-----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, JdnvfUvThp9MMAta7vzMsbC7wzpcjSr/kzW1/qLcITskXDs47gVEzQ0M31UgKJqe 8iD4LxvL2HiUunWtO2s42g== 0000950152-96-002951.txt : 19960617 0000950152-96-002951.hdr.sgml : 19960617 ACCESSION NUMBER: 0000950152-96-002951 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960614 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REALTY REFUND TRUST CENTRAL INDEX KEY: 0000082473 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 346647590 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07062 FILM NUMBER: 96580874 BUSINESS ADDRESS: STREET 1: 1385 EATON CENTER STREET 2: 1111 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2167717663 MAIL ADDRESS: STREET 1: 1385 EATON CENTER STREET 2: 1111 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114 10-Q 1 REALTY REFUND TRUST QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q - ------- Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 X For the quarterly period ended April 30, 1996 - ------- - ------- Transition pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ - ------- Commission File Number 1-7062 ------------------------------------ REALTY ReFUND TRUST - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its chart) Ohio 34-6647590 - -------------------------------------------------------------------------------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1385 Eaton Center 1111 Superior Avenue Cleveland, Ohio 44114 - -------------------------------------------------------------------------------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (216) 771-7663 ----------------------------- N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 N/A -------- -------- ------- Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No N/A X ------ ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 1,020,586 ------------------------- 2 REALTY ReFUND TRUST PART I. FINANCIAL INFORMATION 3 REALTY ReFUND TRUST ------------------- BALANCE SHEETS -------------- APRIL 30 AND JANUARY 31, 1996 ----------------------------- ASSETS ------
April 30, January 31, --------- ----------- (Unaudited) (Audited) INVESTMENTS: Loans receivable $11,395,779 $12,915,955 Loan receivable from related party, net of valuation allowance of $5,000,000 at April 30 and January 31, 1996 4,330,310 4,506,055 CASH 85,132 16,285 INTEREST RECEIVABLE AND OTHER ASSETS 824,196 720,671 REAL ESTATE HELD FOR SALE, net of a $3,000,000 valuation allowance at April 30, and January 31, 1996 6,674,502 6,396,364 ============== ============== $23,309,919 $24,555,330 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Loans payable underlying wrap-around mortgages $ 3,081,980 $ 4,577,187 Loan payable underlying wrap-around mortgage to related party 2,979,518 3,155,263 Note payable to bank 6,920,000 6,295,000 Note payable to related party 4,375,000 4,500,000 Deposits and accrued expenses 1,405,886 1,480,061 -------------- -------------- Total liabilities 18,762,384 20,007,511 -------------- -------------- SHAREHOLDERS' EQUITY: Shares of beneficial interest without par value; unlimited authorization; 1,020,586 shares outstanding at April 30 and January 31, 1996 4,547,535 4,547,819 ============== ============== $23,309,919 $24,555,330 ============== ==============
The accompanying notes are an integral part of these balance sheets. -2- 4 REALTY ReFUND TRUST ------------------- UNAUDITED --------- STATEMENTS OF INCOME -------------------- FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND 1995 --------------------------------------------------
1996 1995 ------------- ------------- REVENUES: Interest income from loans receivable $ 349,415 $ 650,917 Interest income from loan receivable from related party 207,453 234,311 Rental revenue from real estate held for sale 525,466 529,834 ------------- ------------- 1,082,334 1,415,062 ------------- ------------- EXPENSES: Interest on loans underlying wrap-around mortgages 80,288 195,549 Interest on loan underlying wrap-around mortgage to related party 45,954 56,298 Interest on note payable to bank 113,664 222,664 Interest on note payable to related party 92,010 110,438 Fee to related party investment advisor 34,175 73,832 Operating expenses of real estate held for sale 537,031 504,724 Depreciation of building held for sale - 62,283 Amortization of tenant improvements and deferred leasing commissions 10,606 41,362 Other operating expenses 66,831 6,774 ------------- ------------- 980,559 1,273,924 ------------- ------------- NET INCOME $ 101,775 $ 141,138 ============= ============= NET INCOME PER SHARE $.10 $.14 ===== ====== CASH DIVIDENDS PER SHARE DECLARED $.10 $.20 ===== ======
The accompanying notes are an integral part of these statements. -3- 5 REALTY ReFUND TRUST ------------------- UNAUDITED --------- STATEMENTS OF CASH FLOWS ------------------------ FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND 1995 --------------------------------------------------
1996 1995 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Interest received $ 560,939 $ 890,744 Interest paid (338,730) (591,188) Cash payments to investment advisor and other suppliers (220,587) (291,761) Rental revenue received from real estate held for sale 634,914 535,780 Cash payments for operating costs of real estate held for sale (712,461) (270,973) --------------- --------------- Net cash provided by (used for) operating activities (75,925) 272,602 --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Principal collected on mortgage loans receivable 1,695,921 1,602,229 Principal payments on mortgage loans payable (1,670,952) (1,544,675) Payments for tenant improvements - (124,985) Purchase of fee interest in land (278,138) - --------------- --------------- Net cash used for investing activities (253,169) (67,431) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payment on note payable to related party (125,000) (125,000) Net bank borrowings 625,000 100,000 Payment of cash dividends (102,059) (204,117) --------------- --------------- Net cash provided by (used for) financing activities 397,941 (229,117) --------------- --------------- NET INCREASE (DECREASE) IN CASH 68,847 (23,946) CASH AT BEGINNING OF PERIOD 16,285 39,073 --------------- --------------- CASH AT END OF PERIOD $ 85,132 $ 15,127 =============== ===============
-4- 6
1996 1995 --------------- --------------- RECONCILIATION OF NET INCOME TO NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES: Net income $ 101,775 $ 141,138 Adjustments to reconcile net income to net cash provided by (used for) operating activities- Depreciation - 62,283 Amortization of tenant improvements and deferred leasing commissions 10,606 41,362 Amortization of deferred loan fees (4,500) (4,500) Decrease (increase) in interest receivable and other assets (114,131) 291,352 Decrease in deposits and accrued expenses (69,675) (259,033) =============== =============== $ (75,925) $ 272,602 =============== ===============
The accompanying notes are an integral part of these statements. -5- 7 REALTY ReFUND TRUST ------------------- NOTES TO UNAUDITED FINANCIAL STATEMENTS --------------------------------------- APRIL 30, 1996 AND 1995 ----------------------- 1. BASIS OF PRESENTATION: ---------------------- The accompanying unaudited financial statements contain all adjustments which are, in the opinion of the Trust's management, necessary to present fairly the financial position of the Trust as of April 30, 1996, and the results of its operations and cash flows for the three-month periods ended April 30, 1996 and 1995. Such adjustments are of a normal recurring nature. The financial statements included herein have been prepared by the Trust, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Trust's latest annual report on Form 10-K. 2. DIVIDEND DECLARATION: --------------------- On May 15, 1996, the Trustees declared a distribution, payable on June 17, 1996 in the amount of 10 cents per share of beneficial interest. 3. NET INCOME PER SHARE: --------------------- Net income per share has been computed based on the weighted average number of shares outstanding. Net income per share for the three months ended April 30, 1996 and 1995, was based upon 1,020,586 shares. During these periods, the Trust had no potentially dilutive securities outstanding. At April 30, 1996 and 1995, there were 1,020,586 shares of beneficial interest outstanding. 4. NEW ACCOUNTING PRINCIPLE: ------------------------- In the first quarter of fiscal 1997, the Trust adopted Statement of Financial Accounting Standards (FAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Pursuant to this standard, long-lived assets to be disposed of are to be reported at the lower of carrying amount or fair value less incremental direct costs to sell. Long-lived assets to be disposed of shall not be depreciated while being held for disposal. The Trust's real estate held for sale is within the scope of FAS No. 121. As the Trust established a $3,000,000 valuation allowance at January 31, 1996 to reduce the carrying value of the real estate held for sale to its estimated net realizable value, adoption of FAS No. 121 did not have a material impact on the Trust's financial position or results of operations except that no depreciation expense was recorded on the real estate held for sale in the quarter ended April 30, 1996. -6- 8 Management's Discussion and Analysis of Financial Condition - ----------------------------------------------------------- and Results of Operations - ------------------------- Interest income on mortgage loans receivable decreased during the quarter ended April 30, 1996 as compared to the corresponding period of 1995 due to the Sarasota and Orlando, Florida and Saginaw, Michigan loan repayments and the principal prepayments received on the Toledo, Oho wrap-around mortgage loan, all of which occurred in the fiscal year ended January 31, 1996, and the normal amortization of mortgage loan balances. Interest expense on mortgage loans payable decreased due to the normal amortization of mortgage loan balances. During the three months ended April 30, 1996, the Chicago property incurred a net operating loss of approximately $22,000, inclusive of amortization charges for deferred leasing commissions totaling approximately $11,000. For the prior year quarter, the Chicago property incurred a net operating loss of approximately $79,000, inclusive of depreciation and amortization charges for building, building improvements, tenant improvements and deferred leasing commissions of approximately $104,000. Rental revenue was comparable between periods. Operating expenses of the Chicago property increased between periods due to an increase in repair and maintenance expense. Amortization and depreciation expense decreased between periods due to the adoption of FAS No. 121 discussed below. In the first quarter of fiscal 1997, the Trust adopted FAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Pursuant to this standard, long-lived assets to be disposed of are to be reported at the lower of carrying amount or fair value less incremental direct costs to sell. Long-lived assets to be disposed of shall not be depreciated while being held for disposal. the Trust's real estate held for sale is within the scope of FAS No. 121. As the Trust established a $3,000,000 valuation allowance at January 31, 1996 to reduce the carrying value of the Chicago real estate held for sale to its estimated net realizable value, adoption of FAS No. 121 did not have a material impact on the Trust's financial position or results of operations except that no depreciation expense was recorded on the real estate held for sale in the quarter ended April 30, 1996. As a result, the Trust did not provide depreciation on the real estate held for sale. Average bank borrowing levels were considerably lower in the current year quarter as the proceeds received in the prior year in connection with the Sarasota and Orlando, Florida and Saginaw, Michigan loan repayments and the principal prepayments received on the Toledo, Ohio loan were used to reduce bank borrowings. In addition, the effect of lower bank lending rates in the current year quarter resulted in a decrease in interest expense on the note payable to the bank. Interest expense on the note payable to related party decreased due to quarterly principal payments of $125,000 which began in the prior year and lower prime lending rates in the current year period. The fee to investment advisor decreased in the current year due to the lower level of net investment in mortgage loans. Other operating expenses increased in the current period due to higher levels of legal and professional expense. -7- 9 Liquidity - --------- To maintain tax-exempt status, the Trust is required to distribute at least 95% of its taxable income to its shareholders. It is currently the policy of the Trust to distribute sufficient dividends to maintain its tax-exempt status. As a result of the substantial income tax reporting net loss in fiscal 1993, the Trust has available approximately $4.6 million of net operating loss carryforwards for income tax purposes. The loss carryforwards can be used to reduce future dividend payment requirements and still allow the Trust to maintain its tax-exempt status. The Trustees will assess the level of dividends to be declared on a quarterly basis. For the three months ended April 30, 1996 as compared to the prior year period, net cash provided by operating activities decreased due to a higher level of net cash payments for operating costs of the Chicago property. The prior year period included the receipt of $300,000 for reimbursement of building repairs and maintenance expenses. Cash used for investing activities increased primarily from the purchase of the remaining fee interest in the land related to the real estate held for sale. In addition, the Trust capitalized no expenditures for tenant improvements of the Chicago property in the current year quarter. Cash provided by financing activities increased as the Trust increased bank borrowings as compared to the prior year quarter in order to fund the operating and investing activities discussed above, the principal payment on the related party note payable and the payment of dividends. Also, dividends paid decreased as the Trustees declared and paid a lower dividend in the quarter ended April 30, 1996 than in the prior year. In connection with the Trust's wrap-around loans, while the entire debt service is received in cash, the Trust is obligated to the borrower to make debt service payments on the underlying indebtedness. Additionally, the Trust must fund any operating deficits of the Chicago property until such time as it is sold. The Trust's primary sources of funds are a bank credit agreement in the amount of $7,000,000 and repayments of mortgage loans receivable. The credit agreement is used to fund any operating deficits of the Chicago building and for working capital. The credit agreement expires in July 1996. As of April 30, 1996, the Trust had available $80,000 under the credit agreement. Inflation - --------- Generally, inflation affects the Trust as it affects its borrowers and the underlying real estate collateral. This type of collateral traditionally has been able to sustain itself during periods of inflation. -8- 10 FORM 10-Q -- PART II: OTHER INFORMATION --------------------------------------- Items 1 through 3 and 5 are not applicable or the answer to such items is negative; therefore, the items have been omitted and no reference is required in this report. ITEM 4: Submission of Matters to a Vote of Security Holders - ----------- ------------------------------------------------------------------- (a) The Trust's Annual Meeting of Shareholders was held May 15, 1996. (b) The following Trustees were elected at such annual meeting, each for a one-year term expiring in 1997: James H. Berick Alan M. Krause Alvin M. Kendis Frank L. Kennard Samuel S. Pearlman (c) The Election of Trustees was the only matter voted on at the annual meeting of shareholders: Trustee Name Votes For Abstentions ------------------------ ------------ -------------- James H. Berick 697,583 33,136 Alan M. Krause 697,483 33,236 Alvin M. Kendis 692,583 38,136 Frank L. Kennard 692,583 38,136 Samuel S. Pearlman 692,483 38,236 ITEM 6: Exhibits and Reports on Form 8-K - ----------- ------------------------------------------------------------------- (a) Exhibit Number Exhibit ------ ------- 27 Financial Data Schedule(1) (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. - --------------- (1) Filed only in electronic format pursuant to Item 601(b)(27) of Regulation S-K. -9- 11 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. June 13, 1996. REALTY ReFUND TRUST ----------------------------------------- (Registrant) By /s/ Alan M. Krause ----------------------------------------- Alan M. Krause Chairman /s/ James H. Berick ----------------------------------------- James H. Berick President and Principal Financial Officer -10- EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEETS AS OF APRIL 30, 1996 AND JANUARY 31, 1996 AND STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000082473 REALTY REFUND TRUST 3-MOS JAN-31-1997 FEB-01-1996 APR-30-1996 85,132 0 20,726,089 5,000,000 0 0 6,674,502 0 23,309,919 0 17,356,498 4,547,535 0 0 0 23,309,919 0 1,082,334 0 0 648,643 0 331,916 101,775 0 101,775 0 0 0 101,775 .10 .10 THE REGISTRANT UTILIZES AN UNCLASSIFIED BALANCE SHEET. THEREFORE, THE CAPTIONS "TOTAL CURRENT ASSETS" AND "TOTAL CURRENT LIABILITIES" ARE NOT APPLICABLE.
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