<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended June 30, 1999
--------------------------------------------------
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 1-14760
----------------------------------------------------------
RESOURCE ASSET INVESTMENT TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 23-2919819
- --------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1845 WALNUT STREET, 10TH FLOOR, PHILADELPHIA, PA 19103
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 861-7900
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 preceding12 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
------ ------
As of July 31, 1999, 6,173,097 common shares of beneficial interest, with a
par value of $0.01, were outstanding.
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
and Subsidiaries
Index to Quarterly Report
on Form 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1999 (unaudited)
and December 31, 1998 3
Consolidated Statements of Income (unaudited) for the three
and six months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited) for the three
and six months ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements-June 30, 1999 (unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits 15
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-2-
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE ASSET INVESTMENT TRUST
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1999
(unaudited) December 31, 1998
------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 8,247,437 $ 5,011,666
Accrued interest receivable 1,806,664 1,057,919
Investments in real estate loans, net 131,486,789 126,273,069
Investments in real estate, net 72,515,581 68,244,109
Furniture, fixtures and equipment, net 101,437 108,885
Prepaid expenses and other assets 970,028 563,443
------------ ------------
Total Assets $215,127,936 $201,259,091
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities 94,347 142,067
Accrued interest payable 673,379 674,047
Deferred interest payable 474,504 115,568
Tenant security deposits 187,265 144,830
Borrowers' escrows 10,127 418,402
Dividends payable 3,144,320 -
Deferred income 474,977 24,000
Senior indebtedness secured by real estate underlying
the Company's wraparound loans 45,937,585 46,936,032
Long term debt secured by real estate owned 69,946,594 67,267,925
Secured line of credit 9,135,000 -
------------ ------------
Total Liabilities 130,078,098 115,722,871
Minority interest - 17,761
Shareholders' Equity
Preferred Shares, $.01 par value; 25,000,000
authorized shares - -
Common Shares, $.01 par value; 200,000,000
authorized shares; 6,165,334 issued and outstanding 61,654 61,654
Additional paid-in-capital 85,809,885 85,817,332
Accumulated deficit (821,701) (360,527)
------------ ------------
Total Shareholders' Equity 85,049,838 85,518,459
------------ ------------
Total Liabilities and Shareholders' Equity $215,127,936 $201,259,091
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Mortgage interest income $ 5,173,243 $ 2,349,423 $ 9,728,060 $ 3,475,849
Rental income 2,932,094 42,311 5,637,720 49,135
Fee income and other 22,500 - 295,000 50,000
Investment income 41,964 113,325 104,818 362,330
Gain on sale of loan 131,125 - 131,125 -
----------- ----------- ------------ -----------
Total Revenues 8,300,926 2,505,059 15,896,723 3,937,314
COSTS AND EXPENSES
Interest 2,894,959 575,751 5,519,844 895,539
Property operating expenses 1,516,918 - 2,728,396 -
General and administrative 396,531 325,210 788,862 488,773
Depreciation and amortization 608,348 30,437 1,052,915 37,829
----------- ----------- ------------ -----------
Total Costs and Expenses 5,416,756 931,398 10,090,017 1,422,141
----------- ----------- ------------ -----------
Net Income before minority interest $ 2,884,170 $ 1,573,661 $ 5,806,706 $ 2,515,173
----------- ----------- ------------ -----------
Minority interest - - 17,761 -
Net Income $ 2,884,170 $ 1,573,661 $ 5,824,467 $ 2,515,173
=========== =========== ============ ===========
Net Income per common share-basic $ .47 $ .46 $ .94 $ .80
=========== =========== ============ ===========
Weighted average common shares outstanding-basic 6,165,334 3,394,972 6,165,334 3,124,955
=========== =========== ============ ===========
Net income per common share-diluted $ .47 $ .45 $ .94 $ .79
=========== =========== ============ ===========
Weighted average common shares
outstanding-diluted 6,178,942 3,465,589 6,179,062 3,185,011
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-4-
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 5,824,467 $ 2,515,173
Adjustments to reconcile net income to net
cash provided by operating activities
Gain on sale of loan (131,125) -
Minority interest (17,761) -
Depreciation and amortization 1,052,915 37,829
Amortization of original issue discount - (5,001)
Accretion of loan discount (317,573) (101,409)
Increase in accrued interest receivable (748,745) (431,299)
Increase in prepaid expenses and other assets (358,727) (314,539)
Decrease in accounts payable and accrued liabilities (47,720) (321,679)
(Decrease) increase in accrued interest payable (668) 108,797
Increase in deferred interest payable 358,936 -
Increase in tenant security deposits 42,435 -
Increase (decrease) in deferred income 450,977 (345,032)
(Decrease) increase in borrowers' escrows (408,275) 300,000
Decrease in due affiliate - (1,579,330)
------------ ------------
Net cash provided by operating activities 5,699,136 553,574
------------ ------------
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (5,460) (116,057)
Real estate loans purchased (14,225,435) (20,646,388)
Real estate loans originated (8,868,192) (15,150,000)
Proceeds from sale of loan 2,481,782 -
Principal repayments of loans 14,861,932 3,785,073
Real estate purchases and improvements (2,971,572) (1,655,170)
Utilization of reserves held by mortgagee to pay taxes 684,091 -
------------ ------------
Net cash used in investing activities $ (8,042,854) $(33,857,628)
------------ ------------
Cash flows from financing activities
Advances on secured line of credit 9,135,000 -
Issuance of common stock, net - 87,682,055
Payment of dividends (3,144,320) (2,500,076)
Principal repayments on senior indebtedness (184,888) -
Principal repayments on long-term debt (221,857) -
Other (4,446) -
------------ ------------
Net cash provided by financing activities 5,579,489 85,181,979
------------ ------------
Net change in cash and cash equivalents 3,234,771 51,877,925
------------ ------------
Cash and cash equivalents, beginning of period 5,011,666 -
------------ ------------
Cash and cash equivalents, end of period $ 8,247,437 $ 51,877,925
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, these unaudited financial statements
contain all disclosures which are necessary to present fairly the Company's
consolidated financial position at June 30, 1999 and the results of operations
and the cash flows for the three and six months ended June 30, 1999 and 1998.
The financial statements include all adjustments (consisting only of normal
recurring adjustments) which in the opinion of management are necessary in order
to present fairly the financial position and results of operation for the
interim periods. Certain information and footnote disclosures normally included
in financial statements under generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in Form 10-K for the
period ended December 31, 1998.
NOTE 2 - INVESTMENTS IN REAL ESTATE LOANS
The Company's portfolio of Investments in real estate loans consisted
of the following at June 30, 1999:
Long-term first mortgages and senior loan participations $ 37,201,793
Mezzanine (including wraparound) loans 76,919,441
Short-term bridge loans 17,591,712
Less: Provision for loan losses (226,157)
------------
Investments in real estate loans 131,486,789
Less: Senior indebtedness secured by real estate
underlying the Company's wraparound loans (45,937,585)
------------
Net Investments in real estate loans $ 85,549,204
============
The following is a summary description of the assets contained in the
Company's portfolio of Investments in real estate loans:
<TABLE>
<CAPTION>
Number of Average Loan-to- Yield Range of
Type of Loan Loans Value Range Maturities
------------ ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Long-term first mortgages and senior loan participations 8 56% 9-22% 9/2/99-7/31/21
Mezzanine (including wraparound) loans 12 85% 9-18% 1/1/02-1/31/09
Short term bridge loans 1 90% 18% 11/30/99
</TABLE>
Approximately $88.5 million of the loans are secured by multi-family
residential properties and $43.2 million are secured by commercial properties.
As of June 30, 1999, twelve of the loans were subject to pre-existing
forbearance agreements or other contractual restructurings. These agreements
were in place prior to the Company's acquisition of the loans. During the
quarter ending June 30, 1999, all payments under the agreements were timely made
and all borrowers (except one, see NOTE 5-LEGAL PROCEEDINGS) were otherwise in
full compliance with the terms of the agreements. The remaining nine loans in
the Company's portfolio are performing in accordance with their terms as
originally underwritten by the Company and were current as to payments as of
June 30, 1999.
-6-
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
As of June 30, 1999, senior indebtedness secured by real estate
underlying the Company's wraparound loans consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Loan payable, secured by real estate, monthly
installments of $13,789, including interest at
7.08%, remaining principal due
December 1, 2008 $ 1,923,394
Loan payable, secured by real estate, monthly
installments of $17,051, including interest at
6.83%, remaining principal due
December 1, 2008 2,432,032
Loan payable, secured by real estate, monthly
installments of $10,070, including interest at
6.83%, remaining principal due
December 1, 2008 1,532,647
Loan payable, secured by real estate, monthly installments of
$80,427, including interest at 6.95%, remaining principal due July
1, 2008 12,036,103
Loan payable. secured by real estate, monthly installments of
$28,090, including interest at 6.82%, remaining principal due
November 1, 2008 4,274,019
Loan payable, secured by real estate, monthly
installments of $72,005, including interest at
7.55%, remaining principal due
December 1 2008 9,939,390
Loan payable, secured by Company's interest in short-term bridge
loan of $17,576,712, interest at 8.25% due monthly, balance due
December 1, 1999
12,000,000
Loan payable, secured by real estate, monthly
installments of interest only at 10% until July,
1999 at which time amortization on a 20-year
schedule, including interest at 10% begins,
remaining principal due June 30, 2003
1,800,000
-----------
$45,937,585
===========
</TABLE>
-7-
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
As of June 30, 1999 the senior indebtedness secured by real estate
underlying the Company's wraparound loans maturing in 1999, over the next four
years, and the aggregate indebtedness maturing thereafter is as follows:
1999 $ 12,203,656
2000 418,646
2001 450,441
2002 483,501
2003 2,173,450
Thereafter 30,207,891
------------
$ 45,937,585
============
NOTE 3 - INVESTMENTS IN REAL ESTATE
Investments in real estate are comprised of the following at June
30,1999:
Land $ 5,621,425
Office buildings and improvements 64,261,466
Apartment buildings 4,291,318
-----------
Subtotal 74,174,209
Less: Accumulated depreciation (1,658,628)
-----------
Investments in real estate, net $72,515,581
===========
As of June 30, 1999, long term debt secured by the Company's
Investments in real estate consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Loan payable, secured by real estate, monthly installments of
$8,008, including interest at 7.33%, remaining principal due
August 1, 2008 $ 1,086,755
Loan payable, secured by real estate, monthly installments of
$288,314, including interest at 6.85%, remaining principal due
August 1, 2008 43,653,244
Loan payable, secured by real estate, monthly
payments of interest only at 10%, principal due
August 1, 2008
4,552,293(1)
Loan payable, secured by partnership interests,
monthly payments of interest only at 8.19%,
additional interest of 3.81% is deferred and
payable from net cash flow, principal and
deferred interest due September 1, 2008
18,000,266(1)
Loan payable, secured by real estate, monthly installments of
$23,345, including interest at 9.75%, remaining principal due
January 1, 2001 2,654,036(1)
-------------
$ 69,946,594
=============
</TABLE>
(1) These loans all relate to a single investment in real estate.
-8-
<PAGE>
RESOURCE ASSET INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
As of June 30, 1999 the amount of long-term debt secured by the
Company's Investments in real estate maturing in 1999, over the next four years,
and the aggregate indebtedness maturing thereafter, is as follows:
1999 $ 232,131
2000 498,385
2001 3,128,718
2002 545,628
2003 584,837
Thereafter 64,956,895
-----------
$69,946,594
===========
NOTE 4 - SECURED LINE OF CREDIT
In April 1999, the Company established a $20.0 million secured line of
credit with interest at the Wall Street Journal Prime Rate. The facility has a
two-year term with a one-year extension option, and an 11-month non-renewal
notice requirement. This facility will be used to enhance the Company's ability
to expand its loan portfolio and to generate income from that portfolio. As of
June 30, 1999, $9.1 million was outstanding on the line of credit at 7.75%.
NOTE 5 - LEGAL PROCEEDINGS
Pursuant to a loan restructuring agreement entered into prior to the
Company's acquisition of one of the loans, the borrower was required to make
payments on the loan in a minimum monthly amount plus certain excess cash flow.
The borrower was current on minimum payments, but the Company determined that
the borrower had not made all required excess cash flow payments. Accordingly,
the Company moved to exercise its remedies, which included the right to replace
the current manager of the property, an affiliate of the borrower. In November
1998, the borrower sought protection under Chapter 11 of the United States
Bankruptcy Code in order to prevent the Company's exercise of this remedy. The
borrower has continued to make all minimum monthly payments throughout the term
of the bankruptcy proceedings. In June 1999, the joint plan of reorganization
between the Company and the borrower was approved, pursuant to which the
borrower relinquished ownership and management control of the property. The
Company believes that the property has not been managed to its full potential
and that this change in management control will increase the Company's return on
this investment.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In addition to historical information, this discussion and analysis
contains forward-looking statements. These statements can be identified by the
use of forward-looking terminology including "may", "believe", "will", "expect",
"anticipate", "estimate", "continue" or similar words. These forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date hereof. The Company undertakes no obligation to publicly revise or update
these forward-looking statements to reflect events or circumstances that arise
after the date of this report.
Overview
The Company commenced investment operations in January 1998. Its
principal business objective is to generate income for distribution to its
shareholders from a combination of interest, rents and distributions from loans
that the Company originates and funds, loans or property interests acquired and
other investments. The Company completed two public offerings of its Common
Shares during 1998 and utilized these proceeds to build its investment
portfolio.
Liquidity and Capital Resources
Since commencement of investment operations in January 1998, the
principal source of the Company's capital resources has been the two offerings
of its Common Shares which, after offering costs and underwriting discounts and
commissions, resulted in net proceeds to the Company of $86.0 million.
Secondarily, the Company has obtained capital resources from the repayment,
refinancing, and sale of loans in its portfolio (or principal payments on those
loans), aggregating $7.1 million for the quarter ended June 30, 1999 ($17.3
million for the six months ended June 30, 1999). The principal use of these
funds for the quarter ended June 30, 1999, has been the origination, acquisition
and purchase of loans in the amount of $9.2 million ($23.1 million for the six
months ended June 30, 1999) and the purchase of real estate in the amount of
$4.8 million for both the three and six months ended June 30, 1999.
The Company also receives funds from interest payments on its loans and
operating income from its property interests. As required by the Internal
Revenue Code of 1986, the Company utilizes these funds (to the extent of not
less than 95% of its taxable income) to pay dividends to its shareholders. For
the quarter ended June 30, 1999, the Company declared dividends of $3.1 million,
which were paid on July 13, 1999.
In the second quarter of 1999, the Company utilized $9.1 million of the
$20.0 million available from its secured line of credit to consummate two loan
purchases, and assumed an existing mortgage loan in the amount of $2.7 million
in connection with the purchase of real estate. In order to maintain liquidity,
the Company continues to pursue a strategy of providing shorter-term financing
to its borrowers (generally in the form of bridge financing) to increase the
turnover of its investments, and pursuing borrower refinancing of the Company's
loans through senior lenders, with the Company retaining junior interests. The
Company is not currently experiencing material difficulties in originating
shorter-term financings or obtaining senior lien refinancings on acceptable
terms. However, there can be no assurance that difficulties will not be
encountered in the future, depending upon the development of conditions in the
credit markets
-10-
<PAGE>
At June 30, 1999, the Company had approximately $16.0 million in funds
available for investment. This includes cash of $5.1 million ($3.1 million of
cash held at June 30, 1999 was reserved to pay a cash dividend on July 13, 1999)
and availability of $10.9 million on the secured line of credit. All cash was
temporarily invested in a money-market account that the Company believed had a
high degree of liquidity and safety.
Results of Operations
The Company had average earning assets for the three and six months
ended June 30, 1999 of $95.1 million and $93.0 million, respectively ($63.8
million and $70.1 million for the three and six months ended June 30, 1998),
including $6.2 million of average earning assets invested in a money-market
account for both the three and six months ended June 30, 1999 ($13.7 million and
$8.6 million for the three and six months ended June 30, 1998). The increase in
total average earning assets and the decrease in average earning assets invested
in a money-market account from both the three and six months ended June 30, 1998
to the corresponding period in 1999 was due to the origination of loans and the
acquisition of loans and property interests, in part utilizing non-recourse debt
financing.
Interest income derived from financings was $5.2 million and $9.7
million for the three and six months ended June 30, 1999 as compared to $2.3
million and $3.5 million for the corresponding periods in 1998. Interest income
from the money market account was $42,000 and $105,000 for the three and six
months ended June 30, 1999 compared to $113,000 and $362,000 for the
corresponding periods in 1998. The increase in interest income derived from
financings and the decrease in interest income from the money market account
were due to the Company's investment of the proceeds of its two public offerings
in 1998. The yield on average earning non-money market assets was 17.3% and
17.4% for the three and six months ending June 30, 1999 and was 15.3% and 14.0%
for the corresponding periods in 1998. The increases in yield are due to a
decrease in the Company's cost of funds due to utilization of the secured line
of credit and to the Company's ability to increase the pricing of its loans in
response to market conditions. The yield on average earning money market account
assets for both the three and six months ending June 30, 1999 was 5.0% as
compared to 5.3% for both the three and six months ending June 30, 1998. The
Company derived $2.9 million from rents from its property interests for the
quarter ended June 30, 1999 ($5.6 million for the six months ending June 30,
1999) compared to $42,000 for the same period in 1998 ($49,000 for the six
months ending June 30, 1998). The increase in rents from the Company's property
interests from the three and six months ending June 30, 1998 to the same periods
in 1999 was due to the acquisition of two property interests during the first
and third quarters of 1998.
Twelve of the Company's purchased loans were subject to pre-existing
forbearance agreements or other contractual restructurings. These agreements
were in place prior to RAIT's acquisition. During the quarter ending June 30,
1999, all payments under the agreements were timely made and all borrowers
(except one, see Part II, Item 1. Legal Proceedings) were otherwise in full
compliance with the terms of the agreements. The remaining nine loans in the
Company's portfolio are performing in accordance with their terms as originally
underwritten by the Company and were current as to payments as of June 30, 1999.
-11-
<PAGE>
During the quarter ending June 30, 1999, the Company incurred expenses
of $5.4 million ($10.1 million for the six months ending June 30, 1999) compared
to $931,000 for the same period in 1998 ($1.4 million for the six months ending
June 30, 1998). The expenses consist of interest expense, operating expenses
relating to the Company's property interests, general and administrative
expenses and depreciation and amortization. Interest expense was $2.9 million
and $5.5 million for the three and six months ending June 30, 1999 as compared
to $576,000 and $896,000 for the corresponding periods in 1998. Interest expense
relates to interest payments made on senior indebtedness encumbering properties
underlying the Company's investments in wraparound loans and properties owned by
the Company and interest payments made on the Company's secured line of credit,
all of which increased as a result of the increase in the Company's loan
portfolio. Property operating expenses were $1.5 million and $2.7 million for
the three and six months ending June 30, 1999, relating to the property
interests purchased in the third quarter of 1999. Depreciation and amortization
was $608,000 and $1.1 million for the three and six months ending June 30, 1999
as compared to $30,000 and $38,000 for the corresponding periods in 1998. The
increases in depreciation and amortization from the three and six months ending
June 30, 1998 to the corresponding periods in 1999 were due to the Company's
acquisition of two property interests in the first and third quarters of 1998.
General and administrative expenses were $397,000 and $789,000 for the three and
six months ending June 30, 1999 as compared to $325,000 and $489,000 for the
corresponding periods in 1998. The increase in general and administrative
expenses from the second quarter of 1998 to the same period in 1999 was due to
increased employee costs resulting from the addition of one employee and salary
increases for existing employees. General and administrative expenses increased
from the first six months of 1998 to the first six months of 1999 because the
first quarter of 1998 amounts did not reflect a full quarter of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's assessment of its
sensitivity to market risk since its presentation in the 1998 Annual Report on
Form 10-K.
-12-
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pursuant to a loan restructuring agreement entered into prior to the Company's
acquisition of one of its loans, the borrower was required to make payments on
the loan in a minimum monthly amount plus certain excess cash flow. The borrower
was current with respect to minimum payments, but the Company determined that
the borrower had not made all required excess cash flow payments. Accordingly,
the Company moved to exercise its remedies, which included the right to replace
the current manager of the property, an affiliate of the borrower. In November
1998, the borrower sought protection under Chapter 11 of the United States
Bankruptcy Code in order to prevent the Company's exercise of this remedy. The
borrower has continued to make all minimum monthly payments throughout the term
of the bankruptcy proceedings. In June 1999, the joint plan of reorganization
between the Company and the borrower was approved, pursuant to which the
borrower relinquished ownership and management control of the property. The
Company believes that the property has not been managed to its full potential
and that this change in management control will increase the Company's return on
this investment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule
(b) Reports on Form 8-K
(1) No reports were filed on Form 8-K during the quarter ended June 30, 1999.
-13-
<PAGE>
SIGNATURES
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.
August 13, 1999 /s/ Ellen J. DiStefano
- ------------------------ --------------------------------------
DATE Ellen J. DiStefano
Chief Financial Officer
(On behalf of the registrant and
as its principal financial officer)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,247,437
<SECURITIES> 0
<RECEIVABLES> 1,806,664
<ALLOWANCES> 226,157
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 131,938
<DEPRECIATION> 30,501
<TOTAL-ASSETS> 215,127,936
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,654
<OTHER-SE> 84,988,184
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<INCOME-PRETAX> 5,806,706
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<INCOME-CONTINUING> 5,806,706
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<EPS-BASIC> .94
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</TABLE>
