Activities of real estate by including 100% of the assets, liabilities, revenues and expenses of each property and reflects the limited partners share of such items as a Minority Interest in Consolidated Partnerships on the balance sheet and income statement. F-25 64 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. DEFERRED FINANCING COSTS Deferred financing costs are amortized over the term of the related loans using the level yield method. C. INVESTMENT SECURITIES Investment securities are classified as available for sale and carried at fair value, as determined by quoted market prices, with unrealized gains and losses reflected in the Statement of Shareholders' Equity. Realized gains and losses are determined on a specific identification basis. The basis of investment securities is adjusted for amortization of premiums and discounts using the level yield method. D. INVESTMENT IN REAL ESTATE In March 1995, the Financial Accounting Standards Board has issued Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" ("FAS 121"), under which the Trust would be required to recognize impairment losses for its properties when indicators of impairment are present and a property's expected undiscounted cash flows are not sufficient to recover the property's carrying amount. The Trust adopted FAS 121 in the fourth quarter effective January 1, 1995 with no effect on the accompanying financial statements. E. REVENUE RECOGNITION Interest income is accrued when earned. The accrual of interest is discontinued when the borrower acknowledges its inability to make payments or when payments become contractually delinquent ninety days or more, unless the loan is in the process of collection. Once a loan has been placed in a non-accrual status, all cash received is applied against the outstanding loan balance until such time as the borrower has demonstrated an ability to make payments under the terms of the then current loan agreement. That portion of accrued interest income which the Trust considers to be unlikely of collection is reflected in the accompanying consolidated statements of income and expenses in the provision for losses on loans, notes and interest receivable. However, the Trust intends to pursue collection of all amounts contractually due from the borrowers. F. MORTGAGE LOANS RECEIVABLE Mortgage loans receivable in the accompanying consolidated balance sheets are presented at net carrying value, which represents the outstanding principal less unamortized purchased mortgage loan discounts plus any associated unamortized deferred loan costs. Unamortized purchased mortgage loan discounts and associated deferred loan costs are amortized over the term of the loan using the level yield method. F-26 65 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Financial Accounting Standards Board has issued Statements of Financial Accounting Standards Nos. 114 and 118 ("FAS 114/118"), "Accounting by Creditors for Impairment of a Loan". The adoption of FAS 114/118 by the Trust effective January 1, 1995 has not had any impact on the carrying value of the Trust's mortgage loans or financial statements as of December 31, 1995. G. MARKET VALUE ADJUSTMENT OF FINANCIAL INSTRUMENTS The Trust adopted in 1995 Statement of Financial Accounting Standards No. 107 ("FAS 107"), "Disclosures about Fair Value of Financial Instruments," which requires entities to disclose the fair value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in FAS 107 as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Trust believes the carrying amount of its financial instruments approximates fair value at December 31, 1995, based upon (i) fixed rates on mortgage loans payable and receivable are comparable to rates currently offered in the market, (ii) the mortgage loan receivable in default at January 1, 1996 is recorded at fair value of the underlying collateral, (iii) the variable rates on the line of credit and bond payable and (iv) the relatively short maturity of the Trust's cash equivalents. The Trust has no other financial instruments. H. INCOME TAXES For the years ended December 31, 1995, 1994 and 1993, the Trust continued to be treated as a real estate investment trust ("REIT") under Internal Revenue Code Sections 856-860. In order to qualify, the Trust was required to distribute at least 95% of its taxable income to shareholders and meet asset and income tests as well as certain other requirements. As of December 31, 1995, Mortgage Loans Receivable, Investment in Real Estate and Investment in Real Estate Ventures has a basis of $4,757,794, $87,900,893 and $12,318,688, respectively, for income tax purposes. Additionally, investment in liquidating trust with a tax basis of $856,669 has not been accorded any value for financial reporting purposes. As of December 31, 1995, the Trust has a net operating loss carry-forward of approximately $11,500,000 which will expire in 2005, 2006 and 2008. F-27 66 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. CASH EQUIVALENTS The Trust considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. J. USE OF ESTIMATES The preparation 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. K. RECLASSIFICATIONS Certain reclassifications have been made to the previously reported 1994 and 1993 consolidated financial statements in order to provide comparability with the 1995 consolidated financial statements. These reclassifications have not changed the 1994 or 1993 results. F-28 67 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. MORTGAGE LOANS RECEIVABLE The Trust's mortgage loan portfolio at December 31, 1995 consists of the following mortgage loans:
Borrower/Property Pledged as Collateral/ Interest Rate/ Face Carrying Interest Maturity Date Amount Amount Receivable Wateld Associates I $ 55,566 $ 38,803 $ 509 office condominium unit Interest Rate: 11% (a) Maturity Date: 06/01/97 Wateld Associates II 95,422 75,189 875 office condominium unit Interest Rate: 11% (b) Maturity Date: 06/01/98 Wateld Associates III 417,235 330,564 2,938 office condominium unit Interest Rate: 8.45% (c) Maturity Date: 03/20/15 RAW, Ltd. 366,323 293,459 3,470 vacant land parcel Interest Rate: 11% (d) Maturity Date: 09/15/98 Karfad Associates 5,849,266 4,695,079 52,988 six contiguous parcels of land Interest Rate: 10.52% (e) Maturity Date: 11/01/98 ----------- ----------- ----------- Total Investment in Mortgage Loans Receivable $ 6,783,812 $ 5,433,094 $ 60,780 =========== =========== ===========
(a) The loan has an interest rate of 11% with principal and interest payments due monthly over a thirty year amortization period and a balloon payment on June 1, 1997. The loan is collateralized by a Deed of Trust and Security Agreement secured by an office condominium unit located in Fairfax, Virginia. The loan is jointly and severally guaranteed by the individual general partners of the borrower, Wateld Associates. The loan allows for prepayment with no penalty at any time during the loan period. During 1995, the Trust received payments of principal and interest on the loan of $32,285 and $8,068, respectively. F-29 68 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. MORTGAGE LOANS RECEIVABLE (Continued) (b) The loan has an interest rate of 11% with principal and interest payments due monthly over a thirty year amortization period and a balloon payment on June 1, 1998. The loan is collateralized by a Deed of Trust and Security Agreement secured by an office condominium unit located in Fairfax, Virginia. The loan is jointly and severally guaranteed by the individual general partners of the borrower, Wateld Associates. The loan allows for prepayment with no penalty at any time during the loan period. During 1995, the Trust received payments of principal and interest on the loan of $2,605 and $10,654, respectively. (c) During the term of the loan, every April 1 interest shall be adjusted to accrue on the unpaid principal balance at a rate equal to the one year U.S. Treasury Securities rate plus 2%, rounded to the nearest 0.125%. A decrease or increase in such rate is limited to 2% over the prior annual interest rate. The current interest rate for the loan as of December 31, 1995 is 8.45%. Principal and interest payments are due monthly over a thirty year amortization period. The loan is collateralized by a Deed of Trust and Security Agreement secured by an office condominium development located in Fairfax County, Virginia. The loan is jointly and severally guaranteed by two of the general partners of the borrower, Wateld Associates. The loan allows for prepayment with no penalty at any time during the loan period. During 1995, the Trust received payments of principal and interest on the loan of $8,927 and $33,242, respectively. (d) The loan requires payment of interest only at an initial rate of 10% through September 15, 1995, and increases to 11%, 11.5% and 12% in years three, four and five, respectively. The borrower had the right to prepay the loan without penalty in increments of $10,000 on a quarterly basis. The loan is jointly and severally guaranteed by the partners of RAW, Ltd. The loan is collateralized by a Deed of Trust secured by a vacant land parcel located in Falls Church, Virginia. During 1995, the Trust received payments of interest of $37,915. (e) From November 1, 1993 through October 31, 1995 the interest rate on the loan was prime plus 1.25%, or 9.5%. Effective November 1, 1995 through October 31, 1998 the interest rate was adjusted to the greater of 9.5% or 4.9% over the three-year U.S. Treasury Securities rate at November 1, 1995. The interest rate for the loan as of December 31, 1995 is 10.52%. The loan currently requires payment of interest only; however, the loan will begin amortizing over a 25 year period beginning November 1, 1996. The loan is collateralized by a Deed of Trust secured by six contiguous parcels of land located in Fairfax County, Virginia. The loan is jointly and severally guaranteed by the individual general partners of the borrower, Karfad Associates. Prepayment of principal is permitted without premium or penalty provided that principal payments are paid quarterly in minimum increments of $100,000. During 1995, the Trust received payments of interest on the loan of $568,370. F-30 69 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. MORTGAGE LOANS RECEIVABLE (Continued) (e) (continued) Karfad Associates failed to make the required interest payment due on January 1, 1996. The Trust has provided proper notice to the Borrower and all grace and cure periods regarding the loan have subsequently lapsed. In an effort to assert its rights and protect its interest, the Trust declared the loan in default on January 30, 1996. The repayment of the principal balance has been accelerated and the Trust has initiated foreclosure proceedings. Management expects to fully recover all monetary obligations due under the loan from either repayment by the Borrower and/or its guarantors or a sale of the underlying collateral.
1995 1994 1993 Reconciliation of Net Investment in Mortgage Loans Receivable: Balance at Beginning of Year $ 5,136,229 $ 4,891,462 $ --- Additions During Year: New Mortgage Loans --- --- 6,871,278 Deferred Loan Costs --- 4,771 151,934 Discount on Mortgage Loans Receivable --- --- (2,182,550) Amortization of Dis- count on Mortgage Loans Receivable 372,129 307,920 65,914 ----------- ----------- ----------- 372,129 312,691 4,906,576 ----------- ----------- ----------- Deductions During Year: Principal Collections on Mortgage Loans (43,817) (36,742) (6,907) Amortization of De- ferred Loan Costs (31,447) (31,182) (8,207) ----------- ----------- ----------- (75,264) (67,924) (15,114) ----------- ----------- ----------- Balance at End of Year $ 5,433,094 $ 5,136,229 $ 4,891,462 =========== =========== ===========
F-31 70 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. MORTGAGE LOANS AND BOND PAYABLE The properties of the Trust as described below are subject to mortgage loans and bond payable at December 31, 1995 and 1994 as follows:
Mortgage Mortgage Loans and Loans and Cash Basis Bond Payable Bond Payable Annual Final Estimated Interest Property Pledged Balance Balance as Interest Maturity Periodic Balloon Paid in as Collateral as of of Rate Date Payment Payment 1995 12/31/95 12/31/94 FIRST MORTGAGES: Milwaukee Indust- $ 3,799,835 $ 3,900,695 8% 10/01/98 $ 33,458 $3,511,074 $334,088 rial Portfolio, Metropolitan Milwaukee, Wisconsin Elmhurst Metro 3,954,132 4,000,000 8.83% 01/01/00 $ 33,103 3,730,074 350,628 Court, Elmhurst, Illinois Colonial Courts 5,500,000 5,500,000 (a) 12/01/24 (a) 5,500,000 227,299 of Westland Apts., Columbus, Ohio (a) Willowbrook Industrial 2,629,974 --- 8.5% 07/01/02 $22,050 2,281,280 121,658 Court, Willowbrook, Illinois Northlake Tower Shopping 10,350,000 --- 8.5% 08/01/05 $73,313 10,350,000 376,338 Center, Atlanta, Georgia Bluegrass Corporate 2,688,240 --- 8% 04/25/01 $22,641 2,320,254 57,711 Center, Jefferson County, Kentucky FIRST MORTGAGE LINE OF CREDIT: Collateralized by the 20,100,000 --- (b) 12/14/97 (b) 20,100,000 --- Trust's various property interests (b) ----------- ----------- $49,022,181 $13,400,695 ----------- -----------
F-32 71 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. MORTGAGE LOANS AND BOND PAYABLE (CONTINUED) The principal balance of the Trust's mortgage loans and bond are scheduled to be repaid as follows: 1996 $ 252,688 1997 20,374,341 1998 3,768,320 1999 194,883 2000 3,865,146 Thereafter 20,566,803 ----------- Total $49,022,181 -----------
(a) On December 14, 1994, the Trust's subsidiary which acquired title to the Colonial Courts property, completed a $5,500,000 tax-exempt bond financing in connection with the Colonial Courts property. The bond is collateralized by a $5,624,315 letter of credit as a draw against the Trust's line of credit (see Note 3(b) below, for further details). The Trust is required to pay a fee of 1% annually of the face amount of the letter of credit. Pursuant to the bond financing, the Trust was required to deposit approximately $388,000 into a restricted cash account held by the bond holder for future renovations to the property. Subsequent to December 31, 1995, all property renovations were completed and the $388,000 was released to the Trust. The bond has a thirty year term and requires monthly payments of interest only based upon the weekly low floater tax-exempt bond rate. The weekly low floater bond rate as of December 31, 1995 equaled 5.3%. (b) On December 13, 1994, the Trust executed a Mortgage Loan Commitment (the "Original Line") with a Bank in the amount of $15,000,000. The Original Line was a revolving line of credit with an initial term of two years. The Original Line also provided for a one year extension subsequent to the initial two year term with a balloon payment of principal required upon maturity, December 14, 1997. During the initial term and any extension, the Trust was required to pay interest only at the rate of LIBOR plus 2.25% or Prime plus .25% at the election of the Trust. The Trust paid the Bank a one-time non-refundable commitment fee of $75,000 or one half of one percent of the $15,000,000 Original Line upon its closing. A letter of credit fee of one percent of the amount of the then outstanding Letter of Credit balance was required to be paid quarterly. Mortgages on certain of the Trust's properties and its mortgage loans receivable served as collateral for the Original Line. No amounts were outstanding under the Original Line as of December 31, 1994. On December 15, 1995, the Trust modified its Original Line (the "Modified Line") with the Bank. Under the Modified Line the Trust may borrow up to $30,000,000. In addition, the availability of the line was extended from December 14, 1996 to December 14, 1997. The Trust provided the Bank additional collateral consisting of mortgages on certain properties as well as pledges of the Trust's subsidiaries stock or partnership interest in the entities owning said properties. The Trust also paid a loan fee upon execution of the Modified Line in the amount of $75,000, or .5% of the increase in the Original Line. All other terms, as provided for under the Original Line, remain unchanged. In addition, the Trust is required to pay the Bank an unused facility fee of.5% per annum multiplied by the average portion F-33 72 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. MORTGAGE LOANS AND BOND PAYABLE (CONTINUED) (b) (continued) of the Modified Line that is undrawn from time-to-time. As of December 31, 1995, the Trust had utilized approximately $25,725,000 of the $30,000,000 available under the Modified Line. Of the $25,725,000, approximately $5,625,000 has been utilized in conjunction with the Bank's issuance of a letter of credit which serves as collateral for the Trust's tax-exempt bond financing in the amount of $5,500,000 (see above). The remaining $20,100,000 has been utilized by the Trust for its acquisitions of properties. Draws under the Modified Line require monthly payment of interest only until maturity and currently bear interest at a blend of thirty, sixty and one hundred and twenty-day LIBOR rates plus 2.25% or approximately 7.5% to 8.5% per annum. 4. GROUND LEASE On July 28, 1995, BSRT/M&J Northlake Limited Partnership, a joint venture between a subsidiary of the Trust and M&J Wilkow Retail Ltd., acquired a leasehold interest in a shopping center in Atlanta, Georgia pursuant to a ground lease with a remaining term of sixty-two years. The ground lease requires annual lease payments of $600,000 or $50,000 per month through October 4, 2007 plus 7% of total annual gross rental income commencing when gross rental income exceeds $2,000,000 from the operations of the Northlake Property. The ground lease also requires that the Trust pay property operating expenses, including real estate taxes. F-34 73 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INVESTMENT IN REAL ESTATE As of December 31, 1995, the Trust's investment in real estate consisted of the following:
Initial Cost Capitalized Property & Location/ Cost to Subsequent to Date of Construction/ the Trust Acquisition Date Acquired/ Buildings & Buildings & Method of Depreciation Land Improvements Land Improvements Milwaukee Industrial $ 532,800 $ 5,242,243 $ --- $ 485,502 Portfolio Milwaukee, WI (c) 1973-1980 4/30/93 Colonial Courts of 697,034 2,947,186 --- 1,699,780 Westland Apartments, Columbus, OH (c) 1963 6/17/93 Hallmark Village Apartments 448,000 5,625,670 --- 470,606 Clarksville, IN (c) 1972 9/28/93 Elmhurst Metro Court 1,615,360 3,604,358 --- 216,323 Elmhurst, IL (c) 1982 11/30/93 Colonial Penn Office 1,189,300 7,366,210 --- --- Building, Tampa Bay, FL (c) 1984 3/22/94 Florida Power & Light Office 1,700,000 8,366,922 --- 78,277 Building, Sarasota, FL (c) 1991 3/22/94 Willowbrook Industrial Court 962,500 2,961,039 --- 89,403 Willowbrook, IL (c)(d) 1979 6/16/95 Northlake Tower Shopping --- 17,143,993 --- 3,021 Center, Atlanta, GA (c)(e) 1983-1984 7/28/95 Bluegrass Corporate Center 900,000 4,167,185 --- 1,809 Louisville, KY (c)(f) 1976-1980 9/26/95 Lexington Business Center 1,330,000 5,750,243 --- --- Lexington, KY (c)(f) 1985 12/05/95
F-35 74 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INVESTMENT IN REAL ESTATE (CONTINUED)
Initial Cost Capitalized Property & Location/ Cost to Subsequent to Date of Construction/ the Trust Acquisition Date Acquired/ Buildings & Buildings & Method of Depreciation Land Improvements Land Improvements Newtown Distribution Center 355,000 3,231,360 --- --- Lexington, KY (c)(f) 1981-1982 12/05/95 Woodcrest Office Park Tallahassee, FL (c)(f) 1967-1989 12/19/95 3,080,000 7,936,824 --- 2,117 ----------- ----------- ---------- ----------- $12,809,994 $74,343,233 $ --- $ 3,046,838 =========== =========== ========== ===========
F-36 75 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INVESTMENT IN REAL ESTATE (CONTINUED)
Gross Amount at which Carried Property & Location/ at December 31, 1995 (a)(b) Date of Construction/ Date Acquired/ Buildings & Accumulated Method of Depreciation Land Improvements Total Depreciation Milwaukee Industrial $ 532,800 $ 5,727,745 $ 6,260,545 $ 441,300 Portfolio Milwaukee, WI (c) 1973-1980 4/30/93 Colonial Courts of 697,034 4,646,966 5,344,000 308,793 Westland Apartments, Columbus, OH (c) 1963 6/17/93 Hallmark Village Apartments 448,000 6,096,276 6,544,276 387,929 Clarksville, IN (c) 1972 9/28/93 Elmhurst Metro Court 1,615,360 3,820,681 5,436,041 211,152 Elmhurst, IL (c) 1982 11/30/93 Colonial Penn Office 1,189,300 7,366,210 8,555,510 327,317 Building, Tampa Bay, FL (c) 1984 3/22/94 Florida Power & Light Office 1,700,000 8,445,199 10,145,199 377,149 Building, Sarasota, FL (c) 1991 3/22/94 Willowbrook Industrial Court 962,500 3,050,442 4,012,942 46,173 Willowbrook, IL (c)(d) 1979 6/16/95 Northlake Tower Shopping --- 17,147,014 17,147,014 183,184 Center, Atlanta, GA (c)(e) 1983-1984 7/28/95 Bluegrass Corporate Center 900,000 4,168,994 5,068,994 27,765 Louisville, KY (c)(f) 1976-1980 9/26/95 Lexington Business Center 1,330,000 5,750,243 7,080,243 11,976 Lexington, KY (c)(f) 1985 12/05/95
F-37 76 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INVESTMENT IN REAL ESTATE (CONTINUED)
Gross Amount at which Carried Property & Location/ at December 31, 1995 (a)(b) Date of Construction/ Date Acquired/ Buildings & Accumulated Method of Depreciation Land Improvements Total Depreciation Newtown Distribution Center 355,000 3,231,360 3,586,360 6,730 Lexington, KY (c)(f) 1981-1982 12/05/95 Woodcrest Office Park Tallahassee, FL (c)(g) 1967-1989 12/19/95 3,080,000 7,938,941 11,018,941 7,627 ----------- ----------- ------------ ----------- $12,809,994 $77,390,071 $ 90,200,065 $ 2,337,095 =========== =========== ============ ===========
(a) The aggregate cost of the above real estate at December 31, 1995 for Federal income tax purposes is $90,200,065. For further details regarding encumbrances on the Trust's properties see Note 3, Mortgage Loans and Bond Payable. (b) Reconciliation of real estate owned:
1995 1994 1993 Balance at Beginning of Year $41,198,302 $21,954,819 $ --- Acquisitions During Year 47,818,144 18,650,295 20,738,967 Sale of Property --- (54,179) --- Additions During Year 1,183,619 647,367 1,215,852 ----------- ----------- ----------- Balance at End of Year $90,200,065 $41,198,302 $21,954,819 =========== =========== ===========
(c) Depreciation expense is computed using the straight line method. Rates used in the determination of depreciation are based upon the estimated useful life of the asset, primarily 40 years. Reconciliation of Accumulated Depreciation:
1995 1994 1993 Beginning of Year $1,036,890 $ 185,348 $ --- Depreciation Expense 1,300,205 853,063 185,348 Sale of Property --- (1,521) --- ---------- ---------- --------- Balance at End of Year $2,337,095 $1,036,890 $ 185,348 ========== ========== =========
F-38 77 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INVESTMENT IN REAL ESTATE (CONTINUED) (d) On June 16, 1995, Banyan/Morgan Milwaukee Limited Partnership ("BMMLP"), a joint venture between a subsidiary of the Trust, which is a general partner, and Morgan Realty Partners ("Morgan"), acquired the Willowbrook Industrial Court property (the "Willowbrook Property"). 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, which included $200,000 in reserves held by BMMLP for property improvements and lease-up. The terms of the BMMLP partnership agreement, as originally established at the time of the acquisitions of the Milwaukee Industrial and the Elmhurst Metro Court properties, were amended effective July 1, 1995 as a result of the Willowbrook Property acquisition by BMMLP. Pursuant to the amended BMMLP partnership agreement, any excess cash flow from operations, after each of the Trust and Morgan receives its 12% and 11% preferred return, respectively, on contributed equity, will be allocated 85% to the Trust and 15% to Morgan. The amendment was adopted as a result of the increase in additional equity contributed by Morgan of $370,000. The BMMLP ownership percentage changes which occurred upon acquisition of the Willowbrook Property, as mentioned above, became effective July 1, 1995 for financial reporting purposes. (e) 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 leasehold interest in a shopping center known as the Northlake Tower Shopping Center ("Northlake Property"). The Trust is to contribute in total $6,000,000 to BMJNLP for an approximate 80% interest, while Wilkow is to contribute in total approximately $1,500,000 for the remaining 20% interest which included approximately $550,000 in reserves held by BMJNLP for property improvements, lease-up and other closing prorations. 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 capital contribution and then to Wilkow until it has received a 12% cumulative return on its capital contribution. Any excess cash flow will be allocated 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 distributed first to the Trust to the extent that the 12% annual preferred return has not been received. Next, distributions will be made to the Trust and Wilkow on a pro-rata basis in an amount equal to their respective equity contributions. Thereafter, distributions will be made to Wilkow to the extent that its 12% annual preferred return has not been received. In the event there are any remaining proceeds to be distributed and the average annual return to the Trust during the period that BMJNLP owned the Northlake Property is equal to or greater than 15%, Wilkow will receive 30% of any remaining proceeds. (f) A subsidiary of the Trust acquired a 100% ownership interest in the property. (g) On December 19, 1995, BSRT Woodcrest Office Park Limited Partnership ("BWOPLP"), a joint venture between a subsidiary of the Trust, which is a general partner, and Mr. Daniel Smith ("Smith") acquired the Woodcrest Office Park (the "Woodcrest Property"). The Trust contributed approximately $3,750,000 in equity to the partnership for its 85% interest, while Mr. Smith contributed $250,000 for his 15% interest. Pursuant to the terms of the BWOPLP partnership agreement, cash flow from operations will be first distributed to the Trust in an amount equal to a cumulative preferred return of 12% compounded annually on its total capital contribution and then Mr. Smith is entitled to a cumulative compounded 12% preferred return on his capital contribution. Any excess cash proceeds from the property's operation after payment of the required preferred returns is then distributed 85% to the Trust and 15% to Mr. Smith in accordance with the partners' ownership interests in the partnership. Upon the sale or refinancing of the property, cash proceeds shall be distributed as follows: a) repayment of debt and any expenses associated with the sale or refinancing of the property; b) to the Trust for any unpaid cumulative F-39 78 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INVESTMENT IN REAL ESTATE (CONTINUED) (g) (Continued) preferred return; c) repayment of the Trust's total equity contribution to the partnership; d) to the Trust in the amount that cumulative distributions of cash flow from operations of the property are less than the equivalent of a 15% per annum return on its contributed equity on a non-compounded basis; e) to Mr. Smith for any unpaid cumulative preferred return; f) repayment of Mr. Smith's total net equity contribution; and g) any remaining proceeds are to be distributed pro-rata, 85% to the Trust and 15% to Mr. Smith. 6. PRO FORMA INFORMATION The following unaudited pro forma summary presents the results of operations of the Trust as if the 1995 and 1994 property acquisitions had occurred at the beginning of 1994, after giving effect to certain adjustments, including increased depreciation and interest expense. The unaudited pro forma summary information does not necessarily reflect the results of operations as they would have been if the Trust acquired the properties on January 1, 1994.
Year Ended December 31, (Unaudited) 1995 1994 Revenues $21,529,656 $20,331,275 Net Income $ 4,690,738 $ 1,942,800 Earnings Per Share of Beneficial Interest $ 0.45 $ 0.19
7. INVESTMENT IN JOINT VENTURES H STREET ASSEMBLAGE On December 11, 1990, the Trust acquired title to the property known as the Victor Building located in Washington D.C. pursuant to an agreement with Banyan Strategic Land Fund II ("BSLFII"). This property consists of 17,000 square feet of undeveloped land in downtown Washington, D.C. plus an approximately 55,900 square foot office building. The entire property is zoned for office development. On June 5, 1992, the Trust and BSLFII formed a joint venture (the "Venture") to pursue its development rights. The Trust has a 53% interest in the Venture while BSLFII has the remaining 47%. The Trust's carrying value for the Venture at December 31, 1995 was $8,895,678. In April 1993, the Venture terminated a Modified Option effective May 1, 1993. In conjunction with the termination, the F-40 79 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INVESTMENT IN JOINT VENTURES (CONTINUED) option parcel owner is required to pay monthly rent of $12,002 for the use of a portion of the H Street Assemblage property. The Venture recorded a write off of a $2,300,000 non-refundable deposit on the option parcels on the termination date, of which the Trust's share, $1,219,000, is included in the Loss from Operations of Real Estate Ventures in the Trust's 1993 Statement of Income and Expenses. The Venture has completed and obtained the zoning, entitlement and historic preservation for the development of an approximately 330,000 square foot commercial building on the H Street Assemblage. In December 1994, the Venture determined that it would be in its best interest to initiate marketing efforts to sell the property rather than assume the risk associated with the development of the property, thereby necessitating a $5,500,000 valuation allowance. The Trust's share, $2,915,000, is included in the loss from operations of real estate ventures in the Trust's 1994 Statement of Income and Expenses. Summary financial information (unaudited) for the H Street Assemblage as of December 31, 1995, 1994 and 1993 is as follows:
1995 1994 1993 Investment Property Net $16,039,027 $16,096,527 $21,654,026 Other Assets 255,923 23,014 19,251 Other Liabilities (276,780) (206,131) (223,896) Venture Partners' Equity (7,122,492) (7,093,058) (9,694,964) ----------- ----------- ----------- Trust's Equity $ 8,895,678 $ 8,820,352 $11,754,417 =========== =========== =========== Total Revenues $ 469,337 $ 406,315 $ 373,496 =========== =========== =========== Net Income (Loss) $ 71,252 $(6,009,317) $(3,413,522) =========== =========== ===========
PLAZA AT WESTMINSTER On August 7, 1991, THSP Limited Partnership II ("THSP") (formerly known as Banyan Mortgage Investors L.P. III, a former affiliate), received a deed to the property known as the Plaza at Westminster pursuant to a foreclosure sale. 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 $7,525,000 which resulted in a net gain of approximately $1,333,000 after prorations for closing costs of approximately $300,000. The Trust's share of the cash proceeds was approximately $2,218,000 which resulted in the Trust's share of the net gain of approximately $409,000. The Trust's share of income generated from the operations of Westminster for the years ended December 31, 1995, 1994 and 1993 was $24,950 (prior to sale), $190,577 and $195,785, respectively. F-41 80 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. INVESTMENT SECURITIES At December 31, 1994, the Trust held an investment security issued by the Federal Farm Credit Bank which was acquired on December 1, 1994 and matured on April 3, 1995. The security had a face amount of $1,020,000, an interest rate of 4.43% and an amortized cost and estimated fair value at December 31, 1994 of $1,017,236. The Trust did not hold any investment securities at December 31, 1995. 9. DUE FROM AFFILIATES The Trust has entered into a partnership agreement with BSLFII regarding the ownership and operation of the H Street Assemblage (the "H Street Venture"). See Note 7, Investment in Joint Ventures, for further details. 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. As of December 31, 1995, the H Street advances, and all interest thereon, made by the Trust have been repaid in full by BSLFII. 10. 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 Trust 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 particular entity. The Trust's allocable share of costs for the years ended December 31, 1995, 1994 and 1993 aggregated $1,443,434, $1,185,409 and $783,922, 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. At December 31, 1995 and 1994, the Trust had a net payable due to BMC of $176,527 and $253,250, respectively. The net payable is included in accounts payable and accrued expenses in the Trust's Consolidated Balance Sheet. The Trust's allocated costs related to Investment Activities and Foreclosed Activities for the year ended December 31, 1995 were $1,119,311 and $324,123, respectively. The Trust's allocated costs related to Investment Activities and Foreclosed Activities for the year ended December 31, 1994 were $890,809 and $294,600, respectively. The Trust's allocated costs related to Investment Activities and Foreclosed Activities for the year ended December 31, 1993 were $597,904 and $186,018, respectively. During 1994, the Trust sold an investment security to affiliates in the aggregate amount of $1,372,373 which approximated market value at the date of sale. F-42 81 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. DIVIDENDS PAID AND PAYABLE It has been the Trust's policy to distribute to its shareholders an amount equal to at least 95% of taxable income. A portion of the dividends paid during the subsequent year may be allocable to taxable income earned in the prior year. Of the $4,190,252 of 1995 distribution paid, $1,221,232 represents ordinary income and $2,969,020 represents a return of capital. Of the $4,188,441 of 1994 distribution paid, $1,773,545 represents ordinary income and $2,414,896 represents a return of capital. On January 5, 1996, the Trust declared a cash dividend for the fourth quarter ended December 31, 1995, of $0.10 per share payable February 20, 1996 to shareholders of record on January 15, 1996. 12. MINIMUM RENTALS UNDER OPERATING LEASES The Trust receives rental income from the rental of retail, commercial and industrial space under operating leases. The following is minimum future base rentals (excluding amounts representing executory costs such as taxes, maintenance and insurance) on operating leases for the Trust's industrial, commercial and retail projects held at December 31, 1995: 1996 $13,847,076 1997 11,871,677 1998 9,720,655 1999 8,102,929 2000 4,872,116 Thereafter 22,672,720 ------------ $71,087,173 ============
Approximately 14% of total income from property operating activities represents rental income earned relating to one tenant. The Trust is subject to the usual business risks regarding the collection of the above-mentioned rentals. 13. RECOVERY OF LOSSES ON LOANS, NOTES, INTEREST RECEIVABLE AND CLASS ACTION SETTLEMENT COSTS AND EXPENSES The Trust has received cash of $562,337, $347,557 and $57,072 during 1995, 1994 and 1993, respectively, related to its interest in a liquidating trust established for the benefit of the unsecured creditors (including the Trust) of VMS Realty Partners and its affiliates ("VMS"), former affiliates of the Trust. The Trust has recorded $164,958, $57,226 and $57,072, respectively, of these amounts as recovery of losses on mortgage loans, notes and interest receivable in its consolidated statement of income and expenses. The remainder of $687,710 was recorded as a liability to the Class Action Settlement F-43 82 BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. RECOVERY OF LOSSES ON LOANS, NOTES, INTEREST RECEIVABLE AND CLASS ACTION SETTLEMENT COSTS AND EXPENSES (CONTINUED) Fund representing the Trust's share of amounts due under the terms of the previously settled VMS securities litigation. Of this amount, $7,652 is recorded in Other Liabilities at December 31, 1995, representing the total estimated amount remaining 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 as 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 might be named as defendants following settlement of the class action. Subsequently, the trustees released the proceeds from the escrow and the Trust purchased an insurance policy to cover the officers and trustees. 14. AWARD SHARES AND WEIGHTED AVERAGE SHARES OUTSTANDING Pursuant to the amended employment agreement of the Trust's president, Leonard G. Levine, all incentive amounts earned subsequent to January 1, 1993 are to be paid 80% in cash in the year following the period for which the incentive is earned and 20% in shares of beneficial interest ("Award Shares") of the Trust. In 1996, Mr. Levine will be paid $66,985 representing 80% of his 1995 incentive in cash and 1,833 Award Shares valued at $4.20 per share or $7,700 representing 20% in Award Shares of the Trust. Effective July 5, 1995, the Trust issued 6,036 Award Shares to Mr. Levine, representing 20% of Mr. Levine's 1994 incentive compensation earned on the performance of the Investment Activities. The 6,036 Award Shares are valued at $4.125 per share or $24,899. 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 by the Trust, pending satisfaction of the vesting requirements, for the benefit of Mr. Levine until the earlier of (i) December 31, 1997; (ii) the termination of Mr. Levine's employment by the Trust without just cause; or (iii) the permanent disability or death of Mr. Levine. The Award Shares' price of $4.20 and $4.125 was based upon the average closing price of the Trust's shares for the five business days ended prior to December 31, 1995 and 1994, respectively. The 1994 Award Shares are included in the total shares outstanding of the Trust when calculating Net Income Per Share of Beneficial Interest Based on Weighted Average Number of Shares Outstanding. All Award Shares shall be forfeited by Mr. Levine if he fails to be employed by the Trust on December 31, 1997, unless such failure is due to death or permanent disability or termination without just cause. 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 (March 15) and the date that any Award Shares are sold or forfeited by Mr. Levine. F-44 EX-10.I 2 SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10(i) SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT This AGREEMENT ("Agreement") is made and entered into as of December 31, 1992 by and between LEONARD G. LEVINE (the "Executive") and BANYAN STRATEGIC LAND TRUST (the "Fund"). WHEREAS, the parties have previously entered into an Amended and Restated Employment Agreement made as of January 1, 1990 by and between the parties hereto and certain other parties (the "1990 Agreement"); WHEREAS, the parties desire to amend and restate the 1990 Agreement; WHEREAS, the Fund desires to continue to employ the Executive and the Executive desires to accept such continued employment on the terms set forth in this Agreement; NOW THEREFORE, in consideration of the promises, mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Fund and the Executive do hereby agree as follows: 1. Employment and Duties. On the terms and subject to the conditions set forth in this Agreement, the Fund agrees to employ the Executive as the chief executive officer of the Fund to perform such duties as are consistent with such position as may be assigned, from time to time, by the Fund's Board of Trustees ("Board of Trustees"). The Executive agrees to accept appointment as President of the Fund. 2. Performance. The Executive accepts the employment described in Section 1 of this Agreement and agrees to faithfully and diligently perform the services described therein. 3. Term. The term of employment under this Agreement shall remain in effect until December 31, 1997, unless sooner terminated hereunder (the "Employment Period"). The Employment Period thereafter shall be automatically renewed for successive one (1) year periods unless this Agreement is terminated by either the Executive or the Fund by giving written notice of termination on or before the March 31 preceding the end of the then-current Employment Period. Notwithstanding any renewal of the Employment Period under the preceding sentence, the Additional Compensation described in Section 6 shall be determined as of the date set forth in that section and shall not be part of the Executive's Compensation after December 31, 1997 except by mutual agreement of the parties. 4. Salary. For the services to be rendered by the Executive hereunder, the Fund shall pay the Executive an annual base salary of $175,000 effective October 1, 1992, subject to the CPI Adjustment described below ("Salary"). The Salary shall be payable in the manner and frequency in which the payroll of Banyan Management Corp. is customarily handled. The Salary shall be subject to annual increases (but not decreases) due to cost of living ("CPI Adjustment") as follows: the Salary shall be increased effective January 1 of each year beginning 1994 by multiplying the Salary for the year just ended by a fraction the numerator of which is the Index (as defined below) for November of the year just ended and the denominator of which is the Index for November of the immediately prior 1 2 year. For purposes of this Agreement, the term "Index" shall mean the Chicago All Items Consumer Price Index--All Urban Consumers (1982-84 base) as released by the U.S. Bureau of Labor Statistics. 5. Incentive Compensation -- Foreclosed Assets. In addition to the Executive's Salary, the Fund shall pay to the Executive additional compensation ("Incentive Compensation") calculated as follows: (a) Liquification of Secured Claims. The Fund shall pay the Executive an amount equal to one percent (1%) of all Secured Claims of the Fund which are converted into cash on or after January 1, 1993 and prior to the end of the Employment Period. (b) Liquification of Unsecured Claims. The Fund shall pay the Executive an amount equal to three percent (3%) of all Unsecured Claims of the Fund which are converted into cash on or after January 1, 1993 and prior to the end of the Employment Period. (c) Payment of Incentive Compensation. Except as set forth in Section 13(d)(2), Incentive Compensation under Sections 5(a) and (b) shall be deemed earned by the Executive upon the Fund's receipt of the cash payments contemplated by those sections provided that such cash payments are received by the Fund during the Employment Period. The Incentive Compensation shall be paid to the Executive in cash as soon as practical after the end of each calendar year without regard to whether the Executive is employed by the Fund on the date of payment. (d) Special Rules Where Board of Trustees Elects Not to Market Property. If any asset of the Fund has not been converted into cash due to a decision of the Board of Trustees to retain such asset, such asset shall be deemed to have been converted into cash, at the fair market value of such asset, on the date on which the Board of Trustees determines not to market such asset. This Section 5(d) shall not apply to any asset retained by the Fund as a result of the failure to receive a price which the Board of Trustees deems acceptable. (e) Definition of Secured Claim and Unsecured Claim. The term "Secured Claim" shall include each loan made by the Fund to a VMS-related entity which is secured by a mortgage on real property or by a partnership interest. The term "Unsecured Claim" shall mean any debt owed to the Fund by a VMS-related entity which is not a Secured Claim under the preceding sentence. The term "Unsecured Claim" shall include, but not be limited to, any deficiency notes issued by a VMS-related entity which are unsecured, notwithstanding the fact that the original debt to which such notes relate may have been secured. The determination of whether a recovery is of a Secured Claim or Unsecured Claim shall be determined by the nature of the claim at January 1, 1990. For example, if an Unsecured Claim is exchanged for a piece of property, any recovery upon the sale of that property will be treated as liquidation of an Unsecured Claim. (f) Joint Venture. If the Fund enters into a joint venture agreement with respect to any Secured Claim or Unsecured Claim, the Fund shall be deemed to have liquified such claim at the time of the receipt of such joint venture interest. The right to receive payments with respect to the liquification of such claim shall be vested in the Executive at the time of the formation of the joint venture but shall be paid out to the Executive as cash is received by Fund over the life of the joint venture. 2 3 The parties recognize that the payments of Incentive Compensation to the Executive as determined in accordance with this Section 5(f) may survive the termination of the Employment Period or this Agreement. Consequently, the Fund shall give the Executive reasonable security for his continuing interest in the receipt of payments from the joint venture at a time and in a form as the Executive and the Fund may agree. 6. Incentive Compensation -- Reinvested Assets. In addition to the Executive's salary, the Fund shall pay to the Executive, during the employment period, additional compensation ("Additional Compensation") calculated as follows: (a) Definitions. As used in this Section 6, certain terms shall be defined as follows: "Adjusted Cash Flow" shall mean Net Income adjusted as follows: (1) Increased by the following: (A) The amount of any depreciation or amortization taken in computing Net Income; (B) The amount of any Gains not otherwise reflected in Net Income; and (C) The amount of any Additional Compensation paid to the Executive (or substantially similar payments to other employees of the Fund or the manager of the Fund) during the period for which the calculation is being made to the extent that such payments are reflected in Net Income. (2) Reduced by the amount of any Losses not otherwise reflected in Net Income. "Gains" shall mean all realized Gains generated by Reinvestment Activities; provided that, solely in determining the amount of Gain with respect to each particular investment for this Section 6, the book value of such investment shall be reduced by the amount of all previous unrealized Losses since January 1, 1993 with respect to such investment and shall be increased by the amount of any depreciation or amortization taken with respect to such investment since January 1, 1993. "Index Rate" in effect for each year shall mean the field on 5 year Treasury Notes, plus 100 basis points as of January 1 of such year. "Losses" shall mean the unrealized and realized losses generated in connection with the Reinvestment Activities; provided that solely in determining the amount of Loss with respect to each particular investment for this 3 4 Section 6, the book value of such investment shall be reduced by the amount of all previous unrealized Losses since January 1, 1993 with respect to such investment and shall be increased by the amount of any depreciation or amortization taken with respect to such investment since January 1, 1993. "Net Cash Available for Investment" shall mean $42,500,000, (1) increased by the amount of (A) new capital raised by the Fund for purposes of being available for investment; (B) cash retained for investment upon the sale or liquidation of "Foreclosed Assets" (as reflected on the Fund's financial statements); and (C) Net Income of the Fund and (2) decreased by the amount of any dividends or other distributions reflected as a decrease in Reinvestment Assets on the Fund's financial statements. "Net Income" shall mean the Fund's Net Income (Loss) before income taxes, if any, (as reflected on the Fund's financial statements) generated by the Reinvestment Activities during each calendar year of the Fund. "Reinvestment Activities" shall mean those activities reflected as such on the Fund's financial statements. "Rate of Return" shall mean the Adjusted Cash Flow divided by the Net Cash Available for Investment, rounded to the nearest 100th of 1%. (b) Each calendar year beginning January 1, 1993, the Fund shall pay the Executive $500 for each basis point by which the Rate of Return exceeds the Index Rate for that year, up to 500 basis points ($250,000) and $250 for each basis point by which the Rate of Return exceeds the sum of the Index Rate plus 500 basis points. (c) Payment of the Additional Compensation computed under this Section 6 shall be made on March 15 of the year following the period for which the award is made. Eighty (80%) percent of the award shall be paid in cash and twenty (20%) percent shall be paid in shares of the Fund ("Award Shares"). The Award Shares shall provide that they shall not be transferred prior to the date which is seventy five (75) days after the Computation Date (as defined in Section 6(d) (the "Vesting Date"). The Award Shares shall be subject to forfeiture in accordance with the provisions of Section 6(d) and any Certificate representing all or any portion of the Award Shares shall bear an appropriate legend and shall be held by the Fund in trust for the Executive. The number of Award Shares distributable to the Executive shall be based upon the average closing price of the Fund's stock for the five business days ended prior to December 31 of the calendar year for which the payments are made. The Executive shall be entitled to receive and retain all dividends paid on the Award Shares held by him. The Fund, at its sole cost, shall take all reasonable steps necessary to cause the filing of a registration statement and listing application, to be effective as soon after the Vesting Date as practical, with respect to the Award Shares with the appropriate regulatory bodies, except that if, (i) in the Board of Trustees' discretion, the time and expense of registering and listing the Award Shares is unduly 4 5 burdensome and costly, or (ii) in the opinion of the Fund's investment bankers, it would interfere with a pending registration or offering of the Fund's securities, the Board of Trustees may, in its discretion, purchase the Award Shares from the Executive and pay the Executive the "cash value" of the Award Shares on or before the Vesting Date. For purposes of this Section 6(c), "cash value" shall mean the aggregate market value of the Award Shares based on the average closing price of the Fund's shares for the five business days ended at the Computation Date. (d) As soon as practical after December 31, 1997, or, if earlier, upon the termination of the Executive's employment ("Computation Date") the computation provided in Section 6(b) will be computed on a cumulative basis covering the period January 1, 1993 through the Computation Date; provided, however, that for such computation the Adjusted Cash Flow shall also include all unrealized profits and gains generated in connection with Reinvestment Activities. In the event that the total cumulative Additional Compensation as recomputed as determined at the Computation Date exceeds the aggregate Additional Compensation paid to the Executive, the Fund shall pay the Executive, no later than the Vesting Date an additional cash payment equal to the difference. In the event that the cumulative Additional Compensation as recomputed at the Computation Date is less than the aggregate amount of the Additional Compensation paid to the Executive, all or a portion of the Award Shares shall be forfeited and returned to the Fund. In determining the amount of the Award Shares to be forfeited, each Award Share shall be valued at the average price at which the shares were valued when issued to the Executive under Section 6(c). For example, if the Executive holds 100,000 Award Shares with an average value determined under Section 6(c) at the time of issue of $3.00 and the cumulative Additional Compensation at the Computation Date is determined to be $45,000 less than the amount actually paid to the Executive, the Executive shall return 15,000 Award Shares to the Fund without regard to the actual current value of those shares. Certificates representing the balance of any Award Shares shall be delivered to the Executive promptly after the Vesting Date. (e) In determining the amount of unrealized profits or gains for purposes of Section 6(d), the management of the Fund will provide the Board of Trustees with management's estimate of the value of each investment. If the Board of Trustees and the Executive fail to agree on the value of one or more investments, the Fund shall, at its sole cost, cause the investment to be appraised by an appraiser which is mutually acceptable to both. The valuation of the investment by the appraiser shall be binding on both the Executive and the Fund. 7. Bonus. During the Employment Period, the Board of Trustees may, in its sole discretion, pay a bonus to the Executive in consideration of the Executive's performance of his duties and the Fund's profitability. The Fund shall not be obligated to pay any bonus unless and until such bonus is declared by its Board of Trustees. 8. Life Insurance. During the Employment Period, the Fund shall apply for and diligently attempt to procure in the Executive's name and for the Executive's benefit, life insurance in the face amount of not less than twice the Executive's Salary and the Executive shall submit to any medical or other examination and execute and deliver any application or other instrument in writing reasonably necessary to effectuate such insurance. If such insurance is only available on a rated basis, the Fund shall 5 6 acquire the amount of insurance available upon payment of the premium which would have been payable if such insurance had been available on an unrated basis. 9. Disability Benefit. If at any time during the Employment Period the Executive is permanently unable to perform fully his duties hereunder by reason of illness, accident, or other disability (as confirmed by competent medical evidence), the Executive shall be entitled to receive periodic payments equal to one hundred percent (100%) of his Salary for six (6) months following his disability. Thereafter, the Executive shall be entitled to receive periodic payments equal to sixty percent (60%) of his Salary as long as he is disabled but in no event beyond the Executive's sixty-fifth (65th) birthday. Notwithstanding the foregoing provision, the amounts payable to the Executive pursuant to this Section 9 shall be reduced by any amounts received by the Executive with respect to any such disability pursuant to any insurance policy, plan, or other employee benefit provided to the Executive by the Fund and any Social Security or similar government disability programs. The Fund's obligation to make the payments beyond the first six (6) months of the Executive's disability is subject to the ability of the Fund to obtain disability insurance covering such payments after diligent attempts to procure such insurance. 10. Other Benefits. Except as otherwise specifically provided herein, during the Employment Period, the Executive shall be eligible for all non-wage benefits the Fund or Banyan Management Corp. provide generally for their other salaried employees. 11. Business Expenses. The Fund shall reimburse the Executive for the reasonable, ordinary, and necessary business expenses incurred by him in connection with the performance of his duties hereunder, including, but not limited to, ordinary and necessary travel expenses and entertainment expenses and car phone expenses. The Executive shall provide the Fund with an accounting of his expenses, which accounting shall clearly reflect which expenses are reimbursable by the Fund. The Executive shall provide the Fund with such other supporting documentation and other substantiation of reimbursable expenses as will conform to Internal Revenue Service or other requirements. All such reimbursements shall be payable by the Fund to the Executive within a reasonable time after receipt by the Fund of appropriate documentation therefor. 12. Termination. (a) Termination by the Executive. The Executive may terminate his employment by the Fund at any time by written notice of termination given to the Fund at least ninety (90) days in advance of the termination date stated in such notice. (b) Termination for Just Cause. The Fund may terminate the Executive's employment, effective upon written notice of such termination to the Executive, for Just Cause. For purposes of this Agreement, the term "Just Cause" shall mean the occurrence of any one or more of the following events: (1) the conviction of or the rendering of a civil judgment against the Executive for theft or embezzlement of Fund property; (2) the conviction of the Executive for a felony resulting in injury to the business, property or reputation of the Fund or any affiliate of the Fund; or (3) a decision by an Arbitrator (appointed pursuant to Section 15(a)) that the Executive, in the performance of his duties under this Agreement, 6 7 acted in a manner that constituted gross, willful, or wanton negligence. Any acts or omissions or alleged acts or omissions of the Executive which relate to the Executive's employment by VMS Realty Partners or any of its affiliates prior to January 1, 1990 shall not be deemed "Just Cause" except to the extent that the Executive admits, is adjudicated or is determined by an Arbitrator to have committed fraud or a material violation of securities laws during his employment by VMS Realty Partners or any of its affiliates prior to January 1, 1990. If the Board of Trustees of the Fund believes, in good faith, that facts exist which, upon final resolution, will constitute Just Cause, the Fund may suspend the Executive from his duties under this Agreement, with full Salary and all other benefits until such final resolution. (c) Termination without Just Cause. The Fund may terminate the Executive's employment at any time by written notice of termination given to the Executive at least ninety (90) days in advance of the termination date stated in such notice. (d) Constructive Termination. The Fund shall be deemed to have terminated the Executive without Just Cause if any of the following events occurs: (1) The Fund materially reduces the authority of the Executive; (2) Following a Change in Control (as defined in Section 13(c)) the Fund materially decreases the Net Cash Available for Investment (as defined in Section 6(a); (3) The Fund requires the Executive to relocate from the Chicago area and the Executive refuses; or (4) There is a material adverse change in working conditions for the Executive. (e) Termination Upon Death or Disability. The employment of the Executive shall terminate upon the permanent disability (as defined in Section 9) or death of the Executive. 13. Severance Pay. (a) In the event that the Executive's employment is terminated voluntarily by the Executive or is terminated by the Fund for Just Cause, the Executive shall be entitled to any Salary and Incentive Compensation earned through the date of termination. (b) In the event that the Executive's employment terminates due to the permanent disability or death of the Executive, the Fund shall pay to the Executive, or his personal representative, all Salary and Incentive Compensation earned through the date of the Executive's permanent disability or death. The Executive, his heirs, beneficiaries or personal representatives shall also be entitled to any disability benefits or life insurance proceeds provided under this Agreement. (c) Upon any termination of the Executive's employment by the Fund following a Change of Control (as defined below) except as set forth 7 8 in Section 13(a) or (b), the Fund shall pay the Executive a severance pay benefit determined as follows: (1) The Fund shall continue to pay the Salary due to the Executive until the end of the employment Period; (2) The Fund shall immediately pay the Executive all amounts of Incentive Compensation earned by the Executive through the date of termination of the Executive's employment. For the purposes of this Section 13(c)(2), all assets of the Fund shall be deemed to have been sold at book value (as reflected on the Fund's most recent financial statements, adjusted to reflect any events subsequent to the date of the most recent financial statements, up to the date of payment) and all proceeds thereof shall be deemed to have been distributed to the shareholders of the Fund as of the date of the termination of the Executive's employment; provided, however, that the total payments under this Section 12(c) shall not exceed 2.99 times the Executive's "base amount" determined in accordance with Section 280G of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. For the purposes of this Section 13(c), the term "Change of Control" shall mean (i) that the members of the Board of Trustees of the Fund as of the date this Agreement is executed fail to constitute a majority of the members of the Board of Trustees of the Fund; provided, however, that if the Executive has consented to the appointment or election of an individual who becomes a new member of the Board of Trustees, for the purposes of this paragraph, that new member shall be treated as if he were a member of the Board of Trustees as of the date this Agreement is executed; or (ii) that the shareholders of the Fund adopt a plan of liquidation or take other action having the effect of a plan of liquidation, without the recommendation or approval of the Board of Trustees. (d) Upon any termination of the Executive's employment by the Fund except as set forth in Sections 13(a), (b), or (c), the Fund shall pay the Executive a severance pay benefit computed as follows: (1) The Fund shall pay the Executive an amount equal to one (1) year's Salary. (2) The Fund shall pay the Executive all Incentive Compensation earned through the date of termination. For the purposes of this Section 13(d)(2), Incentive Compensation shall be deemed to have been earned under Sections 5(a) or (b) if, prior to the termination to the Executive's employment, the Fund has received an expression of interest with respect to such underlying asset or claim and the party (or an affiliate thereof) expressing such interest ultimately acquires the underlying asset or claim; provided that the portion of the Incentive Compensation due with respect to such claim shall be payable only upon the closing of the transaction involving such claim and shall be payable only if the closing of the transaction occurs within one (1) year of the date of termination of the Executive's employment. (3) The Fund shall pay the Executive an amount equal to full cost of the Executive's COBRA benefits for one (1) year. 8 9 (4) Except as specifically provided under Section 13(d)(2) with respect to transactions not closed prior to the Executive's termination, all amounts payable under this Section 13(d) shall be payable in full, in cash within ninety (90) days after the date of the termination of the Executive's employment. (e) In addition to the amounts set forth in Section 13(a), (b), (c) or (d), the Fund shall pay the Executive all amounts of Additional Compensation, if any, determined as of the date of the termination of the Executive's employment to be due under Section 6(d). 14. Other Activities of the Executive. (a) The Executive may engage in other activities undertaken for profit without the consent of the Board of Trustees, including activities involving the management of real estate and real estate investments, provided that these activities do not compete, directly or indirectly, with the Fund's goals and purposes, including but not limited to specific Fund investments, and do not substantially interfere with the performance of the Executive's duties under this Agreement. The Board of the Fund acknowledges that the Executive has a proprietary interest in Oak Realty Group, Inc. ("Oak") and will devote a portion of time to Oak's affairs so long as no actions taken on the part of Oak or by Oak itself would cause the Executive to contravene this Agreement. (b) The Executive shall not: (i) engage in any activity which may be adverse to the Fund's business; (ii) appropriate or usurp Fund business opportunities; or (iii) engage or invest in businesses or assets which compete directly or indirectly with the Fund. (c) The obligations and limitations imposed by this Section shall be in addition to those provided by law. The Executive shall, on an annual basis, provide the Board of Trustees with a signed statement warranting compliance with this Section in the form of the attached Exhibit A. (d) The Executive shall not engage in any business or investment activity with individuals or entities who were or are associated with VMS Realty Partners or its affiliates without prior disclosure to the Board. 15. Arbitration. (a) Except as provided in Section 6(e), any dispute under this Agreement shall be submitted to arbitration conducted in accordance with the Commercial Arbitration Rules ("Rules") of the American Arbitration Association ("AAA") except as amplified or otherwise varied hereby. The parties shall submit the dispute to the Chicago regional office of the AAA and the situs of the arbitration shall be Chicago. The arbitration shall be conducted by a single arbitrator. The parties shall appoint the single arbitrator to arbitrate the dispute within ten (10) business days of the submission of the dispute. In the absence of agreement as to the identity of the single arbitrator to arbitrate the dispute with such time, the AAA is authorized to appoint an arbitrator in accordance with the Rules, except that the arbitrator shall have as his principal place of business the Chicago metropolitan area. 9 10 (b) Anything in the Rules to the contrary notwithstanding, in any dispute seeking a monetary award, the arbitration award shall be made in accordance with the following procedure: Each party shall, at the commencement of the arbitration hearing, submit an initial statement of the amount each party proposes be selected by the arbitrator as the arbitration award ("Settlement Amount"). During the course of the arbitration, each party may vary its proposed Settlement Amount. At the end of the arbitration hearing, each party shall submit to the arbitrator its final Settlement Amount ("Final Settlement Amount"), and the arbitrator shall be required to select either one or the other Final Settlement Amounts as the arbitration award without discretion to select any other amount as the award. The arbitration award shall be paid within five (5) business days after the award has been made, together with interest from the date the dispute was submitted to arbitration at the rate of ten percent (10%) per annum. Judgment upon the award may be entered in any federal or state court having jurisdiction over the parties. 16. Indemnification. The Fund shall indemnify and hold harmless the Executive from liabilities, which he may incur resulting from or arising out of any act undertaken in connection with his duties under this Agreement in the same manner and to the same extent as the Fund indemnifies any director or any other officer. 17. General Provisions. (a) Notice. Any notice required or permitted hereunder shall be made in writing (i) either by actual delivery of the notice into the hands of the party thereunder entitled, or (ii) by the mailing of the notice in the United States mail, certified or registered mail, return receipt requested, all postage prepaid and addressed to the party to whom the notice is to be given at the party's respective address set forth below, or such other address as the parties may from time to time designate by written notice as herein provided. As addressed to the Fund: c/o Banyan Management Corp. Suite 2900 150 South Wacker Drive Chicago, Illinois 60606 With a copy to: Shefsky & Froelich Ltd. 444 North Michigan Avenue Suite 2500 Chicago, Illinois 60611 Attention: Cezar M. Froelich As addressed to the Executive: Mr. Leonard G. Levine 3142 East Kay Jay Drive Northbrook, Illinois 60062 10 11 The notice shall be deemed to be received in case (i) on the date of its actual receipt by the party entitled thereto and in case (ii) on the date of its mailing. (b) Amendment and Waiver. No amendment or modification of this Agreement shall be valid or binding upon the Fund unless made in writing and signed by an officer of the Fund duly authorized by the Board of Trustees or upon the Executive unless made in writing and signed by him. The waiver by the Fund of the breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any subsequent breach by him. (c) Entire Agreement. This Agreement constitutes the entire Agreement between the parties with respect to the Executive's duties and compensation as an executive of the Fund on or after January 1, 1993, and there are no representations, warranties, agreements or commitments between the parties hereto with respect to his employment except as set forth herein. The 1990 Agreement shall continue to govern issues with respect to the Executive's employment prior to January 1, 1993 except that all amounts of Incentive Compensation owed to the Executive by the Fund and deferred under Section 5(f) of the 1990 Agreement shall be payable on or before December 31, 1992, notwithstanding anything in the 1990 Agreement to the contrary, and the Executive's salary shall be as set forth in Section 4 as of October 1, 1992. (d) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of Illinois. (e) Severability. If any provision of this Agreement shall, for any reason, be held unenforceable, such provision shall be severed from this Agreement unless, as a result of such severance, the Agreement fails to reflect the basic intent of the parties. If the Agreement continues to reflect the basic intent of the parties, then the invalidity of such specific provision shall not affect the enforceability of any other provision herein, and the remaining provisions shall remain in full force and effect. (f) Assignment. The Executive may not under any circumstances delegate any of his rights and obligations hereunder without first obtaining the prior written consent of the Fund. This Agreement and all of the Fund's rights and obligations hereunder may be assigned or transferred by it, in whole or in part, to be binding upon and inure to the benefit of any subsidiary or successor of the Fund. (g) Costs of Enforcement. In the event of any suit or proceeding seeking to enforce the terms, covenants, or conditions of this Agreement, the prevailing party shall, in addition to all other remedies and relief that may be available under this Agreement or applicable law, recover his or its reasonable attorneys' fees and costs as shall be determined and awarded by the court. 11 12 IN WITNESS WHEREOF, this Agreement is entered into on the day and year first above written. BANYAN STRATEGIC LAND TRUST By: /s/ William M. Karnes ------------------------------ William M. Karnes, Senior Vice President - Finance and Administration Chief Financial and Accounting Officer EXECUTIVE: /s/ Leonard G. Levine ------------------------------ Leonard G. Levine 12 13 Exhibit A DATE Board of Trustees Banyan Strategic Land Trust Re: Statement of Other Activities Gentlemen: Pursuant to the provisions of Section 14(c) of my Second Amended and Restated Employment Agreement, please be advised that I have not engaged in any activities during the preceding year in contravention of the requirements set forth in Section 14. /s/ Leonard G. Levine ------------------------------ Leonard G. Levine 13 14 Exhibit A DATE Board of Trustees Banyan Short Term Income Trust Re: Statement of Other Activities Gentlemen: Pursuant to the provisions of Section 13(c) of my Second Amended and Restated Employment Agreement, please be advised that I have not engaged in any activities during the preceding year in contravention of the requirements set forth in Section 13. /s/ Leonard G. Levine ------------------------------ Leonard G. Levine 14 EX-10.II 3 AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10(ii) AMENDMENT TO LOAN AGREEMENT This Amendment to Loan Agreement dated as of December 1, 1994 by and between Banyan Strategic Realty Trust, a Massachusetts business trust ("Borrower") and American National Bank and Trust Company of Chicago, a national banking association ("Lender"). WHEREAS, Borrower and Lender entered into a Loan Agreement dated as of December 1, 1994 (the "Loan Agreement"); and WHEREAS, Borrower and Lender desire to amend the Loan Agreement as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, Borrower and Lender do hereby agree as follows: 1. The Designated Properties, Designated Debt Properties and Property Owners described on Exhibit A attached hereto and made a part hereof which were included within the definitions thereof in the Loan Agreement are hereby withdrawn and deleted from the Loan Agreement. If any of them should subsequently be added to and included within the Loan Agreement, they will be so added and included upon the terms originally contemplated by the Loan Agreement being amended hereby. Except in respect of the Karfad loan prior mortgages (O'Shaughnessy) shown in the Permitted Exceptions to the Loan Agreement (prior to this Amendment) the parties confirm that all Mortgages given to Lender on Designated Debt Properties and pledged to Lender as to Designated Debt Properties will be first and sole mortgage liens thereon. 2. In all other respects the Loan Agreement shall remain in full force and effect. IN WITNESS WHEREOF the parties have executed this Amendment To Loan Agreement as of the day and year first above set forth. LENDER BORROWER - ------ -------- AMERICAN NATIONAL BANK AND BANYAN STRATEGIC REALTY TRUST, TRUST COMPANY OF CHICAGO, a a Massachusetts business trust national banking association By: /s/ Peter C. Malecek By: /s/ Daniel J. Gumbiner ------------------------- ------------------------- Peter C. Malecek, Its: Authorized Signatory Vice President 2 EXHIBIT "A" TO AMENDMENT TO LOAN AGREEMENT DATED AS OF DECEMBER 1, 1994 The following are hereby withdrawn and deleted from the Loan Agreement: Designated Property Designated Debt Instruments Property Owner 1. Documents and BSLT Karfad Corp. instruments respecting the Karfad (Virginia) loan portfolio 2. Fountain Square BSRT Fountain Square Office Building Corp. (Colonial Penn Building) (Tampa, Florida) 3. Commerce BSRT Commerce Center Center Corp. Office Building (Sarasota, Florida) 2 3 SECOND AMENDMENT TO LOAN AGREEMENT This Second Amendment To Loan Agreement ("Second Amendment") is dated as of December 21, 1994 by and between Banyan Strategic Realty Trust, a Massachusetts business trust ("Borrower") and American National Bank and Trust Company of Chicago, a national banking association ("Lender"). WHEREAS, Borrower and Lender entered into a Loan Agreement dated as of December 1, 1994 (the "Loan Agreement"); and WHEREAS, Borrower and Lender entered into an Amendment to Loan Agreement dated as of December 1, 1994 (the "First Amendment"), a copy of which is attached hereto as Exhibit "A"; and WHEREAS, Borrower and Lender desire to further amend the Loan Agreement as set forth herein. NOW, THEREFORE, for and in consideration of the mututal covenants herein contained, Borrower and Lender do hereby agree as follows: 1. Exhibit "A" to the First Amendment is hereby deleted in its entirety, and Exhibit "A-1" attached hereto and made a part hereof is substituted therefor. 2. In all other respects the Loan Agreement, as amended by the First Amendment, shall remain in full force and effect. 3. This document may be executed in two (2) or more counterparts, all of which taken together shall constitute one (1) original. IN WITNESS WHEREOF the parties have executed this Second Amendment as of the day and year first above set forth. LENDER BORROWER - ------ -------- AMERICAN NATIONAL BANK AND BANYAN STRATEGIC REALTY TRUST, TRUST COMPANY OF CHICAGO, a a Massachusetts business trust national banking association By: /s/ Peter C. Malecek By: Daniel J. Gumbiner ------------------------ ------------------------- Peter C. Malecek, Its: Authorized Signatory Vice President 4 EXHIBIT "A" TO SECOND AMENDMENT TO LOAN AGREEMENT DATED AS OF DECEMBER 21, 1994 FIRST AMENDMENT 5 EXHIBIT "A-1" TO SECOND AMENDMENT TO LOAN AGREEMENT DATED AS OF DECEMBER 21, 1994 The following are hereby withdrawn and deleted from the Loan Agreement: Designated Property Property Owner - ------------------- -------------- 1. Commerce BSRT Commerce Center Center Office Corp. Building (Sarasota, Florida) 6 THIRD AMENDMENT TO LOAN AGREEMENT This Third Amendment To Loan Agreement ("Third Amendment") is dated as of December 18, 1995 by and between BANYAN STRATEGIC REALTY TRUST, a Massachusetts business trust ("Borrower"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association ("Lender"). WHEREAS, Borrower and Lender entered into a Loan Agreement dated as of December 1, 1994 (the "Original Loan Agreement") relating to a loan made by Lender to Borrower in the maximum principal amount outstanding at any time not to exceed the lesser of (i) $15,000,000, and (ii) sixty percent (60%) of the Collateral Value of all of the Designated Properties and Designated Debt Instruments, as more fully set forth in the Original Loan Agreement; and WHEREAS, Borrower and Lender entered into that certain Amendment to Loan Agreement dated as of December 1, 1994 (the "First Amendment") pursuant to which certain Designated Properties, Designated Debt Properties and Property Owners were withdrawn from the Original Loan Agreement; and WHEREAS, Borrower and Lender entered into that certain Second Amendment to Loan Agreement dated as of December 21, 1994 (the "Second Amendment") pursuant to which a Designated Property and Property Owner were withdrawn from the Original Loan Agreement (the Original Loan Agreement, the First Amendment and the Second Amendment are hereinafter collectively referred to as the "Loan Agreement); and WHEREAS, Borrower and Lender desire to increase the amount set forth in subclause (i) of the first Recital paragraph herein from $15,000,000 to $30,000,000 (the "Increase"), and further amend the Loan Agreement and enter into the agreements as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, Borrower and Lender do hereby agree as follows: 1. Definitions. Capitalized terms used in this Third Amendment but not otherwise defined herein shall have the meaning ascribed to them in the Loan Agreement. 2. Other Documents. Concurrent herewith Borrower is amending or causing to be amended the Note, the Mortgages, the Reimbursement Agreement and the Additional Collateral Documents, for the purpose of reflecting the Increase and the foregoing amendments and other agreements. All references in the Loan Agreement to: a. the "Note" are hereafter deemed to be references to the Note as amended concurrent herewith, as the same may hereafter be renewed, restated, replaced, extended or amended from time to time; b. the "Mortgages" are hereafter deemed to be references to the Mortgages as amended concurrent herewith, as the same hereafter may be amended from time to time, and all Mortgages which are executed and delivered to Lender concurrent herewith and which from time to time hereafter may be executed and delivered to Lender as security for or relating to the indebtedness and obligations 7 as evidenced by any one or more of the Note, Loan Agreement and Reimbursement Agreement, as same may be amended from time to time; c. the "Reimbursement Agreement" are hereafter deemed to be references to the Reimbursement Agreement as amended concurrent herewith, as the same may hereafter be amended from time to time; and d. the "Additional Collateral Documents" are hereafter deemed to be references to the Additional Collateral Documents as amended concurrent herewith, as the same may hereafter be amended from time to time, and all other mortgages, documents and instruments (other than the Note, Loan Agreement, Mortgages and Reimbursement Agreement) which are executed and delivered to Lender concurrent herewith and which from time to time hereafter may be executed and delivered to Lender as security for or relating to the indebtedness and obligations evidenced by any one or more of the Note, Loan Agreement and Reimbursement Agreement, as same may be amended from time to time. 3. Additional Designated Properties; Additional Property Owners. a. The properties listed on Exhibit "A" attached hereto and made a part hereof shall be considered Designated Properties in addition to the initial Designated Properties identified in the Loan Agreement. Without limiting the generality of the foregoing, and except as specifically set forth herein, all representations, warranties, covenants, agreements and other provisions of the Loan Agreement relating to Designated Properties shall be deemed to be made on and as of the date hereof with respect to the Designated Properties identified on Exhibit "A" hereto, as if such Designated Properties were initially included as Designated Properties in the Loan Agreement. b. The property owners listed on Exhibit "A" hereto shall be considered Property Owners in addition to the initial Property Owners identified in the Loan Agreement (and also, therefore, included within the term Borrowing Entities). Without limiting the generality of the foregoing, and except as specifically set forth herein, all representations, warranties, covenants, agreements and other provisions of the Loan Agreement relating to Property Owners shall be deemed to be made on and as of the date hereof with respect to the Property Owners identified on Exhibit "A" hereto, as if such Property Owners were initially included as Property Owners in the Loan Agreement. c. The Mortgages and Additional Collateral Documents executed pursuant hereto shall be considered Mortgages and Additional Collateral Documents, respectively, under the Loan Agreement, as amended hereby, in addition to the initial Mortgages and Additional Collateral Documents. Without limiting the generality, all representations, warranties, covenants, agreements and other provisions in the Loan Agreement relating to Mortgages and Additional Collateral Documents shall be deemed to be made on and as of the date hereof with respect to the Mortgages and Additional Collateral Documents being executed pursuant hereto. 2 8 d. After giving effect to the provisions of Section 3a and 3b hereof, the Designated Properties, Designated Debt Properties and the Property Owners shall be as set forth on Exhibit "B" attached hereto and made a part hereof. 4. Loan Amount. a. In Paragraph A of Article I of the Original Loan Agreement, the phrase "Fifteen Million and no/100 Dollars ($15,000,000)" is hereby deleted and the following substituted therefor: "Thirty Million and no/100 Dollars ($30,000,000)". b. In Paragraphs A and D of Article I of the Original Loan Agreement, the phrase "Sixty percent (60%)" is hereby changed, for the period between the date hereof until March 31, 1996, to "Sixty-Five percent (65%)"; and on and after March 31, 1996 said phrase shall automatically revert to "Sixty percent (60%)." c. All references in Paragraph F of Article I of the Loan Agreement to the sum of "$15,000,000" shall be deemed to be references to the sum of "$30,000,000." 5. Representations and Warranties. Without limitation of any representations and warranties in the Loan Agreement, or of any of the provisions hereof, Borrower hereby represents, warrants and covenants as follows: a. All representations and warranties made by Borrower in the Loan Agreement are true and correct on and as of the date hereof. All such representations and warranties, together with all covenants and agreements of Borrower set forth in the Loan Agreement, are hereby remade on and as of the date hereof. Notwithstanding the foregoing, it is understood and agreed by the parties that with respect to the Designated Property known as Colonial Courts of Westland Apartments, Columbus, Ohio, the following information is true and correct as of the date hereof: BSRT Colonial Courts Limited Partnership, an Illinois limited partnership, owns this Designated Property. BSRT Colonial Courts Corp., an Illinois corporation, holds a one percent (1%) interest as the general partner. The corporation is wholly owned by Borrower. The limited partners and their respective percentages of interest are as follows: (a) Borrower (89%); (b) PHC General Partnership, an Illinois general partnership (10%). b. Each of the Property Owners identified on Exhibit "A" hereto has good and marketable fee simple title to the Designated Property it purports to own, subject only to such exceptions as are shown on Exhibit "C" attached hereto and made a part hereof. The partnership interest/shares of stock of various entities as set forth on Exhibit "D" attached hereto and made a part hereof are true and correct, and (except to the extent shown on stock certificates of corporations owned by Borrower in respect of customary and mandatory restrictions under federal securities laws) all of such interests are owned by the entities so described thereon free and clear of any liens, claims and encumbrances. c. Borrower has delivered to Lender true and correct copies of the Tenant Leases relating to the Designated Properties identified on Exhibit "A" hereto. Attached hereto as Exhibit "E" and made a part hereof is a true, correct and complete Rent Roll for each Designated Property identified on Exhibit "A" hereto listing, with 3 9 respect to each Tenant Lease, the security deposit, rent, expiration date and, if applicable, any renewal options, purchase options, rights of first offer or first refusal, termination rights and co-tenancy provisions, other material conditions. d. The ownership structures set forth in Exhibit "D" hereto are true and correct. e. The representations and warranties made in Paragraph A of Article II of the Original Loan Agreement apply to this Third Amendment in the same manner as applicable therein to the Original Loan Agreement, and also apply to the documents being executed pursuant hereto in the same manner as applicable therein to the Note, Reimbursement Agreement, Mortgages and Additional Collateral Documents. The representations and warranties contained in this Third Amendment are true as of the date hereof and will be true and will be deemed remade at and as of the date of any disbursement of the proceeds of the Loan, except for the necessary effect of the transactions contemplated by the Loan Agreement as amended by this Third Amendment. 6. Deliveries. In connection with the increase, Borrower will deliver or cause to be delivered to Lender the following documents each in form, substance and execution and showing solely matters satisfactory to Lender: a. An amendment to the Note, executed by Borrower. b. An amendment to any Guaranty previously delivered by each Property Owner. c. A Guaranty with respect to payments due under the Note, as amended concurrent herewith, executed by each Property Owner identified on Exhibit "A" hereto, and the general partner of each Property Owner identified on Exhibit "A" hereto which is a partnership, with respect to payments due under the Note, as amended concurrent herewith. d. The Mortgages or amendments thereto, as applicable, executed by the appropriate Property Owners, in favor of Lender, subject only to the Permitted Title Exceptions applicable to each Designated Property. e. UCC Financing Statements. f. An Assignment of Leases and Rents, or an amendment thereto, as applicable, with respect to each of the Designated Properties, executed by the appropriate Property Owners, in favor of Lender. g. An Assignment of Partnership Interest, or an amendment thereto, as applicable, with respect to each Property Owner which is a partnership executed by Borrower and any partner of such Property Owner affiliated with Borrower, in 4 10 favor of Lender, and an Assignment of Stock, or an amendment thereto, as applicable, with respect to each Property Owner which is a corporation, and consents of the other partners/shareholders to each of the foregoing. h. An Assignment of Licenses and Permits, or an amendment thereto, as applicable, with respect to each of the Designated Properties executed by the appropriate Property Owners, in favor of Lender and consents thereto by all licensing and permitting authorities. i. An Assignment of Management Contracts, or an amendment thereto, as applicable, with respect to each of the Designated Properties, executed by the appropriate Property Owners in favor of Lender and a consent thereto by the managing agent. j. An Environmental Indemnity or amendment thereto, as applicable, with respect to each of the Designated Properties and Designated Debt Properties executed by Borrower and the appropriate Property Owner. k. An ADA Indemnity or amendment thereto, as applicable, with respect to each of the Designated Properties and Designated Debt Properties executed by Borrower and the appropriate Property Owner. l. An amendment to the Reimbursement Agreement. m. An assignment, in form and content reasonably acceptable to Lender, of the obligations of New England Mutual Life Insurance Company with respect to environmental remediation of the Designated Property identified herein as Building B, Lexington Business Center, 1300 New Circle Road, Lexington, Kentucky (the "Kentucky Building B Designated Property"), together with the consent thereto of the obligor thereunder. n. A copy of any and all Tenant Leases with the Occupancy Tenants at the Designated Properties identified on Exhibit "A" hereto, certified to Lender by Borrower to be true, correct and complete. o. A copy of the Rent Roll for each Designated Property identified on Exhibit "A" certified to Lender to be true, correct and complete. p. The partnership agreement of each of the Property Owners identified on Exhibit "A" hereto which is a partnership and all amendments thereto, certified by Borrower as the sole general partner of such partnership, to be true, correct and complete. q. Certified resolutions of the Trustees of Borrower authorizing the execution of this Third Amendment, the documents provided herein by Borrower and the various Borrowing Entities and the rendering of full performance therein. 5 11 r. A certified copy of the Articles of Incorporation and By-Laws of each Property Owner identified on Exhibit "A" hereto which is a corporation, and certified corporate resolutions of the directors and shareholders thereof of each Property Owner authorizing the execution of the Mortgages, Additional Collateral Documents and/or amendments to any or all of the foregoing. s. Copies of all recorded documents affecting the Premises identified on Exhibit "A" hereto. t. Such estoppel certificates, subordination and attornment agreements and other certificates, documents and assurances from and with respect to the Occupancy Tenants at the Designated Properties identified on Exhibit "A" hereto as Lender may require. u. Such other papers, instructions and documents as the Title Insurer may require for the issuance of title insurance commitments or interim binders, for a mortgage title insurance policy or policies in such forms and amounts, and with such endorsements as Lender reasonably may require. v. The $6,200,000 Note. w. Such other documents and instruments as are required pursuant hereto whether as conditions precedent to any of Lender's obligations, or otherwise, or pursuant to any one or more of the Note, Mortgages, or any of them, any one or more of the items of Additional Collateral Documents or any amendment to any of the foregoing. 7. Available Cash. Until March 31, 1996, the reference in subparagraph 1 of Article III, Paragraph Q of the Original Loan Agreement to "$3,000,000" shall be "$2,000,000." Commencing as of April 1, 1996, the said amount shall automatically revert to "$3,000,000". 8. Sarasota. Concurrent herewith there is being executed a note made by Borrower and BSRT Commerce Center Corp., an Illinois corporation (the "Corporation") payable to the order of Lender in the principal amount of $6,200,000 (said $6,200,000 as same hereafter may be renewed, restated, replaced, extended or amended from time to time is herein referred to as the "$6,200,000 Note"), which is secured in part by a mortgage on the Florida Power and Light Building, Sarasota Commerce Park, Sarasota, Florida (the "Sarasota Designated Property"). At such time as Borrower may hereafter be entitled to a release of the collateral respecting, solely, the Sarasota Designated Property, as set forth in Paragraph E of Article I of the Original Loan Agreement, and in Paragraph 10 hereof, Borrower shall have the right to request instead that Lender (a) assign the $6,200,000 Note and the collateral respecting, solely, the Sarasota Designated Property to a lender designated by Borrower, or (b) cancel the $6,200,000 Note and so release the collateral respecting, solely, the Sarasota Designated Property. Any such assignment shall be without recourse and pursuant to documents reasonably acceptable to Lender and shall be accompanied by such amendments to the documents assigned and this Loan Agreement, the Note, Mortgages and Additional Collateral Documents as Lender may require. Until the $6,200,000 Note is so assigned by Lender, or is so cancelled, and the collateral respecting, solely, the Sarasota Designated Property, is assigned or released, then (a) the Loan Amount, outstanding from time to time shall include the amounts from time to time outstanding under the Note and the $6,200,000 Note, together with the amounts from time to time drawn and available to be drawn under the 6 12 Letter of Credit, (b) the maximum amount of Lender's commitment under any circumstances for the aggregate of the Note and the $6,200,000 Note shall be $30,000,000 (subject to the limitations set forth in the Loan Agreement, as amended hereby), (c) all references in the Note to $30,000,000 shall be deemed to be references to $23,800,000, (d) in addition to the matters set forth in the Original Loan Agreement as Events of Default, the occurrence of a Default under and as defined in the $6,200,000 Note shall be an Event of Default under the Loan Agreement, as amended hereby, (e) an Event of Default under and as defined in the Loan Agreement, as amended hereby, shall be deemed to be a default under the $6,200,000 Note, (f) the Mortgage and Additional Collateral Documents securing, guarantee or granting indemnities in respect of the $6,200,000 Note shall also be deemed to secure, guarantee and grant indemnities in respect of the Note, (g) the Mortgage and Additional Collateral Documents securing, guaranteeing or granting indemnities in respect of the Note shall also be deemed to secure, guarantee and grant indemnities in respect of the $6,200,000 Note, and (h) the Loan availability of Borrower shall further be reduced by the amount outstanding from time to time, on the subordinated third party mortgage as to the Ohio Designated Property. After such assignment, release or cancellation and release by Lender of the $6,200,000 Note, the said reference to $23,800,000 shall automatically be deemed to be a reference to $30,000,000, and this Paragraph 8 shall be of no further force and effect. 9. Lexington, Kentucky. With respect to the Kentucky Building B Designated Property, without limitation of any covenant, agreement or other provision of the Loan Agreement or the Mortgage, Environmental Indemnity, any Additional Collateral Document or other document executed and delivered to Lender relating to the Kentucky Building B Designated Property, Borrower hereby covenants and agrees that notwithstanding any assignment to Lender of the obligations of New England Mutual Life Insurance Company to environmentally remediate the Kentucky Building B Designated Property, Borrower shall in all events and as requested by Lender: a. To the fullest extent permitted by law, enforce (and cause the enforcement by the Kentucky Building B Designated Property Owner of) the obligations of New England Mutual Life Insurance Company to environmentally remediate the Kentucky Building B Designated Property, as set forth in the Purchase and Sale Agreement between New England Mutual Life Insurance Company and Borrower in respect thereof; and b. Perform (and cause the performance by the Kentucky Building B Designated Property Owner of) all environmental requirements and obligations of Borrower and/or the Kentucky Building B Designated Property Owner under the Loan Agreement, as amended hereby, and under the Mortgages and Additional Collateral Documents relating to the Kentucky Building B Designated Property. 7 13 10. Loan Fee. In addition to the Loan Fee set forth in the Original Loan Agreement, Borrower shall pay to Lender a one time non-refundable fee of Seventy Five Thousand and no/100 Dollars ($75,000), representing one-half of one percent (0.5%) of the Increase (the "Loan Fee"). The said additional Loan Fee shall be due and payable upon the execution of this Third Amendment by Borrower. As of, on and after the date of this Third Amendment, the unused facility fee set forth in Paragraph F of Article I of the Loan Agreement shall be calculated by multiplying one half of one percent (0.5%) per annum by the average portion of the $30,000,000 Loan maximum that is undrawn from time to time, as more fully set forth in said Paragraph F of Article I. 11. Releases. Without limiting the other requirements of Paragraph E of Article I of the Original Loan Agreement, Borrower shall not have the right to obtain from Lender a release or assignment of the collateral respecting any one or more of the Designated Properties and/or Designated Debt Instruments unless Borrower shall submit to Lender such Financial Statements and other information and documents as Lender may require and Lender shall determine based thereon that all representations and warranties regarding the financial condition of Borrower and/or of any one or more of the Property Owners who would remain as such after giving effect to such release or assignment remain true and correct ("Lender's Release Approval"). Any request by Borrower for any such release or assignment shall include a statement expressly referring to this Paragraph 10 of this Third Amendment and requesting Lender to identify, within seven (7) days after receipt of such request, those Financial Statements and other information and documents Lender may so require. Within eight (8) days after Borrower submits to Lender the Financial Statements and other documents and information so identified, and any follow-up items reasonably requested by Lender within said eight (8) day period, Lender shall notify Borrower whether Lender is or is not rendering Lender's Release Approval. If Lender shall fail to so respond to Borrower within such period, Lender shall be deemed to have rendered its Lender's Release Approval. The rendering of Lender's Release Approval pursuant to this Third Amendment shall not limit the other requirements of Paragraph E of Article I of the Loan Agreement, but is in addition thereto. 12. Counterparts. This document may be executed in two (2) or more counterparts, all of which taken together shall constitute one (1) original. 13. Headings. Section headings used herein are for reference and convenience only and are not intended to be substantive and shall not be deemed to limit or otherwise affect the interpretation of this Third Amendment. 14. Conflict; Inconsistency. Except as amended by this Third Amendment, the Loan Agreement shall remain in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of the Loan Agreement and the terms and provisions of this Third Amendment, the terms and provisions of this Third Amendment shall control to the extent necessary to resolve such conflict or inconsistency. Upon full execution of this Third Amendment, any references herein or elsewhere to the Loan Agreement shall be deemed to be references to the Loan Agreement as amended by this Third Amendment. 8 14 15. Successors; Assigns. The provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. This instrument has been made, executed and delivered in the State of Illinois and shall be governed by and construed in accordance with the laws of the State of Illinois. IN WITNESS WHEREOF the parties have executed this Third Amendment as of the day and year first above set forth. LENDER BORROWER - ------ -------- AMERICAN NATIONAL BANK AND BANYAN STRATEGIC REALTY TRUST, TRUST COMPANY OF CHICAGO, a a Massachusetts business trust national banking association By: /s/ Peter C. Malecek, By: /s/ Robert G. Higgins ------------------------ --------------------- Peter C. Malecek, Its: Vice President Vice President 9 15 EXHIBIT "A" TO THIRD AMENDMENT TO LOAN AGREEMENT DESIGNATED PROPERTY PROPERTY OWNER Florida Power & Light Building, BSRT Commerce Center Corp., Sarasota Commerce Park, an Illinois corporation Sarasota, Florida Buildings A, C, D & F BSRT Lexington Corp., Lexington Business Center an Illinois corporation Lexington, Kentucky Building B BSRT Lexington B Corp., Lexington Business Center an Illinois corporation 1300 New Circle Road Lexington, Kentucky Newtown Distribution Center BSRT Newtown Corp., Lexington, Kentucky an Illinois corporation 16 EXHIBIT "B" TO THIRD AMENDMENT TO LOAN AGREEMENT DESIGNATED PROPERTY PROPERTY OWNER Colonial Courts of Westland Apartments, BSRT Colonial Courts Limited Columbus, Ohio Partnership, an Illinois limited partnership Fountain Square Office Building BSRT Fountain Square Corporation, (Colonial Penn Building) an Illinois corporation (Tampa, Florida) Florida Power & Light Building, Sarasota BSRT Commerce Center Corp., an Commerce Park, Sarasota Florida Illinois corporation Buildings A, C, D & F BSRT Lexington Corp., Lexington Business Center an Illinois corporation Lexington, Kentucky ("Kentucky I Property") Building B BSRT Lexington B Corp., Lexington Business Center an Illinois corporation 1300 New Circle Road Lexington, Kentucky ("Kentucky II Property") Newtown Distribution Center BSRT Newtown Corp., Lexington, Kentucky an Illinois corporation ("Newtown Property") DESIGNATED DEBT PROPERTY PROPERTY OWNER Hallmark Village Apartments, BSRT Hallmark Village Limited Clarksville, Indiana Partnership, an Illinois limited partnership Karfad Associates Property, Skyline I, BSLT Karfad Corp., an Illinois Skyline II and BuidAmerica, Virginia corporation 17 EXHIBIT "C" TO THIRD AMENDMENT TO LOAN AGREEMENT 1. SARASOTA PROPERTY [ATTACHED BEHIND] 2. KENTUCKY I PROPERTY [ATTACHED BEHIND] 3. KENTUCKY II PROPERTY [ATTACHED BEHIND] 4. NEWTOWN PROPERTY [ATTACHED BEHIND] 18 EXHIBIT "D" TO THIRD AMENDMENT TO LOAN AGREEMENT 1. Florida Power & Light Building (Sarasota, Florida). BSRT Commerce Center Corp., an Illinois corporation, owns this Designated Property. The corporation is wholly owned by Borrower. 2. Buildings A, C, D & F, Lexington Business Center (Lexington, Kentucky). BSRT Lexington Corp., an Illinois corporation, owns this Designated Property. The corporation is wholly owned by Borrower. 3. Building B, Lexington Business Center, 1300 New Circle Road (Lexington, Kentucky). BSRT Lexington B Corp., an Illinois corporation, owns this Designated Property. The corporation is wholly owned by Borrower. 4. Newtown Distribution Center (Lexington, Kentucky). BSRT Newtown Corp., an Illinois corporation, owns this Designated Property. The corporation is wholly owned by Borrower. 19 EXHIBIT "E" TO THIRD AMENDMENT TO LOAN AGREEMENT RENT ROLLS 1. SARASOTA PROPERTY 2. KENTUCKY I PROPERTY 3. KENTUCKY II PROPERTY 4. NEWTOWN PROPERTY EX-10.III 4 FIRST AMENDMENT TO NOTE 1 EXHIBIT 10(iii) FIRST AMENDMENT TO NOTE This First Amendment to Note dated as of December 18, 1995 ("First Amendment") is made by and between Banyan Strategic Realty Trust, a Massachusetts business trust ("BSRT") and American National Bank and Trust Company of Chicago, a national banking association (hereinafter, together with its legal representatives, successors and assigns, referred to as "ANB"). WHEREAS, BSRT has previously delivered to ANB that certain Note dated as of December 1, 1994 in the maximum principal amount of Fifteen Million and no/100 Dollars ($15,000,000), subject to the limitations set forth therein (the "Note"); and, WHEREAS, BSRT desires to increase the maximum principal amount of the Note from Fifteen Million and no/100 Dollars ($15,000,000) to Thirty Million and no/100 Dollars ($30,000,000), subject to the limitations set forth therein; NOW, THEREFORE, in consideration of the Note, the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. Other Documents. Capitalized terms used in this First Amendment but not otherwise defined herein shall have the meaning ascribed to them in the Note. Concurrently herewith, BSRT is amending or causing to be amended the Loan Agreement, the Mortgages, the Reimbursement Agreement and the Additional Collateral Documents. All references in the Note to: a. the "Loan Agreement" are hereafter deemed to be references to the Loan Agreement, as previously amended and as amended concurrent herewith, as the same may hereafter be renewed, restated, replaced, extended or amended from time to time; b. the "Mortgages" are hereafter deemed to be references to the Mortgages as amended concurrent herewith, as the same hereafter may be amended from time to time, and all Mortgages which are executed and delivered to Lender concurrent herewith and which from time to time hereafter may be executed and delivered to Lender as security for or relating to the indebtedness and obligations as evidenced by any one or more of the Note, Loan Agreement and Reimbursement Agreement, as same may be amended from time to time; c. the "Reimbursement Agreement" are hereafter deemed to be references to the Reimbursement Agreement as amended concurrent herewith, as the same may hereafter be amended from time to time: and d. the "Additional Collateral Documents" are hereafter deemed to be references to the Additional Collateral Documents as amended concurrent herewith, as the same may hereafter be amended from time to time, and all other mortgages, documents and instruments (other than the Loan Agreement, Mortgages and Reimbursement Agreement) which are executed and delivered to Lender concurrent herewith and which from time to time hereafter may be executed and delivered to Lender as security for or relating to the indebtedness and obligations evidenced by any one or more of the Note, Loan Agreement and Reimbursement Agreement, as same may be amended from time to time. 2 2. Loan Amount. All references in the Note to "Fifteen Million" or "$15,000,000.00" are hereby amended to "Thirty Million" or "$30,000,000" as the case may be. 3. Ratio. In paragraph 2A of the Note, the phrase "sixty percent" or "(60%)" is hereby changed, for the period between the date hereof until March 31, 1996, to "sixty-five percent" or "(65%)", as the case may be; and on and after March 31, 1996 said phrase shall automatically revert to "sixty percent" or "(60%)", as the case may be. 4. Corrections. (a) The word "Lender" appearing in Paragraph P of Section 1 of the Note is hereby changed to the phrase "the Bank". (b) The word "Borrower" appearing in Section 14 of the Note is hereby changed to the word "Maker"; the word "Lender" appearing in Section 14 of the Note is hereby changed to the phrase "the Bank". 5. Conflict; Inconsistency. Except as amended by this First Amendment, the Note shall remain in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of the Note and the terms and provisions of this First Amendment, the terms and provisions of this First Amendment shall control to the extent necessary to resolve such conflict or inconsistency. 6. Successors; Assigns. The provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. This instrument has been made, executed and delivered in the State of Illinois and shall be governed by and construed in accordance with the laws of the State of Illinois. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date and year first written above. BSRT: ANB: BANYAN STRATEGIC REALTY AMERICAN NATIONAL BANK AND TRUST, a Massachusetts business TRUST COMPANY OF CHICAGO, a trust national banking association By: /s/ Robert G. Higgins By: /s/ Peter C. Malecek ------------------------ ------------------------ Its: Vice President Peter C. Malecek, Vice President EX-21 5 SUBSIDIARIES OF TRUST 1 EXHIBIT 21 SUBSIDIARIES OF BANYAN STRATEGIC REALTY TRUST State of Name of Subsidiary Organization Banyan/Morgan Milwaukee Limited Partnership Illinois Banyan/Morgan Willowbrook Limited Partnership Illinois BSLT/BSLFII H Street Partnership Illinois BSLT Milwaukee Corp. Illinois BSLT Karfad Corp. Illinois BSRT Colonial Courts Corp. Illinois BSRT Colonial Courts Limited Partnership Illinois BSRT Commerce Center Corp. Illinois BSRT Fountain Square Corp. Illinois BSRT Hallmark Village Corp. Illinois BSRT Hallmark Village Limited Partnership Illinois BSRT Lexington Corp. Illinois BSRT Lexington B Corp. Illinois BSRT/M&J Northlake Limited Partnership Illinois BSRT Merger Corp. Illinois BSRT Newtown Corp. Illinois BSRT Northlake Festival Corp. Illinois BSRT Seaway Corp. Illinois BSRT/STM Business Center Corp. Illinois BSRT Willburr Corp. Illinois BSRT Woodcrest Office Corp. Illinois BSRT Woodcrest Office Park Limited Partnership Illinois VSLT Ninth Street Corp. Illinois EX-27 6 FINANCIAL DATA SCHEDULE
5 "THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BANYAN STRATEGIC REALTY TRUST'S FORM 10K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10K." YEAR DEC-31-1995 DEC-31-1995 5500215 0 659161 0 0 6159376 90200065 2337095 110764772 2237954 5500000 0 0 56875404 0 110764772 0 12902369 0 0 9225384 (164958) 1535787 2600045 0 2600045 0 0 0 2600045 .25 .25
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