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 June 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 Outanding at August 4, 2000
--------------------- ---------------------------
Common Stock, $.01 par value 479,226
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PROPERTY CAPITAL TRUST, INC.
INDEX
<CAPTION>
PAGE NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
June 30, 2000 (unaudited) and December 31, 1999 3
Consolidated Statements of Operations
Three Months and Six Months ended June 30, 2000 and 1999
(unaudited) 4
Consolidated Statements of Cash Flows
Six Months ended June 30, 2000 and 1999 (unaudited) 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of the Consolidated
Financial Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 11
Signatures 12
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PROPERTY CAPITAL TRUST, INC.
Consolidated Balance Sheets
June 30, 2000 (Unaudited)and December 31, 1999
<CAPTION>
June 30, 2000 December 31, 1999
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Assets
<S> <C> <C>
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 874,201 858,757
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974,013 989,457
Cash and Cash Equivalents 131,993 180,931
Prepaid Expense 5,000 5,000
Deferred Charges, Net of
Accumulated Amortization of
$38,130 in 2000 and $35,195
in 1999 50,442 53,377
Deferred Rent 243,863 267,088
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$ 1,405,311 $ 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 69,681 74,101
Tenant security deposits 11,453 11,453
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410,169 414,589
Mortgage Payable, Net of current
Portion 971,595 978,252
Commitments and Contingencies
Limited Partners' Interest
in Operating Partnership 412,798 412,798
Shareholders' Equity (Deficit)
Common stock, $.01 par value
Authorized - 30,000,000 shares
Issued and outstanding - 479,226 4,792 4,792
Additional paid in capital 995,208 995,208
Accumulated deficit (1,389,251) (1,309,786)
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(389,251) (309,786)
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$ 1,405,311 $ 1,495,853
============ ===========
The accompanying notes are an integral
part of these consolidated financial statements.
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PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Operations (Unaudited)
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental Income $ 77,638 $ 77,638 $ 155,275 $ 155,275
Interest Income 989 9,148 2,224 9,734
--------- ---------- ---------- ----------
78,627 86,786 157,499 165,009
--------- ---------- ---------- ----------
Expenses:
Transaction Costs - 1,252,710 - 1,252,710
Administrative and
Financial expenses 46,194 3,625 57,587 9,103
Professional services
expenses 19,195 12,500 32,969 12,500
Interest expense 27,568 17,260 54,756 17,260
Depreciation &
amortization 9,188 8,251 18,379 16,024
--------- ---------- ---------- -----------
102,145 1,294,346 163,691 1,307,597
--------- ---------- ---------- -----------
Loss before
limited partners'
interest in operating
partnership income (23,518) (1,207,560) (6,192) (1,142,588)
Limited partners'
interest in operating
partnership income (36,637) (35,555) (73,273) (90,726)
--------- ---------- ---------- -----------
Net Loss $ (60,155) $(1,243,115) $ (79,465) $(1,233,314)
========= =========== ========== ===========
Basic and diluted loss
per common share $ (.13) $ (2.59) $ (.17) $ (2.57)
========= =========== ========== ===========
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.
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PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30, 2000 and 1999
<CAPTION>
2000 1999
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Cash Flows from Operating Activities:
<S> <C> <C>
Net Loss $ (79,465) $ (1,233,314)
Limited partners' interest in
operating partnership income 73,273 90,726
Adjustments to reconcile net
loss to net cash
provided by (used in)
operating activities:
Depreciation and amortization 18,379 16,024
Decrease in accounts receivable - (268,844)
Decrease in deferred rent 23,225 23,225
(Decrease) increase in
accrued expenses (4,420) 92,880
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Total Adjustments 110,457 (45,989)
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Net cash provided by (used in)
operating activities 30,992 (1,279,303)
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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
Proceeds from issuance of common stock - 1,000,000
Proceeds from mortgage payable - 1,000,000
Principal paid on mortgage payable (6,657) (2,673)
Distributions to partners (73,273) (1,145,000)
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Net cash (used in) provided by
financing activities (79,930) 1,413,679
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Net (decrease) increase in cash (48,938) 97,774
Cash, beginning of period 180,931 153,094
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Cash, end of period $ 131,993 $ 250,868
============ ==============
The accompanying notes are an integral part of these
consolidated financial statements.
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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 June 30, 2000, and the results of
its operations for the three and six months ended June 30, 2000 and 1999, and
cash flows for the six months ended June 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.
(3) 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 six months
ended June 30, 2000.
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(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.
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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 June 30, 2000, PCT LP had an outstanding mortgage of
$984,720 that is secured by the real estate and assignment of rents under the
operating lease.
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 recover from the downturn that
began in mid-1998 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 JUNE 30, 2000 COMPARED WITH THE THREE MONTHS ENDED
JUNE 30, 1999
Revenues
Rental income for the three months ended June 30, 2000 and 1999 totaled $77,638.
Interest income decreased $8,159 from $9,148 for the three months ended June 30,
1999 to $989 for the three months ended June 30, 2000. In April 1999, $1,000,000
of mortgage proceeds, net of closing costs, were invested in a money market
account until the transaction costs were paid in June 1999. Interest income for
the three months ended June 30, 2000 is the result of the working capital
reserves being invested in similar accounts.
Expenses
Transaction costs for the three months ended June 30, 1999 totaled $1,252,710.
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 June 30, 1999.
Administrative and Financial expenses totaled $46,194 and $3,625 for the three
months ended June 30, 2000 and 1999, respectively. The approximately $42,600
increase in expenses are a result of PCT having a full three months of expenses
for the three months ended June 30, 2000 as compared to the three months ended
June 30, 1999. These operating costs include insurance, investor services
related to the proxy, annual shareholders meeting and stock transfers, storage
and printing.
Professional Services expenses increased $6,695 from $12,500 for the three
months ended June 30, 1999 to $19,195 for the three months ended June 30, 2000.
This increase is primarily due to the additional work done in preparation for
the annual proxy statement and shareholders meeting held in May.
Interest expense increased $10,308 from $17,260 for the three months ended June
30, 1999 to $27,568 for the three months ended June 30, 2000. The increase is
due to a full three months of interest due on both the mortgage and note
payable.
FOR THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE SIX MONTHS ENDED JUNE
30, 1999.
Revenues
Rental Income was $155,275 for the six months ended June 30, 2000 and 1999.
Interest Income decreased $7,510 from $9,734 for the six months ended June 30,
1999 to $2,224 for the six months ended June 30, 2000. In April 1999, $1,000,000
of mortgage proceeds, net of closing costs were invested in a money market
account until the transactions costs were paid in June 1999. Interest Income for
the six months ended June 30, 2000 is a result of the working capital reserves
being invested in similar accounts.
Transaction Costs for the six months ended June 30, 1999 totaled $1,252,710.
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 June 30, 1999. No
additional costs have been incurred for the six months ended June 30, 2000.
Administrative and Financial Expenses increased approximately $48,500 from
$9,103 for the six months ended June 30, 1999 to $57,587 for the six months
ended June 30, 2000. The increase is a result of PCT having a full six months of
expenses for the period ended June 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 $12,500 for the six months
ended June 30, 1999 to $32,969 for the six months ended June 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 $37,496 from $17,260 for the six months ended June
30, 1999 to $54,756 for the six months ended June 30, 2000. The increase is due
to a full six months of interest due on both the mortgage and note payable.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $131,993 at June 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 the three months ended June 30, 2000, cash from operations distributed to
the partners of PCT LP totaled $36,636, as compared to $72,500 for the three
months ended June 30, 1999. In July of 2000, PCT LP distributed an additional
$36,636 to its limited partners.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Property Capital Trust, Inc. (the "Company") held its annual meeting of
stockholders on May 25, 2000. The stockholders voted to elect Robert L. Beal as
the Class II Director of the Company to serve until 2003. 416,482 votes were
cast for the election of Mr. Beal, and 512 votes were withheld. No other matters
were submitted to stockholders.
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 June 30, 2000.
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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 4TH day of August 2000.
PROPERTY CAPITAL TRUST, INC.
/S/ BRUCE A. BEAL
Bruce A. Beal, President
/S/ MICHAEL A. MANZO
Michael A. Manzo, Treasurer
(Principal Financial Officer)
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