UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended September 30, 2000
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 0-26215
PROPERTY CAPITAL TRUST, INC.
(Exact name of Registrant as specified in its charter)
Maryland 04-2452367
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
177 Milk St., Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 451-2100
Former name, former address, and former fiscal year, if changes since last year.
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 6, 2000
--------------------- ---------------------------------
Common Stock, $.01 par value 479,226
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PROPERTY CAPITAL TRUST, INC.
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets
September 30, 2000 (unaudited) and Decemb 3
Consolidated Statements of Operations
Three Months and Nine Months ended September 30, 2000
and 1999 (unaudited) 4
Consolidated Statements of Cash Flows
Nine Months ended September 30, 2000 and 5
N6 - 7 to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of the Consolidated
F8 - 10al Condition and Results of Operations
PART II OTHER INFORMATION:
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 12
2
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PART I. FINANCIAL INFORMATION
ITEM 1 Financial Statements
PROPERTY CAPITAL TRUST, INC.
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999
September 30, 2000 December 31, 1999
------------------ -----------------
Assets
Rental Property, at cost
Land ................................. $ 202,500 $ 202,500
Building & Fixtures .................. 1,243,600 1,243,600
Tenant improvements .................. 402,114 402,114
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1,848,214 1,848,214
Less Accumulated depreciation ........ 881,923 858,757
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966,291 989,457
Cash and Cash Equivalents ............ 107,867 180,931
Prepaid Expense ...................... 5,000 5,000
Deferred Charges, Net of
Accumulated Amortization of
$39,598 in 2000 and $35,195
in 1999 ............................. 48,974 53,377
Deferred Rent ........................ 232,250 267,088
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$1,360,382 $1,495,853
========== ==========
Liabilities and Shareholders' Equity (Deficit)
Liabilities:
Current portion of mortgage
payable ........................... $ 13,125 $ 13,125
Notes payable- other ................. 315,910 315,910
Accounts payable
and accrued expenses ................ 55,789 74,101
Tenant security deposits ............. 11,453 11,453
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396,277 414,589
Mortgage Payable, Net of current
Portion ............................. 968,387 978,252
Commitments and Contingencies
Limited Partners' Interest
in Operating Partnership ............. 412,798 412,798
Shareholders' Equity (Deficit)
Common stock, $.01 par value
Authorized - 30,000,000 shares
Issued and outstanding - 479,226 ...... 4,792 4,792
Additional paid in capital ............ 995,208 995,208
Accumulated deficit ................... (1,417,080) (1,309,786)
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(417,080) (309,786)
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$1,360,382 $1,495,853
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Operations (Unaudited)
Three Months Nine Months
Ended September 30 Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Rental Income ............... $ 77,637 $ 77,637 $ 232,912 $ 232,912
Interest Income ............. 699 717 2,923 10,451
---------- ---------- ---------- ----------
78,336 78,354 235,835 243,363
---------- ---------- ---------- ----------
Expenses:
Transaction Costs ............ 0 2,131 0 1,254,841
Administrative and
Financial expenses ......... 21,091 8,325 78,678 17,428
Professional services
expenses ................... 11,250 11,250 44,219 23,750
Interest expense ............. 27,998 27,472 82,754 44,732
Depreciation &
amortization ............... 9,190 9,202 27,569 25,226
---------- ---------- ---------- ----------
69,529 58,380 233,220 1,365,977
---------- ---------- ---------- ----------
Income (Loss) before
limited partners' interest
in operating partnership
income ...................... 8,807 19,974 2,615 (1,122,614)
Limited partners'
interest in operating
partnership income .......... (36,636) (36,636) (109,909) (127,362)
---------- ---------- ---------- ----------
Net Loss ..................... $ (27,829) $ (16,662) (107,294) (1,249,976)
========== ========== ========== ==========
Basic and diluted loss per
common share ................ (.05) (.04) (.22) (2.61)
========== ========== ========== ==========
Dividends per common share ... $ $ $ $
========== ========== ========== ==========
Weighted average common
shares outstanding .......... 479,226 479,226 479,226 479,226
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4
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PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30, 2000 and 1999
2000 1999
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Cash Flows from Operating Activities:
Net Loss .............................. $ (107,294) $(1,249,976)
Limited partners' interest in
operating partnership income ........ 109,909 127,362
Adjustments to reconcile net
loss to net cash
provided by (used in)
operating activities:
Depreciation and amortization ....... 27,569 25,226
Decrease in deferred rent ........... 34,838 34,832
(Decrease) increase in
accrued expenses ................... (18,313) 40,050
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Total Adjustments ................. 154,003 227,476
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Net cash provided by (used in)
operating activities .............. 46,709 (1,022,500)
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Cash Flows From Investing Activities:
Purchase of furniture and fixtures .. -- (8,000)
Expenditures for deferred charges ... -- (28,602)
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Net cash used in investing activities -- (36,602)
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Cash Flows From Financing Activities:
Proceeds from notes payable ........... -- 561,352
Principal paid on notes payable ....... -- (245,442)
Proceeds from issuance of common stock -- 1,000,000
Proceeds from mortgage payable ........ -- 1,000,000
Principal paid on mortgage payable .... (9,864) (5,616)
Distributions to partners ............. (109,909) (1,181,636)
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Net cash (used in) provided by
financing activities ................ (119,773) 1,128,658
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Net (decrease) increase in cash ........ (73,064) 69,556
Cash, beginning of period .............. 180,931 153,094
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Cash, end of period .................... $ 107,867 $ 222,650
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
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PROPERTY CAPITAL TRUST, INC.
Notes to Consolidated Financial Statements
(1) BASIS OF PRESENTATION
The interim consolidated financial statements presented have been prepared by
Property Capital Trust, Inc. ("PCT") without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of its financial position at September 30, 2000, and the results
of its operations for the three and nine months ended September 30, 2000 and
1999, and cash flows for the nine months ended September 30, 2000 and 1999.
Interim results are not necessarily indicative of results for a full year. The
consolidated financial statements represent the activity of PCT and Property
Capital Trust Limited Partnership ("PCT LP"), a Massachusetts limited
partnership of which PCT is the sole general partner.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of PCT. The consolidated financial statements and
notes included herein should be read in conjunction with the consolidated
financial statements and notes included in PCT's Current Annual Report on form
10-K, filed with the Securities and Exchange Commission on March 29, 2000.
(2) BUSINESS AND ORGANIZATION
PCT LP was formed pursuant to the provisions of the Uniform Limited Partnership
Act of Massachusetts to acquire, hold, develop, operate, and lease real
property. PCT LP owns and operates commercial real estate located at 51 New York
Avenue, Framingham, Massachusetts.
In May 1999, Maryland Property Capital Trust, Inc., a Maryland corporation,
merged with Property Capital Trust (the "Trust"), a publicly traded
Massachusetts business trust. PCT changed its name to "Property Capital Trust,
Inc." and intends to continue to qualify as a Real Estate Investment Trust
("REIT"). Immediately following the merger, PCT LP purchased 319,489 shares of
common stock of PCT for an aggregate price of $1,000,000, which stock was
distributed to the partners of PCT LP. PCT LP borrowed $1,000,000, secured by
the property located at 51 New York Avenue, Framingham, Massachusetts, as a
source of funding this purchase. In connection with these transactions, the
partnership agreement of PCT LP was amended and restated and PCT contributed
$1,000,000 to the capital of PCT LP and became the general partner of the
partnership.
As a result of transactions outlined above, PCT LP's limited partners control
approximately 67% of the voting stock of PCT. Because PCT LP's partners own the
larger portion of the voting rights of PCT, PCT LP has been treated as the
"accounting acquirer" and historical information of PCT solely reflects the
financial information of PCT LP for the periods prior to May 28, 1999, the date
on which the merger was consummated.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by PCT in preparing its
consolidated financial statements are set forth in Note (1) to such financial
statements included in Form 10-K for the year ended December 31, 1999. PCT has
made no significant change in these policies during the three and nine months
ended September 30, 2000.
6
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PROPERTY CAPITAL TRUST, INC.
Notes to Consolidated Financial Statements
(4) SEGMENT INFORMATION
Management of PCT has decided to operate the business with only one reportable
segment. The results of operations for the rental real estate segment are
reflected in the accompanying consolidated financial statements.
7
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PROPERTY CAPITAL TRUST, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
This Management's Discussion and Analysis of the Consolidated Financial
Condition and Results of Operations, and other sections of this Quarterly
Report, contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements that are based on current expectations, estimates and
projections about the industries in which PCT operates, management's beliefs and
assumptions made by management. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates", variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which are difficult to
predict. These risks, among others, that could affect PCT's future performance
include: (i) changes in business strategy and development opportunities; (ii)
the business abilities and judgment of PCT's officers and directors; (iii)
failure of PCT to qualify as a REIT; (iv) real estate investment considerations,
such as the effect of economic and other conditions in PCT's market area in cash
flows and values; and (v) PCT's ability to generate revenues sufficient to meet
debt service payments and other operating expenses that are not otherwise paid
by the existing tenant. Therefore, actual outcomes and results may differ
materially from those in such forward-looking statements. PCT undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
OVERVIEW
Maryland Property Capital Trust, Inc. ("PCT"), a Maryland corporation was formed
on June 15, 1998. In May 1999, PCT merged with Property Capital Trust (the
"Trust"), a publicly traded Massachusetts business trust. PCT changed its name
to "Property Capital Trust, Inc." and intends to continue to qualify as a Real
Estate Investment Trust ("REIT") under the Internal Revenue Code of 1986, as
amended.
PCT does not own directly any real estate. PCT's sole asset is its approximate
1% general partnership interest and approximate 32.3% common limited partnership
interest in PCT LP.
PCT LP owns 17,250 square feet of real estate located at 51 New York Avenue,
Framingham, MA. This property is comprised of 1.1 acres of land improved by a
one-story combined office and research development building. Framingham York
Associates Limited Partnership, the predecessor of PCT LP, acquired this
property in 1985. Currently, Genzyme Corporation is the sole tenant of the
property. The lease, as amended, is for a term of twenty years that expires in
September 2005. As of September 30, 2000, PCT LP had an outstanding mortgage of
$981,512 that is secured by the real estate and assignment of rents under the
operating lease.
8
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PCT relies on the experience and knowledge of its officers and directors to
manage its growth, if any. PCT believes that its executive officers have
long-standing relationships with institutional owners, lenders, bankers and
other real estate operators and developers which PCT anticipates may provide PCT
with access to transaction activity and investment opportunities. As part of its
strategy, PCT anticipates that it may position itself to produce portfolio
growth if and when the capital markets for REIT's improve and as funding for
real estate activities of publicly held entities becomes more readily available.
Until PCT is satisfied that the financial markets are sufficiently stabilized to
allow growth of PCT, PCT LP will be operated with the existing single property
and with all operating expenses maintained at the lowest levels, consistent with
regulatory requirements and other needs. Given appropriate market conditions,
PCT believes that its REIT structure will allow PCT to make tax efficient
acquisitions through the issuance of units of partnership interest of PCT LP.
PCT also may issue equity securities of PCT that may be senior to the shares of
common stock of PCT.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE THREE
MONTHS ENDED SEPTEMBER 30, 1999
Revenues
Rental income for the three months ended September 30, 2000 and 1999 totaled
$77,637. Interest income decreased $18 from $717 for the three months ended
September 30, 1999 to $699 for the three months ended September 30, 2000.
Interest income for the three months ended September 30, 2000 is the result of
working capital reserves being invested in money market accounts.
Expenses
Transaction costs for the three months ended September 30, 1999 totaled $2,131.
The remaining costs were related to the issuance of the common stock
certificates to PCT LP and the shareholders of the Trust. These costs were
expensed as of September 30, 1999.
Administrative and Financial expenses totaled $21,091 and $8,325 for the three
months ended September 30, 2000 and 1999, respectively. The approximately
$12,800 increase in expenses are a result of the costs incurred for the annual
meeting, including printing, mailing and other investor service charges related
to mailing of the Proxy Statement and Annual Report to the shareholders of
record.
Interest expense increased $526 from $27,472 for the three months ended
September 30, 1999 to $27,998 for the three months ended September 30, 2000. The
increase is due to the increase in the prime rate that is used to calculate
interest on the outstanding note payable.
9
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1999.
Revenues
Rental Income was $232,912 for the nine months ended September 30, 2000 and
1999. Interest Income decreased $7,528 from $10,451 for the nine months ended
September 30, 1999 to $2,923 for the nine months ended September 30, 2000. In
April 1999, $1,000,000 of mortgage proceeds, net of closing costs was invested
in a money market account until the transaction costs were paid. Interest Income
for the nine months ended September 30, 2000 and 1999 is a result of the working
capital reserves being invested in money market accounts.
Transaction Costs for the nine months ended September 30, 1999 totaled
$1,254,841. These costs included legal, accounting, printing, insurance and
other costs related to the issuance of the common stock certificates to PCT LP
and the shareholders of the Trust. These costs were expensed as of September 30,
1999. No additional costs have been incurred for the nine months ended September
30, 2000.
Administrative and Financial Expenses increased approximately $61,200 from
$17,428 for the nine months ended September 30, 1999 to $78,678 for the nine
months ended September 30, 2000. The increase is a result of PCT having a full
nine months of expenses for the period ended September 30, 2000. These operating
expenses include insurance coverage, investor services related to the proxy,
annual shareholders meeting and stock transfers, storage and printing.
Professional Services expense increased $20,469 from $23,750 for the nine months
ended September 30, 1999 to $44,219 for the nine months ended September 30,
2000. The increase is primarily due to the additional reporting and compliance
work done in preparation for the annual report, proxy statement and shareholders
meeting held in May.
Interest Expense increased $38,022 from $44,732 for the nine months ended
September 30, 1999 to $82,754 for the nine months ended September 30, 2000. The
increase is due to a full nine months of interest due on both the mortgage and
note payable.
Financial Condition, Liquidity and Capital Resources
Cash and cash equivalents were $107,867 at September 30, 2000 as compared to
$180,931 at December 31, 1999. Management has considered the liquidity needs of
PCT and the adequacy of expected liquidity sources to meet these needs. As long
as the tenant continues to pay the rent obligation to PCT LP and substantially
all of the operating costs, as provided for under the existing lease agreement,
management believes the level of working capital provided by operating
activities will be sufficient to pay the monthly debt service, operating
expenses not paid directly by the tenant, the minimum distributions required to
maintain PCT's REIT qualification under the Internal Revenue Code and the
quarterly distributions as required under the partnership agreement of PCT LP
for a least the next 12 months.
For the three months ended September 30, 2000 and 1999, cash from operations
distributed to the partners of PCT LP totaled $36,636. In October of 2000, PCT
LP distributed an additional $36,636 to its limited partners.
10
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PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(3) Articles of Incorporation and By-Laws
3.1 The Articles of Amendment and Restatement of Property Capital Trust,
Inc., incorporated herein by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1999, filed with the Securities and Exchange Commission on March 29,
2000 (file no. 000-26215).
3.2 By-Laws of Property Capital Trust, Inc., incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, filed with the Securities
and Exchange Commission on March 29, 2000 (file no. 000-26215).
(4) Instruments Defining Rights of Shareholders
4.1 Second Amended and Restated Agreement of Limited Partnership of
Property Capital Trust Limited Partnership, dated as of May 28, 1999
by and among Property Capital Trust, Inc. and the persons whose names
are set forth on Exhibit A-1 therein, incorporated herein by reference
to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000, filed with the Securities and Exchange
Commission on May 12, 2000 (file no. 000-26215).
(27) Financial Data Schedule is filed herewith as Exhibit 27.
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by the Company during the quarter
ending September 30, 2000. 8
11
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PROPERTY CAPITAL TRUST, INC.
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 as of the 6th day of November 2000.
PROPERTY CAPITAL TRUST, INC.
/s/ Bruce A. Beal
---------------------------------
Bruce A. Beal, President
/s/ Michael A. Manzo
---------------------------------
Michael A. Manzo, Treasurer
(Principal Financial Officer)
