FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999
OR
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE
EXCHANGE ACT OF 1934 For the transition period from
to
------------------------ ---------------------------
Commission File No. 33-99694
METROPOLITAN REALTY COMPANY, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 38-3260057
(State of incorporation) (I.R.S. Employer Identification No.)
535 Griswold, Suite 748
Detroit, Michigan 48226
(Address of principal executive offices)
Registrant's Telephone Number, including area code:
(313) 961-5552
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No____
There is no established public trading market for the Company's
Class A Membership Interests and Class B Membership Interests.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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METROPOLITAN REALTY COMPANY, L.L.C.
BALANCE SHEET (000's Omitted)
September 30, 1999 December 31, 1998
------------------------------------ ----------------------------------
Class A Class B Class A Class B
Membership Membership Membership Membership
Interests Interests Total Interests Interests Total
---------- ---------- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 1,432 $ 2 $ 1,434 $ 1,221 $ 78 $ 1,299
Investment securities 2,348 2,647 4,995 13,181 13,260 26,441
Mortgage notes receivable:
Unaffiliated 24,220 20,982 45,202 25,476 13,842 39,318
Affiliated -- -- -- -- -- --
Allowance for loan losses (1,134) (139) (1,273) (1,134) (139) (1,273)
-------- -------- -------- -------- -------- --------
Total mortgage notes receivable 23,086 20,843 43,929 24,342 13,703 38,045
Accrued interest and other receivables 171 128 299 183 91 274
Other assets 41 -- 41 62 -- 62
-------- -------- -------- -------- -------- --------
Total assets $ 27,078 $ 23,620 $ 50,698 $ 38,989 $ 27,132 $ 66,121
======== ======== ======== ======== ======== ========
Liabilities and Members' Equity
Liabilities
Accounts payable $ 66 $ 14 $ 80 $ 59 $ 9 $ 68
Distribution payable 37 -- 37 -- -- --
Due to (from) (1,009) 1,009 -- (4,440) 4,440 --
Deposits from borrowers for property taxes 43 -- 43 33 -- 33
Other -- -- -- 1 -- 1
-------- -------- -------- -------- -------- --------
Total liabilities (863) 1,023 160 (4,347) 4,449 102
Members' Equity
Class A members' equity 27,972 -- 27,972 43,286 -- 43,286
Class B members' equity -- 22,629 22,629 -- 22,600 22,600
Accumulated other comprehensive
income (31) (32) (63) 50 83 133
-------- -------- -------- -------- -------- --------
Total members' equity 27,941 22,597 50,538 43,336 22,683 66,019
-------- -------- -------- -------- -------- --------
Total liabilities and members' equity $ 27,078 $ 23,620 $ 50,698 $ 38,989 $ 27,132 $ 66,121
======== ======== ======== ======== ======== ========
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METROPOLITAN REALTY COMPANY, L.L.C.
STATEMENT OF OPERATIONS (000's Omitted)
Three months ended September 30, 1999 Three months ended September 30, 1998
------------------------------------- -------------------------------------
Class A Class B Class A Class B
Membership Membership Membership Membership
Interests Interests Total Interests Interests Total
---------- ---------- -------- ---------- ---------- --------
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Revenue
Interest income:
From mortgage notes, unaffiliated $ 481 $ 374 $ 855 $ 567 $ 122 $ 689
From mortgage notes, affiliated -- -- -- -- -- --
Investment income 55 12 67 286 246 532
Miscellaneous income 12 7 19 6 -- 6
------ ------ ------ ------ ------ ------
Total revenue 548 393 941 859 368 1,227
Operating Expenses
General and administrative 56 31 87 82 16 98
Amortization of organization costs -- -- -- -- 22 22
------ ------ ------ ------ ------ ------
Total operating expenses 56 31 87 82 38 120
------ ------ ------ ------ ------ ------
Net Investment Income $ 492 $ 362 $ 854 $ 777 $ 330 $1,107
====== ====== ====== ====== ====== ======
<CAPTION>
Nine months ended September 30, 1999 Nine months ended September 30, 1998
------------------------------------ ------------------------------------
Class A Class B Class A Class B
Membership Membership Membership Membership
Interests Interests Total Interests Interests Total
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Interest income:
From mortgage notes, unaffiliated $1,455 $ 979 $2,434 $1,719 $ 146 $1,865
From mortgage notes, affiliated -- -- -- 105 -- 105
Investment income 428 238 666 898 958 1,856
Miscellaneous income 41 8 49 78 3 81
------ ------ ------ ------ ------ ------
Total revenue 1,924 1,225 3,149 2,800 1,107 3,907
Operating Expenses
General and administrative 138 88 226 233 67 300
Amortization of organization costs -- -- -- -- 67 67
------ ------ ------ ------ ------ ------
Total operating expenses 138 88 226 233 134 367
------ ------ ------ ------ ------ ------
Net Investment Income $1,786 $1,137 $2,923 $2,567 $ 973 $3,540
====== ====== ====== ====== ====== ======
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METROPOLITAN REALTY COMPANY, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' EQUITY (000's Omitted)
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Accumulated
Other Members' Equity
Comprehensive -------------------- Total
Income Class A Class B Members' Equity
--------------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Balance - December 31, 1997 $ (28) $ 43,565 $ 22,936 $ 66,473
Comprehensive income:
Net investment income -- 3,457 967 4,424
Change in unrealized holding
gains(losses) on investment
Securities 161 -- -- 161
--------
Total Comprehensive income 4,585
Distributions -- (3,736) (1,303) (5,039)
------ -------- -------- --------
Balance - December 31, 1998 $ 133 $ 43,286 $ 22,600 $ 66,019
Comprehensive income:
Net investment income -- 1,786 1,137 2,923
Change in unrealized holding
gains(losses) on investment
Securities (196) -- -- (196)
--------
Total Comprehensive income 2,727
Distributions -- (17,100) (1,108) (18,208)
------ -------- -------- --------
Balance - September, 1999 $ (63) $ 27,972 $ 22,629 $ 50,538
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METROPOLITAN REALTY COMPANY, L.L.C.
STATEMENT OF CASH FLOWS (000's Omitted)
Nine months ended
September 30
---------------------
1999 1998
---- ----
Cash Flows from Operating Activities
Net investment income $ 2,969 $ 3,540
Adjustments to reconcile net investment
income to net cash from operating
activities:
Depreciation and amortization expense 1 69
Other 37 34
Decrease (increase) in assets:
Accrued interest and other receivables (27) 55
Other assets 20 (63)
Increase (decrease) in liabilities:
Accounts payable (34) 41
Other liabilities 10 (10)
-------- --------
Total adjustments 7 126
-------- --------
Net cash provided by operating activities 2,976 3,666
Cash Flows from Investing Activities
Purchases of investment securities (8,747) (19,243)
Collections of principal from investment securities 29,997 23,025
Net change in loans (5,882) (5,938)
-------- --------
Net cash provided by (used for) investing activities 15,368 (2,156)
Cash Flows from Financing Activities
Distributions paid to members (18,208) (3,860)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 136 (2,350)
Cash and Cash Equivalents - Beginning of period 1,298 5,324
-------- --------
Cash and Cash Equivalents - End of period $ 1,434 $ 2,974
======== ========
METROPOLITAN REALTY COMPANY, L.L.C.
Notes to Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation have been
included. Operating results for the three months ended September 30,
1999 are not necessarily indicative of the results that would be
expected for the year ending December 31, 1999. For further
information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the fiscal
year ended December 31, 1998.
2. INCOME TAXES
As a limited liability company, it is intended that the Company will be
classified as a partnership for federal income tax purposes and, as
such, it generally will be treated as a "pass-through" entity that is
not subject to federal income tax. Accordingly, no provision for income
taxes has been made for the periods presented.
3. DISTRIBUTIONS
In accordance with the terms of the Operating Agreement, Class A and
Class B members will receive pro rata quarterly distributions of cash
income, less expenses, from their respective class of net assets within
90 days after the end of each fiscal quarter. All distributions are
subject to a determination by the Managing Board that the Company will
have sufficient cash on hand to meet its current and anticipated needs
to fulfill its business purpose.
Item 2. Management's Discussion and Analysis Of Financial Condition And
Results Of Operation
Overview
On May 11, 1999, the Managing Board of the Company approved a contract with
WMF Proctor, a Michigan Corporation located in Bloomfield Hills, Michigan.
Pursuant to the terms of the contract, WMF Proctor will use its best efforts
to find buyers for the Company's outstanding mortgage loans.
The Managing Board also voted to approve the sale and disposition of the
Company's assets, to dissolve the Company, and to make interim distributions
of the Company's assets to Members in such amounts as may, from time to time,
be approved by the Executive Committee of the Managing Board; provided,
however, that distributions to certain Members who received their Membership
Interests by gift at the time of the Company's restructuring in December,
1996 may be deferred until the Company is dissolved, to the extent permitted
by the Company's Operating Agreement.
Funds that have not yet been invested in or committed for mortgage loans are
primarily invested in marketable securities. Income and principal received
with respect to the Company's investments in mortgage loans are also invested
in marketable securities pending distribution to members.
Pursuant to the resolution passed at the May 11, 1999 Managing Board meeting
related to the liquidation of Metropolitan Realty Company, a partial
distribution of $14,954,449 with respect to uninvested funds in Class A was
sent, pro rata, to all major members on June 30, 1999. There was no initial
distribution for Class B as the funds are fully invested in or committed for
mortgage investments.
Class A Assets and Class B Assets
As a result of the restructuring effective December 6, 1996, the Company
reports its financial condition and results of operations by segregating all
information into Class A membership interests and Class B membership
interests. Each class is distinguished by its differing member composition.
Interim Financial Statements
The Interim Financial Statements furnished include all adjustments which, in
the opinion of management, are necessary to reflect fair statements of the
results for the interim period presented and are recurring in nature.
Financial Condition and Results of Operation, Class A Membership Interests
Net investment income for the three months ended September 30, 1999 was
$492,000 versus $777,000 in the same period in 1998 - a 37 percent decrease.
The decrease relates primarily to the decrease in investment income as
approximately $15,000,000 in excess funds were distributed to major members
during the second quarter as discussed above.
The allowance for loan losses remains at $1,134,000 - unchanged since
December 31, 1998. Management reviews, on a regular basis, factors which may
adversely affect its mortgage loans, including occupancy levels, rental rates
and property values. It is possible that economic conditions in southeastern
Michigan, and the nation in general, may adversely affect certain of the
Company's loan assets. After evaluation of the loan portfolio and the
associated allowance for loan losses, management deemed the allowance of
$1,134,000 adequate to cover any potential future write-offs of loan assets.
The Company makes quarterly distributions of net income in accordance with
the Operating Agreement of the Company. During August of 1999, the Company
distributed approximately $582,000 to Class A Membership Interests relating
to second quarter 1999 cash income. Cumulative distributions for the year
include $1,564,000 distributed for quarterly net income and $14,954,449 as a
partial liquidation distribution as discussed above.
Management is not aware of any material unrecorded liabilities or
contingencies relating to Class A Membership Interests.
Financial Condition and Results of Operation,
Class B Membership Interests
Net investment income for the three months ended September 30, 1999 was
$362,000 versus $330,000 in the same period in 1998 - a 10 percent increase.
This resulted from a change in investment strategy and an overall increase in
yield.
The allowance for loan losses remains at $139,000 - unchanged since December
31, 1998. Management reviews, on a regular basis, factors which may adversely
affect its mortgage loans, including occupancy levels, rental rates and
property values. It is possible that economic conditions in southeastern
Michigan, and the nation in general, may adversely affect certain of the
Company's loan assets. After evaluation of the loan portfolio and the
associated allowance for loan losses, management deemed the allowance of
$139,000 adequate to cover any potential future write-offs of loan assets.
The Company makes quarterly distributions of net income in accord with the
Operating Agreement of the Company. During August of 1999, the Company
distributed approximately $377,000 to Class B Membership Interests relating
to second quarter 1999 cash income. Cumulative distributions for the year
include $731,000 distributed for quarterly net income.
Management is not aware of any material unrecorded liabilities or
contingencies relating to Class B Membership Interests.
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.
Dated: November 11, 1999
METROPOLITAN REALTY COMPANY, L.L.C.
By: /s/ Robert G. Jackson
----------------------------------
Robert G. Jackson, President
(Principal Executive Officer and
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> $ 1,434
<SECURITIES> 4,995
<RECEIVABLES> 45,202
<ALLOWANCES> (1,273)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 40
<DEPRECIATION> (37)
<TOTAL-ASSETS> 50,698
<CURRENT-LIABILITIES> 160
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 50,538
<TOTAL-LIABILITY-AND-EQUITY> 50,698
<SALES> 0
<TOTAL-REVENUES> 3,149
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,923
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,923
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
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