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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20001
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-6201
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BRESLER & REINER, INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-0903424
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(State or other Jurisdiction of (IRS Employer Identification number)
incorporation or organization)
401 M Street, S.W.
Waterside Mall
Washington, D. C. 20024
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(Address of principal executive Office) (Zip Code)
Registrant's telephone number including area code: (202) 488-8800
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for at least the past 90 days. Yes X
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part 3 of this Form 10-K or any amendment to this
Form 10-K. [X]
The number of shares outstanding of Registrant's common stock ($.01 par value)
at March 4, 1996 was 2,839,563 shares, and the aggregate market value of the
shares held by non-affiliates (based upon $11.25 per share, the average of the
high bid and low asked prices reported by The National Quotation Bureau) was
approximately $6,435,000.
Documents Incorporated by Reference:
Part III - Item 10. Directors and Executive Officers of Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
The information required by this Part will be incorporated by
reference to a definitive proxy statement which Registrant intends to file with
the Commission pursuant to Regulation 14A involving the election of directors
within 120 days after the end of its fiscal year.
The Exhibit Index is found on page 60.
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PART I
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ITEM 1. BUSINESS
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Registrant has two principal activities, Residential Land
Development and Construction and Rental Property Ownership and Management.
RESIDENTIAL LAND DEVELOPMENT AND CONSTRUCTION
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Registrant owns several partially developed residential tracts of
land within the greater Washington, D.C. area. On these tracts, it plans to
develop residential lots for sale and to construct and develop single family
homes and townhouses as part of residential subdivisions. Registrant may
decide to sell certain of its undeveloped land if it determines that it is in
the best interest of Registrant to do so.
Registrant also has general and limited partnership interests in
entities which are operating properties located in the Northern Virginia
suburbs of Washington, DC and Orlando, Florida.
While the following information represents Registrant's current
intentions, the number of units, commencement dates, and other specific details
of a project may vary, depending on Registrant's ability to secure adequate
financing on acceptable terms, labor conditions, approval of land use plans,
and other regulatory requirements, general economic conditions, demand for
housing and other factors.
Registrant designs and constructs its homes in accordance with its
periodic evaluation of the prevailing market for new homes. Its current plan
is to continue to build homes that appeal to the entry level homeowner, which
will give the purchaser the maximum amount of space for the purchase price.
Registrant generally avoids custom features and offers a limited number of home
models. It also generally does not build homes in advance of sales contracts
other than models and certain units for immediate sales.
A. Registrant's Homebuilding Projects
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1. Skyline Hill's, Prince George's County, Maryland.
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Clearing, grading, sewers and construction of model homes have been completed
for this 179 single family homes and 43 townhomes project. As of February 28,
1996, 20 additional single family homes are planned, of which four single
family homes are under contract of sale. As of this same date, three townhomes
have been sold and settled and one townhome is under contract of sale.
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2. Terraco Acres, Prince George's County, Maryland.
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This 134 single family home development has been substantially completed. As
of February 28, 1996, three homes remain to be sold.
3. St. Mary's County, Maryland. This project originally
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consisted of 64 subdivided lots, which range in size from .87 acres to 6.36
acres and 31 farmsteads, of 15 to 30 acres each, totalling 949 acres. As of
February 28, 1996, 11 farmsteads totalling 254 acres remain to be sold.
4. Oak Hill Towns, Prince George's County, Maryland.
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The final development plan for 83 townhouses on this 11.1 acre tract has been
approved and recorded. Clearing, grading and installation of sewers and
construction of model homes have been completed. As of February 28, 1996, 52
homes have been sold and settled and 12 homes are under contract of sale.
5. Yorkshire Knolls, Prince George's County, Maryland. The
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final development plan for 252 townhouses on this 31.5 acre tract has been
approved and recorded. Clearing and grading has been completed and five model
homes have been completed. As of February 28, 1996, 44 homes have been sold
and settled and 11 are under contract of sale.
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In the sale of homes by Registrant and entities controlled by it,
Registrant has utilized furnished model homes at each site. Sales are made by
independent real estate brokers to whom a commission is paid. In its
production of homes for sale, Registrant competes with numerous builders, which
range from well-financed and managed regional and national firms to small
speculative builders.
When Registrant enters into an agreement of sale for a home, it
generally receives a deposit of $500 to $2,000 as is customary in its area of
business. These deposits may be refundable under certain circumstances,
including Registrant's inability to complete construction within specified time
periods, or the purchaser's inability to secure financing. Registrant
generally receives the balance of the purchase price in cash upon the closing
of the sale, but has in the past occasionally taken a note secured by a junior
mortgage for a portion of the purchase price.
Although it is the responsibility of the home purchaser to obtain
financing for his purchase, Registrant seeks to obtain mortgage commitments
from lending institutions for its customers (subject to verification of
individual customer credit status)
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for purchases of homes in its developments. Registrant may also be required to
pay the lender a discount or points at the closing of each loan, which in the
case of loans insured by the Federal Housing Administration, or the Veterans
Administration, cannot be charged to customers.
There can be no assurances that Registrant will in the future be
able to secure acceptable permanent mortgage commitments, and the absence of
such commitments could adversely affect its sale of homes.
Because of its seasonal nature, home sales generally decline in the
first quarter of Registrant's fiscal year.
B. Joint Ventures with Sequoia Building Corporation of Virginia
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("Sequoia").
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Starting in 1984, Registrant entered into a series of joint
ventures and partnerships with Sequoia as detailed below.
1. Manassas; Prince William County, Virginia. In 1984,
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Registrant and Sequoia organized a limited partnership known as Paradise
Developers ("Paradise") to develop a 418 acre tract of land in Manassas,
Virginia (the "Tract"). The Tract yielded approximately 243 acres of
residential land and 100 acres of commercial land after streets, recreation
facilities, parks and schools.
Registrant's subsidiary is the sole general partner and managing
general partner, owning a 50% partnership interest. Sequoia is a limited
partner owning a 50% partnership interest.
Registrant originally owned the Tract and Paradise purchased the
Tract in two stages from Registrant in December, 1985 and September, 1986. The
consideration for this purchase was a subordinated non-recourse mortgage and
note ("purchase money mortgage") in the original principal amount of
$11,525,616. As of December 31, 1995, the balance due Registrant on the
purchase money mortgage was $1,838,855. In addition, Registrant was due
$896,220 in unpaid interest, which will be recognized in income when received.
All of the residential land and 51 acres of the commercial land was
sold prior to 1993. Paradise developed 18 acres of land into three commercial
projects; the 7800 Building, a bank building and Paradise Sudley North Office
Park. 31 acres of commercial land remain to be sold or developed.
(a) 7800 Building. Paradise constructed a 15,460
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square foot office building known as the 7800 Building on 1.52 acres of the
Tract.
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Paradise deeded the property to Registrant's subsidiary in
December, 1991. The building is 23% leased.
Registrant has entered into two leases for an additional
7,830 square feet of office space which will increase the occupancy to 73% by
April, 1996.
(b) Bank Building. This building of 3,478 rentable
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square feet on two-thirds of an acre is fully occupied by a branch of Nations
Bank.
(c) Paradise Sudley North Office Buildings. In March,
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1987, Registrant, through a subsidiary, and various officers and employees of
Sequoia, formed Paradise Sudley North Limited Partnership ("Sudley") to develop
a 16.35 acre parcel of the Tract. In December, 1991, these officers assigned
their interests in Sudley to Registrant in return for a release from bank debt
and guarantees. Registrant's subsidiary is the sole general partner of the
Partnership, owning a 55% partnership interest, and Registrant also owns a
43.75% limited partnership interest. A former employee of Sequoia owns the
remaining 1.25% interest.
Sudley has developed on this site four office buildings,
which contain approximately 187,000 square feet of space, known as Buildings A,
B, C and D.
Building A, 22,608 square feet, is 70% leased.
Registrant has entered into an additional lease for 5,965
square feet which will increase occupancy to 96% by April, 1996.
Building B, 62,420 square feet, is 57% leased.
Building C, 33,120 square feet, is 62% leased.
Building D, 69,374 square feet, is 100% leased. In January,
1988, Sudley contributed the 6.9 acres of land under Building D to a new
limited partnership, Paradise Sudley North Building D Partnership. Sudley is a
50% partner in the new partnership with a right to a return of the value of its
capital contribution before distributions to other partners. The other
partners are non-affiliates. Sudley is responsible for managing the new
partnership's day-to-day operations.
2. Fairfax County, Virginia. On October 22, 1987, a
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subsidiary of Registrant and certain officers and directors of Sequoia formed a
limited partnership known as Frying Pan Road Associates ("Frying Pan"), which
purchased approximately 17 acres of commercially zoned undeveloped land in
Fairfax County,
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Virginia, for $7,145,000 and acquired for $1,000,000 an option to purchase an
additional 40 acres. Of the purchase price for the land, approximately
$5,574,100 was paid by Frying Pan's assumption of several mortgages on this
property, which are recourse to Registrant's subsidiary. In November, 1989,
Frying Pan exercised its option to purchase the additional 40 acres of land and
funded the purchase with an $18 million non-recourse loan at prime from the
seller. The lender amended the loan agreement to reduce the interest rate and
to reduce the outstanding principal amount due under the loan from $18,000,000
to $15,500,000, which was due on September 30, 1994.
Registrant's subsidiary is the sole general partner holding a 50%
interest. Sequoia's affiliates are limited partners and own a 50% interest.
The partnership agreement requires Registrant's subsidiary to advance funds as
additional capital contributions to Frying Pan for certain acquisition and
carrying costs. At November 30, 1994, Registrant had advanced $13,699,527 to
Frying Pan pursuant to the partnership agreement.
In December 1994 Frying Pan concluded that the long-term
development plans for the property were no longer warranted given the continued
softness in the commercial real estate market and the inability to reach
agreement with the lenders for continued debt modifications. As a result, in
December 1994 Frying Pan gave deeds in lieu of foreclosure to the seller on the
17 acre parcel. Frying Pan gave a deed in lieu of foreclosure to the seller of
the remaining 40 acres.
On September 30, 1994, Registrant reduced its carrying value of
this property by $4 million. At December 31, 1994, Registrant recorded an
additional reduction in the carrying value in the amount of $12,834,000.
Concurrently, Registrant recognized a gain of $5,200,000 (before income taxes)
in debt elimination.
RENTAL PROPERTY OWNERSHIP AND MANAGEMENT
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Registrant owns and manages apartment buildings, for itself and
others. In the Southwest Washington, DC urban renewal area, as described
below, Registrant holds a 46% interest in an office building, and owns and
manages a portion of an enclosed shopping-office center. It is the policy of
Registrant to manage and lease these rental properties through its own
personnel. Registrant also is a limited partner in certain properties
described below, which are operated by others.
Apartments. Registrant owns and operates two apartment
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complexes, with a total of 294 units in Greenbelt, Maryland, and in the
southwest Washington, DC urban renewal area. (See
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"Southwest Washington, DC Urban Renewal Area", below). Registrant constructed
these apartment buildings.
Registrant owned a 178 garden apartment in Camp Springs, Maryland
known as the "Allentown Apartments". In June 1992, Registrant ceased making
principal and interest payments under a non-recourse mortgage note and $480,000
guaranty agreement covering the property, and offered the lender a deed to the
property. During 1992, the Resolution Trust Corporation was appointed receiver
for the lender and it subsequently sold the loan as part of a package loan
disposal. The new holder of the loan had refused the deed offered by
Registrant, had a receiver appointed which took possession of the property on
September 22, 1993, and in January 1994 brought suit against Registrant under
the mortgage and guarantee. In May 1995 the note holder foreclosed on the
property, and in August 1995 the Court ratified the foreclosure sale. This
transaction resulted in an extraordinary gain before income taxes of
$2,678,000.
As of December 31, 1995, approximately 85% of Registrant's
apartment units were rented. In renting apartment units Registrant employs
rental agents and uses model apartments, advertising in local newspapers and
displays on the site. Each building or complex has a project manager employed
by Registrant who supervises rentals and general operations.
Apartment leases generally provide for a fixed monthly rental over
a one year term and the tenant normally gives a security deposit. Registrant
estimates that the average length of occupancy of an apartment by its tenants
is approximately 30 months. Registrant pays for all utilities, except that
certain tenants pay for their own electricity. All of Registrant's properties
are in good condition, and in the opinion of Registrant, are adequately covered
by fire and other casualty insurance.
Southwest Washington, D.C. Urban Renewal Area. Since 1964,
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Registrant has been the redeveloper of a portion of the Southwest Washington,
D.C. Urban Renewal Area (the "Area"), located immediately south of the "mall"
which extends from the United States Capitol Building to the Washington
Monument. Registrant has performed each of its principal business activities,
as well as building construction for others, in this Area.
High Rise Office Buildings. Located in the Area are two
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matching 14 story office buildings, which are leased and managed by Registrant.
One building is owned by Trilon Plaza Company ("Trilon") an affiliate; the other
building is owned by Town Center East Investors ("Town Center"), a limited
partnership
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in which Registrant holds a 46% interest, and serves as the general partner.
Trilon is a limited partnership, in which a substantial majority
interest is owned by Messrs. Bresler and Reiner, whose wholly owned corporation
is the general partner (other officers of Registrant hold minor interests) and
the balance is owned by non-affiliates. Trilon's principal assets are its
leasehold interests in the Area and the projects developed thereon.
GSA Lease. The United States General Services Administration
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("GSA") leases the two high rise buildings, as well as the second and third
floors of the adjacent shopping-office center and a portion of another smaller
structure (see "Shopping Center") at an annual rental of approximately $19.5
million for approximately 905,000 square feet plus 216,000 square feet of
parking space (the "GSA Lease"). Approximately 282,000 square feet of the
portion of the shopping center owned by Registrant is included in the lease at
an annual rental of approximately $5.6 million, as is 56,000 square feet owned
by S.E.W. Investors, another affiliate, and 172,000 square feet owned by Town
Center, in which Registrant has a 46% interest. Registrant acts as managing
and leasing agent for Trilon, Town Center and S.E.W. Investors for their
portions of the leased space. All four owners, including Registrant, are
jointly and severally liable as landlord to GSA under the Lease. See
"Management of Rental Properties".
The GSA Lease was renewed in June, 1993 for a five year term, which
commenced as of September, 1992.
In November, 1994, GSA elected to extend the lease for a further
five years to September, 2002. As required by the lease, the annual rental was
reduced, retroactive to the September, 1992 commencement date, from $21.8
million to $19.5 million. GSA has the option to cancel the lease on certain
space effective any time during the second five years and on certain other
space at any time after the eighth year.
The lower rental results in a reduction of approximately $1,245,000
per year in the Registrant's revenues, including management and leasing fees
and its 46% interest in Town Center.
Shopping-Office Center. An enclosed shopping-office center is
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located between the two high rise buildings containing approximately 750,000
square feet of space. The center includes approximately 1,100 parking spaces
located in an underground parking garage and adjacent parking areas.
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Registrant acts as managing and leasing agent for Trilon and for
S.E.W. Investors, a limited partnership ("S.E.W. Investors") (see "Southeast
Section" below) for their portions of the shopping-office center, part of which
is leased to the GSA as described above and the balance is leased to other
commercial tenants. See "Management of Rental Properties".
The planned use of the shopping-office center is limited by the
renewal plan for the site. The renewal plan permits occupancy by retail and
personal service establishments, offices for government agencies, professional
and other services for the southwest Washington, D.C. area and apartments. The
site may not be used for general office buildings.
Registrant's portion of the shopping-office center, consisting of
231,023 square feet, is leased by Registrant from the District of Columbia
Redevelopment Land Agency ("RLA") for a term expiring in 2058. Under the
lease, Registrant is responsible for all expenses related to the land,
including real estate taxes and utilities. Registrant must obtain the approval
of RLA before constructing additional improvements on these tracts.
Southeast Section. On October 10, 1980, Registrant assigned
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its leasehold interest in a portion ("Southeast Section") of the
shopping-office center to S.E.W. Investors. The Southeast Section contains
approximately 105,000 square feet of rentable space in the three story and
basement building, of which approximately 49,000 square feet were completed
prior to 1981. Tenant occupancy commenced in February, 1982, including 56,000
square feet leased to the GSA. S.E.W. Investors was organized by Registrant to
acquire the Southeast Section. Registrant is the sole general partner, with a
1% interest. Of the limited partnership interests, 62% is held by
non-affiliates and the remaining 37% is held by certain directors and officers
of Registrant, including Charles S. Bresler, its Chairman of the Board and
principal shareholder, and Burton J. Reiner, its President, director and
principal shareholder. Registrant manages this building. See "Management of
Rental Properties".
Town Center East Apartment Buildings. On August 1, 1979,
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Registrant assigned its leasehold interest in two high rise apartment buildings
in the redevelopment area, with 256 units, known as Town Center East
Apartments, to Third Street Southwest Investors, a limited partnership.
Registrant is the sole general partner in this limited partnership, with a 1%
interest, and acts as management agent for the project. In this partnership,
90% of the limited partnership interests are held by unaffiliated persons, and
the remaining 9% of the limited partnership interests are held by certain
directors and officers of Registrant, including Charles S. Bresler, Chairman
and Chief
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Executive Officer of Registrant and Burton J. Reiner, its President.
Registrant manages these buildings. See "Management of Rental Properties".
Low Income Housing. Registrant has interests in the following
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limited partnerships which are operating low-income housing units:
1. Multi-State Projects. On November 15, 1988, Registrant
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purchased 99% limited partnership interests in each of seven limited
partnerships, which collectively have constructed 266 rental apartments. The
projects are located in small communities in Maryland (3), Pennsylvania (1),
Virginia (2) and West Virginia (1). At March 1, 1996, the projects were 95%
occupied. The projects are financed by Farmers Home Administration mortgages
and enjoy the benefits of low income housing credits against federal income tax
authorized under Section 42 of the Internal Revenue Code of 1986, as amended,
(the "Code"). The purchase price for such limited partnership interests is
approximately $5,168,000 in the aggregate, of which $3,353,055 has been paid to
date. It is payable in annual installments over the ten years such tax credit
is available, commencing in March 1990, and is to be adjusted annually based on
the annual tax benefits generated.
2. Windsor, Connecticut Project. On April 27, 1989,
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Registrant purchased a 97% limited partnership interest in a Connecticut
limited partnership. This partnership converted a former school house into 40
residential apartments in Windsor, Connecticut, a suburb of Hartford. The
partnership received the certificate of occupancy for the apartments and is
eligible for both Federal historic tax credit and Federal low income housing
credits against Federal income tax as authorized under Section 42 of the Code.
The purchase price for the partnership interest, payable in installments over
the ten (10) years the credits are available, is approximately $1,130,000 of
which $664,000 was paid as of December 31, 1995. The purchase price is to be
adjusted based on the tax benefits generated annually. The project is 90%
occupied.
3. Orlando, Florida Project. On July 17, 1989, Registrant
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purchased a 90% limited partnership interest in a Florida limited partnership.
The general partners of the partnership are three individuals and PAC Land
Development corporation, a Florida real estate development company ("PAC").
The partnership developed and constructed a 28 acre, 312 unit apartment project
in Orlando, Florida, of which 63 units are
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eligible for Federal low income housing credits and the balance of 249 units
are market rate apartments. The purchase price for the partnership interest
was $1,600,000. The purchase price, other than the first installment, is to be
adjusted based on the tax benefits generated annually, which may result in
additional payments in the future. Ninety-two percent of the apartments were
occupied as of December 31, 1995.
4. St. Mary's County, Maryland Project. On November 22,
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1989, Registrant purchased a 79% limited partnership interest in Foxchase
Village Associates Limited Partnership, which has constructed a 134 unit
apartment project in St. Mary's County, Maryland. The project is eligible for
Federal low income housing credits against Federal income tax authorized under
Section 42 of the Code over the first ten years after occupancy. Registrant's
purchase price for its partnership interest, payable in installments over eight
years, is approximately $4,278,930 of which $3,929,938 has been paid to date.
The purchase price is to be adjusted based on the aggregate tax benefits
generated annually. Charles S. Bresler, an officer and director of Registrant,
purchased a 20% limited partnership interest in the partnership for $1,070,825,
payable on terms similar to Registrant's. Eighty-four percent of the
apartments were occupied as of December 31, 1995.
Condominium Apartment Units. Registrant owns and rents (as
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lessor) 74 condominium units in Georgian Gardens, Glassmanor, Maryland. This
is a portion of a 121 unit garden type apartment property which had been
converted into a condominium by Registrant in 1974.
Competition. In each of the areas where Registrant's rental
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properties are located, there are buildings which offer similar accommodations
at approximately the same rentals. The rents charged by Registrant for its
properties in the District of Columbia are subject to rent control regulation.
Management of Rental Properties. Registrant, through a
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subsidiary, has contracts to act as managing agent and, in certain cases,
leasing agent, for residential and commercial projects of certain partnerships
in which Registrant is a general partner, and of certain partnerships in which
Charles S. Bresler and Burton J. Reiner, officers, directors, and principal
shareholders of Registrant, have substantial interests and other directors and
officers have minor interests as follows:
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Contract
Property Managed Compensation(1) Expiration
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414 apartment units,
20 townhouses (5) 5% December, 2000 (2) (3)
390,000 square feet of office
space(5) 3%(9) December, 1997 (4)
185,000 square feet of office
space(6) 3%(9) December, 1997 (4)
256 apartment units (7) 5% September, 1999 (2) (3)
105,000 square feet of
shopping-office
center (8) 3%(9) December, 1997 (4)
(1) As a percentage of gross rent collected.
(2) These contracts renew automatically for additional five year terms unless
either party gives notice of termination at the end of the term stated above.
(3) This contract may be terminated at any time by the Federal Housing
Commissioner or the mortgagee.
(4) These contracts may be terminated by the owners on 60 days prior written
notice, subject to payment of the present value of the leasing fees (see note 9
below) for the remainder of the contract term.
(5) These properties are located in the Southwest Washington, D.C. Urban
Renewal Area and are managed for Trilon Plaza Company, an affiliate.
(6) The project is described in "Southwest Washington, D.C. Urban Renewal
Area" and is managed for Town Center, a partnership in which Registrant has a
46% interest and is the general partner.
(7) These buildings are the Town Center East Apartments described in
"Southwest Washington, D.C. Urban Renewal Area" and are managed for a
partnership in which Registrant has a 1% interest and is general partner.
(8) This property is managed for a partnership in which Registrant has a 1%
interest and is a general partner. (See "Southwest Washington, D.C. Urban
Renewal Area - Southeast Section" above.)
(9) In addition, Registrant earns leasing fees of 5% of gross rents collected
on the GSA Lease for these properties.
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Operation of Holiday Inn. Registrant owns and operates a 151
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room Holiday Inn motel located in Camp Springs, Maryland, suburban Washington,
D.C., opposite the main entrance to Andrews Air Force Base and an interchange
of the Capital Beltway. The motel commenced business in March, 1970.
Occupancy averaged 60% in 1995.
Under Registrant's franchise license agreement with Holiday Inns,
Inc., Registrant pays Holiday Inns a monthly royalty, and additional payments
for advertising and trading services. The franchise license agreement expires
on March 11, 2000.
Registrant has applied for a new Holiday Inn Express franchise
which will require substantial renovation of the existing facility. At this
date, the cost of renovation has not been determined.
There are three other motels in the immediate vicinity of
Registrant's motel in suburban Washington, D.C. The motel business in
Washington, D.C. area is highly competitive.
The Colonnade, Baltimore, Maryland. The Colonnade is a
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multi-purpose condominium apartment, hotel, office and retail building adjacent
to the Johns Hopkins University in Baltimore, Maryland. The building consists
of 119 condominium apartments owned by others on the fourth through twelfth
floors; 125 hotel rooms on the first three floors, 252 condominium parking
spaces (of which the Registrant's affiliate owns 21), a restaurant, a small
amount of retail and office space and a parking garage.
On July 12, 1993, Uptown Hotel Corporation ("Uptown"), a wholly
owned subsidiary of Registrant, purchased the secured mortgage on the Colonnade
from the lender for its then outstanding balance of $15,336,290.86. To finance
the purchase, Uptown borrowed $13,836,291 from the lender, due in September
1995 (with the right to extend to 1998 under certain conditions), secured by an
assignment of the Colonnade mortgage and a guaranty by Registrant. To secure
its guarantee, Registrant in May 1992 granted lender a mortgage on the
apartment property known as "The Commons" in the Southwest Washington, D.C.
Urban Renewal Area to the extent of $6,000,000, and its Holiday Inn property to
the extent of $4,000,000. Registrant's guaranty is further secured by
mortgages on the Paradise Bank property (see "Paradise Bank at Bull Run" above)
and 11 convenience stores (see "Convenience Stores" below). As of December 31,
1995, the outstanding principal balance of the mortgage was $10,097,089.
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The mortgage note provided for an extension to March 1, 1998 under
certain conditions. The conditions for the extension were met (principally
certain loan to value ratios), and Registrant was granted the extension to
March 1, 1998.
On September 13, 1993 there was a public Trustee Sale of the
property, at which Uptown purchased the hotel, commercial spaces, six
condominium units which were sold in 1994 and certain parking spaces for
$5,158,000. Unrelated parties purchased three condominium apartment units.
Hotel occupancy averaged 69% in 1995.
Pine Club Phase II Limited Partnership, Orlando, Florida.
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Registrant holds a 64.35% limited partnership interest in Pine Club Phase II,
Ltd., a Florida limited partnership. The general partners of this partnership
are three unaffiliated individuals and PAC, who own with others, in the
aggregate, a 35.65% partnership interest.
The partnership has constructed 160 residential apartment units on
approximately 14 acres of land in Orlando, Orange County, Florida. This land
is contiguous to Registrant's low-income housing and market rate housing
project in Orlando, Florida previously discussed under "Low Income Housing -
Orlando, Florida Project". The Project was completed in January, 1991, and is
91% occupied as of February 28, 1996.
Convenience Stores. In June, 1986, Registrant acquired 16
------------------
convenience stores, primarily located in southern and southeastern states, for
an aggregate consideration of approximately $3,390,000. Registrant acquired
title to each store building, but holds leasehold interests in the underlying
parcels of land. All of the stores were under lease through February, 2000, on
a net basis, to Circle K Corporation, a large convenience store chain which
operates the stores under the name "Circle K." On May 15, 1990, Circle K and
certain of its affiliates filed Petitions under Chapter 11 of the Bankruptcy
Code. One of Circle K's rights under the Bankruptcy Code was to affirm or
reject the rental leases on its stores. At various times, Circle K rejected a
total of 12 of the sixteen leases owned by Registrant. As of February 28,
1996, Registrant has rented four of these stores and has sold five stores.
Registrant is attempting to relet or sell the other three stores.
Nursing Home. Registrant owns a New Jersey nursing home
------------
facility, Lakewood Manor, which it leases to an unaffiliated operating company.
Lakewood Manor is a 120-bed nursing home facility in Lakewood, New
Jersey. The skilled and intermediate care facility
-14-
<PAGE>
is located on State Road 88, Ocean County, New Jersey, approximately 60 miles
south of New York City. The one-story building of approximately 37,000 square
feet, with brick exterior, is situated on 11 acres of land.
Since it acquired the property on December 31, 1984, Registrant has
leased the nursing home to an unaffiliated operator. The monthly rent is
$48,295 for the first five years of a ten year term, with increased rent
thereafter. Tenant has several renewal options for up to 20 additional years.
The lessee pays taxes and other operating expenses, and all structural and
nonstructural repairs and replacements. The lessee has a right of first
refusal in the event Registrant seeks to sell the property. The lessee may
assign the lease to another experienced nursing home operator, subject to
certain conditions. The facility is now 97% occupied.
There are several other nursing homes in Lakewood, New Jersey. The
Nursing Home business is highly competitive. Nursing homes operate under state
licenses and are subject to extensive governmental regulations. Should
Lakeview Manor not be in compliance with these regulations, it would be subject
to termination of its qualification for federal assistance payment or
termination of its operating license by federal or state regulators.
EQUIPMENT LEASING AND VENDING
- -----------------------------
Registrant previously engaged in personal property leveraged
equipment leasing, both directly and through subsidiaries and general
partnerships. It also acted as broker in arranging equipment sale and
leaseback transactions for a fee.
In December, 1983, Registrant, with others, organized a general
partnership to engage in equipment leasing known as Builders Leasing Company,
and agreed to act as its managing partner with a 20% interest. The initial $2
million capital of the partnership was contributed by each partner, in
proportion to his percentage interest, over five years in semiannual
installments. In addition to the initial capitalization, the partners
contributed $1,150,000 to the capital of the partnership in 1988, 1989 and
1990. Registrant's capital contribution to date totals $630,000. Certain
directors and officers of Registrant also hold an aggregate of 27% of the
partnership interests, including Charles S. Bresler, Chairman of the Board and
principal shareholder (20%), and Burton J. Reiner, President, director and
principal shareholder (5%).
Builders Leasing Company owns two vessels servicing the oil
industry. It also owns transportation barge and petroleum transportation
vehicles. The value of the vessels may be
-15-
<PAGE>
impacted by fluctuations in the price of oil. The partners are personally
liable for debt of Builders Leasing, with a balance at December 31, 1995 of
about $1,256,000.
In February 1984 Registrant organized Tech-High Leasing Company, a
general partnership in which it holds a 50% interest. The other 50% is held by
a non-affiliated corporation. Registrant and its partner have each contributed
$1,100,000. Tech-High currently owns heavy duty construction and
transportation equipment with a net book value as of December 31, 1995, of
approximately $3,572,000. The partnership debt on these acquisitions as at
December 31, 1995, was approximately $1,891,000 of which Registrant is
personally liable for approximately $458,000.
Registrant is no longer entering into new equipment leases. The
current lease portfolio will substantially phase out in 1996.
Registrant, through a wholly owned subsidiary, has since August,
1987, conducted a coin operated telephone business, primarily in Florida and
Maryland. The telephones are now being serviced by a management company in
Maryland and by a partnership, of which Registrant's subsidiary is a 50%
partner, in Florida.
Employment
- ----------
On February 23, 1996, Registrant and its subsidiaries employed
approximately 137 persons.
------------------------------
Registrant borrows money from time to time on general credit and it
expects to continue such open account borrowing in the future. It has also
granted mortgages or deeds of trust on its real estate and security interests
in its equipment leases and leased equipment. Registrant's business and
earnings are dependent in part on its ability to obtain interim construction
and permanent financing on acceptable terms for its construction and sale of
single family residences and for its development of rental property. Certain
of Registrant's borrowing is tied to the prime interest rate.
Registrant's business is substantially dependent on general
economic conditions, and the availability of construction labor and materials
in the area served. Registrant's business is materially affected by federal
housing programs. To the extent that Registrant's financing of projects is
insured by the Federal
-16-
<PAGE>
Housing Administration ("FHA"), Registrant is subject to FHA construction,
operation and other requirements, including provisions relating to rentals,
management agreements, various reserves, employment and leasing practices. The
development of unimproved real estate is subject to Registrant's obtaining
appropriate governmental approvals, and availability of utilities, including
sewers.
ITEM 2. PROPERTIES.
----------
Rental properties of Registrant are described under "Rental
Property Ownership and Management" in Item 1.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
Registrant, S.E.W. Investors, Town Center Management Company (a
subsidiary of Registrant), Bresler and Reiner Companies (a subsidiary of
Registrant), and Trilon Plaza Company are defendants in a civil suit case no.
90-CA10594 filed October 12, 1990 in the Superior Court of the District of
Columbia by Joanne Bahura, et. al. (the "Plaintiffs"). The Plaintiffs are 19
individuals who state they are all present or former employees of the
Environmental Protection Agency, which leases certain office space at a high
rise office building in Washington, D.C. known as the "Waterside Mall Complex."
Four spouses of such employees are also plaintiffs. See "Management of Rental
Properties," "Southwest Washington, D.C. Urban Renewal Area," "High Rise Office
Buildings," "Shopping-Office Center" and "Southeast Section" in Item 1 above.
The Complaint, as amended (the "Complaint"), alleges that (i) the defendants are
the owners of the Waterside Mall Complex and (ii) certain renovations and
reconstruction to the Waterside Mall Complex were done in such a manner as to
cause the Plaintiffs multiple physiological and physical symptoms.
The Complaint seeks damages aggregating $40,000,000 under claims of
negligence, breach of warranty of habitability, breach of contract, strict
liability, loss of consortium and punitive damages. The claims of six
plaintiffs were tried to a jury from October 25 to December 23, 1993, with
verdicts for plaintiffs totalling $948,000. No punitive damages were awarded.
Defendants filed motions for judgment notwithstanding the verdict, which the
Court granted in November 1995, as to $716,000. Plaintiffs have filed a notice
of appeal. The cases of the other plaintiffs remain to be tried. Management
believes the claims are without merit and intends to continue to contest the
case vigorously.
-17-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
Not Applicable.
------------------------------
Executive Officers of Registrant
(included pursuant to instruction 3 to Item
401(b) of Regulation S-K)
Present Positions
and Offices with Date Elected
Name Age Registrant to Office
- ---- --- ----------------- ------------
Charles S. Bresler 68 Chief Executive June 2, 1970
Officer, Chairman
of the Board and
Director
Burton J. Reiner 67 President and June 2, 1970
Director
William L. Oshinsky 53 Treasurer and April 6, 1994
Director November 15, 1994
Edwin Horowitz 64 Secretary and June 2, 1970
Director
In accordance with Article V of the By-Laws of Registrant, each
officer was elected to serve until his successor is chosen and shall have
qualified or until his earlier resignation or removal.
There is no family relationship as defined in the instructions to
this Item between any of the above officers, except Mr. Oshinsky is the
brother-in-law of Mr. Reiner.
Each officer has held the above positions as his principal
occupation for more than the past five years, except Mr. Oshinsky, who, prior
to his election as Treasurer, served as an officer of subsidiaries of
Registrant for more than the past five years.
PART II
-------
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
----------------------------------------------------
Registrant's Common Stock is traded in the over-the-counter market.
The following table presents the high and low bid quotations for the periods
shown, as reported by the National Quotation Bureau, Inc. No bid quotations
were reported for the first quarter of 1994. No dividends were declared or
paid during the years reported.
-18-
<PAGE>
Year Ended December 31, 1995
- ----------------------------
Quarter Price
----------------------------------------------
1st High 11
Low 10
----------------------------------------------
2nd High 11
Low 10
----------------------------------------------
3rd High 10
Low 9
----------------------------------------------
4th High 10 1/2
Low 10
----------------------------------------------
Year Ended December 31, 1994
- ----------------------------
Quarter Price
----------------------------------------------
1st High *
Low *
----------------------------------------------
2nd High 10
Low 10
----------------------------------------------
3rd High 11 1/2
Low 10
----------------------------------------------
4th High 11
Low 10
----------------------------------------------
---------------
*Unpriced.
The above quotations represent prices between dealers and do not
include retail markup, markdown or commissions and do not represent actual
transactions.
As of March 4, 1996, there were 168 record holders of Common Stock.
-19-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
1995 1994 1993* 1992* 1991*
---- ---- ----- ----- -----
Revenues $ 33,824,000 $ 39,563,000 $ 31,683,000 $ 34,086,000 $ 35,639,000
Net (loss)
income
before
extra-
ordinary
item and
cumulative
effect of
accounting
change $ 4,404,000 $(4,109,000) $(8,408,000) $(1,973,000) 172,000
Net income
(loss) $ 6,140,000 $ 3,404,000 $(5,133,000) $(1,973,000) $ 3,383,000
============ ============ ============ ============ ============
Earnings
per common
share
before
extra-
ordinary
item and
cumulative
effect of
accounting
change $ 1.57 $ (1.45) $ (2.96) $ (.70) $ 0.06
Earnings
per common
share $ 2.18 $ 1.20 $ (1.81) $ (.70) $ 1.19
============ ============ ============ ============ ============
Total
Assets $101,395,000 $103,401,000 $152,520,000 $165,196,000 $175,413,000
============ ============ ============ ============ ============
Long Term
Obliga-
tions $ 33,729,000 $ 42,495,000 $ 91,336,000 $ 91,177,000 $ 95,203,000
============ ============ ============ ============ ============
Cash divi-
dends per
common
share (1) (1) (1) (1) (1)
============ ============ ============ ============ ============
__________________________
(1) No dividends have been declared or paid.
* Restated to reflect reclassifications.
-20-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Since January 1993, Registrant restructured, acquired and disposed of
several principal assets and liabilities, and negotiated a major commercial
lease renewal with an existing tenant.
The transactions, which are discussed below under the appropriate
captions, are as follows:
1. In June 1993 Registrant entered into a new lease with the General
Services Administration ("GSA") of the Waterside Mall office areas for the five
year term of September 14, 1992 - September 13, 1997. In November 1994 the
lease was extended at a reduced rent, to September 2002.
2. The disposition of Registrant's interest in the assets and
liabilities of the Country Club joint venture and the termination of
Registrant's recourse debt liabilities effective February 10, 1994.
3. The purchase in 1993 of the outstanding debt on Paradise Sudley
North buildings B and C. This debt was 50% recourse and was in dispute with
the successor in interest to the lender.
4. The purchase of the first trust debt on the Colonnade project and
the subsequent foreclosure of the property, in 1993.
5. The purchase of the debt on the 7800 office building in Manassas,
Virginia in 1993.
6. Gain in 1993 equal to approximately 57% of the previously
written-off reserve for Washington Bancorporation Commercial Paper.
7. The take-over by a receiver in 1993 of the 178 unit garden
apartment project known as Allentown Apartments and subsequent foreclosure and
ratification of the foreclosure in 1995.
8. In December 1994 the Frying Pan partnership returned this land to
the sellers.
Sales of Homes and Lots
- -----------------------
During 1995, Registrant sold 56 homes and no condominium units and three
lots totalling $8,117,000 as compared with 65
-21-
<PAGE>
homes and 6 condominium units and no lots in 1994 totalling $11,236,000 and 49
homes and four lots totalling $7,633,000 in 1993. Continued slow economic
growth, employment uncertainty and proposed government reduction in the
Washington, DC metropolitan area affected sales at Registrant's projects, and
has resulted in increased inventory of homes as purchasers have terminated
sales agreements.
Rentals-Apartments and Commercial
- ---------------------------------
The GSA lease was renewed in 1993, effective September 1992. As a
result, the increased rent commencing September 1992 was recognized in 1993.
The 1994 decreased revenues result from the reporting of twelve months of
revenues for 1994 while the 1993 results include revenues for fifteen months
with respect to the GSA lease, due to the August 1993 rent catch up payment.
The GSA lease provided that the rent was to be reduced, if GSA elected
before December 31, 1994 to extend the lease for a further five years. GSA
exercised the option in November 1994. The reduction will be about $895,000
per year in the Registrant's revenues from the lease, plus $350,000 per year in
leasing and management fees and income from Town Center office building
discussed below. GSA has the option to cancel the lease on certain space
effective any time during the second five years and on certain other space at
any time after the eighth year.
The 1993 results include revenues from Allentown Apartments for the
period January 1, 1993 through September 30, 1993, when a receiver took
possession of the property (see, "Notes Payable-Mortgages" below).
Hotel Operation
- ---------------
Included in 1995 results is $3,570,000 of income and $3,317,003 of
expenses relating to the Colonnade. See "Income (Loss) from Equity
Investments" below.
Leasing Fees, Affiliates
- ------------------------
The 1993, 1994 and 1995 results consist of a 5% real estate leasing fee
earned by Registrant resulting from the GSA lease. These fees are recorded as
earned over the life of the lease, as rent is collected. The 1994 decrease is
a result of recording twelve months of leasing fees as opposed to fifteen
months of fees in 1993, due to the August 1993 rent catch up payment. See
"Rentals -- Apartments and Commercial."
-22-
<PAGE>
Interest, Other
- ---------------
The 1993 increased revenues result primarily from interest received in
conjunction with Federal income tax refunds and District of Columbia property
tax refunds. There were no such revenues in 1994 or 1995. During 1994, there
was a reduction in notes receivable, other due to the refinancing of those
notes, thus reducing Interest, Other. The 1995 increase resulted from higher
cash balances.
Gain on Sale of Realty Interests
- --------------------------------
On June 30, 1992, Registrant sold its Philadelphia nursing home to an
unaffiliated nursing home operator. The sale price was $4,200,000, of which
Registrant received $500,000 in cash and a wrap-around mortgage of $3,700,000.
In May 1994 the nursing home was sold and the outstanding balance of $3,574,500
was paid off. A gain of $1,145,000 was recorded in 1994.
Gain on Commercial Paper
- ------------------------
In 1990, Registrant held $2.5 million of short term commercial paper of
Washington Bancorporation ("WBC"). In August, 1990, WBC defaulted on its
commercial paper and filed for protection under Chapter 11 of the Federal
Bankruptcy Act. Registrant recorded in 1990 a $1.25 million reserve for the
potential loss on commercial paper and ceased accruing interest. On June 14,
1993, Registrant received $1,961,168 in settlement of its commercial paper
claim as part of a global settlement between commercial paper creditors, other
creditors, director and officer insurance carriers and the FDIC. As a result,
Registrant recognized a $711,168 gain in the second quarter of 1993.
Income (Loss) from Equity Investments
- -------------------------------------
The components of this Item are as follows:
Year Ended December 31 1995 1994 1993
---------------------- ---- ---- ----
Colonnade $ -0- -0- ($13,828,000)
Orlando, Florida Apartments ( 72,000) ($125,000) ( 61,000)
Town Center Office Building 809,000 936,000 1,149,000
Tech High Leasing Company 84,000 ( 25,000) 226,000
Other ( 180,000) ( 23,000) ( 18,000)
--------- --------- ------------
Total $641,000 $763,000 ($12,532,000)
On July 12, 1993, Uptown Hotel Corporation ("Uptown"), a subsidiary of
Registrant, purchased from the mortgage holder the secured deed of trust note
on the Colonnade property for the outstanding balance of $15,336,391. On
September 13, 1993, as
-23-
<PAGE>
the result of a public trustee sale of the property Uptown purchased the hotel,
commercial space, six condominiums and certain parking spaces. The trustee
sale was ultimately ratified on March 10, 1994.
As a result of these activities, the Registrant in 1993 recorded a loss
from equity investment of $13,828,000, which is the result of writing down the
Registrant's investment to fair value and recording the Colonnade operating
losses for 1993.
Registrant has a 46% partnership interest in Town Center East Office
Building at Waterside Mall. Registrant's share of the earnings from that
partnership decreased in 1995, due to decreased revenues from the GSA lease
(see, "Rentals, Apartments and Commercial," above).
Loss on Write Down of Receivables
- ---------------------------------
Included in Receivables - Other at December 31, 1994 were amounts due
-------------------
Registrant from a state Department of Public Welfare with respect to a nursing
home previously owned by Registrant. At September 30, 1995 Registrant reduced
this receivable by $545,000 to reflect the amount allowed by the Department of
Public Welfare.
Provision for Loss on Real Estate
- ---------------------------------
In 1994 Registrant wrote off the carrying value of the Fairfax, Virginia
property, which the Frying Pan partnership returned to the sellers. This
resulted in a charge of $16,834,000, and a gain on elimination of debt of
$5,200,000 (before income tax effect).
On February 10, 1994, Registrant entered into an agreement with the
holder of the first and second mortgages relating to the property owned by
Country Club Associates Partnership whereby Registrant paid $3,500,000,
including a two year secured note for $1,000,000, for the release of
Registrant's guaranty of the first trust loan, the second trust note, the land
exchange liability, any mechanics liens, real estate taxes and unknown recourse
claims.
In accordance with generally accepted accounting principles, Registrant
reduced the carrying value of Country Club as at December 31, 1993, resulting
in a charge of $9,898,000. In accordance with generally accepted accounting
principles, Registrant recorded a $6,398,000 gain on elimination of the Country
Club debt in the first quarter of 1994 to reflect the February, 1994
transaction.
-24-
<PAGE>
Extraordinary Item-Debt Elimination
- -----------------------------------
A partnership, now 98% owned by Registrant, owns four office buildings in
Manassas, Virginia, totalling 187,000 square feet on 16.35 acres of land.
Buildings B and C of that project were subject to the original construction
loan with a balance outstanding in June, 1993 of $8.12 million, plus accrued
interest. In June, 1993, Registrant purchased the loan for $5 million and
recorded a net gain of $4.9 million due to elimination (defeasance) of debt.
In September 1993, Registrant purchased the construction loan on the 7800
Building in Manassas, VA and recorded a net gain of $145,000.
In January, 1994 the holder of the note on the Country Club Associates
property foreclosed and obtained possession of the property. On February 10,
1994, Registrant entered into an agreement with the holder of the first and
second mortgages relating to the property owned by Country Club Associates
Partnership whereby Registrant paid $3,500,000, including a two year secured
note for $1,000,000, for the release of Registrant's guaranty of the first
trust loan, the second trust note, the land exchange liability, any mechanics
liens, real estate taxes and unknown recourse claims. At that time Registrant
recorded the disposition of the property. This transaction resulted in a
pre-tax extraordinary gain of $6,398,000 in the first quarter of 1994.
Registrant also recorded pre-tax extraordinary gain of $5,200,000 in
December 1994 with respect to the disposition of the Fairfax, Virginia
property.
In 1992 Registrant tendered a deed to the holder of the loan on Allentown
Apartments. In September 1993 the holder refused the deed offered by
Registrant, had a receiver appointed and took possession of the property. In
May 1995 the holder foreclosed on the property. In August 1995 the Circuit
Court for Prince George's County, Maryland ratified the foreclosure sale. This
transaction resulted in a pre-tax extraordinary gain of $2,678,000 after
payment of $480,000 guaranteed by Registrant and related expenses.
Balance Sheet:
- -------------
Land Held for Development and Notes Payable - Land and Development
- ------------------------------------------------------------------
The decrease in these items reflects the write-off of the Country Club
and Frying Pan properties (see "Provision for Loss on Real Estate" above) and
the corresponding debt elimination.
-25-
<PAGE>
Notes Payable - Mortgages
- -------------------------
Included in the total for Mortgages is a $4,177,134 Deed of Trust Note on
Allentown Apartments at December 31, 1994. See "Extraordinary Item - Debt
Elimination" above.
Liquidity and Capital Resources
- -------------------------------
Registrant believes that the eight transactions enumerated above have
alleviated most of its earlier partnership problems.
Registrant continues to fund its obligations out of current cash flow.
The banking and finance communities continue to be adverse to most real estate
lending, requiring increased coverage on debt and significant owner investment
in properties. There is no assurance that Registrant will be able to meet all
of its needs out of cash flow or that additional funding will be available to
Registrant if needed.
During the year ended December 31, 1994, Registrant generated cash flow
from operating activities and investing activities of $7,575,000 and $1,953,000
respectively. The cash flow was used in financing activities for the repayment
of notes payable, including $2,500,000 related to the disposition of the
Country Club Associates property. Overall, cash flow from operating, investing
and financing activities resulted in an increase of $4,538,000 in cash and cash
equivalents during the year ended December 31, 1994.
During the year ended December 31, 1995, Registrant generated cash flow
from operating activities and investing activities of $7,214,000 and $548,000,
respectively. The cash flow was used in financing activities for the repayment
of mortgages and notes payable. Overall, cash flow from operating, investing
and financing resulted in an increase of $3,721,000 in cash and cash
equivalents during the year ended December 31, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The financial statements are listed under Item 14 in this annual
report and are included therein.
No supplementary data are supplied because none are required.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
None.
-26-
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
-----------------------------------------------
The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year, except for the information
contained under such definitive proxy statement under the captions "Board
Compensation Committee Report on Executive Compensation" and "Performance
Graph."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
---------------------------------------------------
The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year.
[balance of page intentionally left blank]
-27-
<PAGE>
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page
----
A. The following documents are filed as part of this report:
1. Financial Statements
Bresler & Reiner, Inc. Consolidated Financial Statements:
Report of Independent Public Accountants 29
Consolidated Balance Sheets 30-31
Consolidated Statements of Income 32
Consolidated Statements of Changes in Shareholders' Equity 33
Consolidated Statements of Cash Flows 34-35
Notes to Consolidated Financial Statements 36
2. Financial Statement Schedules III and IV 52
Schedules other than those listed above have been omitted because they
are not required, not applicable, or the required information is set
forth in the financial statements or notes thereto.
3. Exhibits 60
B. Reports on Form 8-K
No report on Form 8-K was filed during the last quarter of the fiscal year
1995.
-28-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bresler & Reiner, Inc.:
We have audited the accompanying consolidated balance sheets of Bresler &
Reiner, Inc. (a Delaware corporation, the "Company"), as of December 31, 1995
and 1994, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years ended December
31, 1995. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
index of financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. This information has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated, in all material respects in
relation to the basic consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Washington, D.C.,
March 15, 1996
-29-
<PAGE>
BRESLER & REINER, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
RENTAL PROPERTY AND EQUIPMENT, net $ 38,018,000 $ 40,337,000
CONSTRUCTION IN PROCESS 10,198,000 12,817,000
HOMES HELD FOR SALE 3,650,000 2,154,000
LAND HELD FOR DEVELOPMENT 4,903,000 4,886,000
LAND HELD FOR SALE 431,000 793,000
RECEIVABLES:
Mortgages and notes, affiliates 5,971,000 6,358,000
Mortgages and notes, other 1,228,000 2,417,000
Direct financing leases 1,022,000 3,007,000
Other 1,838,000 3,457,000
INVESTMENT IN AND ADVANCES TO
JOINT VENTURES AND PARTNERSHIPS 4,233,000 5,615,000
CASH AND CASH EQUIVALENTS 10,921,000 7,200,000
CASH DEPOSITS HELD IN ESCROW 11,215,000 7,165,000
INCOME TAXES RECEIVABLE 991,000 2,733,000
DEFERRED CHARGES AND OTHER ASSETS 6,776,000 4,462,000
------------ ------------
$101,395,000 $103,401,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-30-
<PAGE>
BRESLER & REINER, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES:
Notes payable-
Mortgages $ 33,634,000 $ 40,045,000
Land and development 500,000 1,000,000
Leasing equipment 95,000 1,450,000
Accounts payable, trade 2,703,000 3,259,000
Accrued expenses 859,000 970,000
Tenant deposits 275,000 264,000
Deferred income 1,183,000 976,000
Deferred income taxes payable 2,871,000 2,791,000
Due to affiliates 1,000,000 -
------------ ------------
Total liabilities 43,120,000 50,755,000
MINORITY INTEREST 306,000 432,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value:
4,000,000 shares authorized,
2,839,603 shares issued, 2,792,653
and 2,836,403 shares outstanding at 28,000 28,000
December 31, 1995 and 1994,
respectively
Capital in excess of par 7,565,000 7,565,000
Retained earnings 50,804,000 44,664,000
Treasury stock (428,000) (43,000)
------------ ------------
Total shareholders' equity 57,969,000 52,214,000
------------ ------------
$101,395,000 $103,401,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-31-
<PAGE>
BRESLER & REINER, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Sales of homes and lots $ 8,117,000 $10,567,000 $ 7,633,000
Other construction, net 1,340,000 970,000 561,000
Rental income - apartments 13,803,000 15,167,000 15,047,000
and commercial
Hotel income 5,534,000 5,492,000 1,799,000
Management fees, affiliates 831,000 879,000 835,000
Leasing fees, affiliates 725,000 776,000 1,008,000
Interest-
Affiliates 1,112,000 1,213,000 1,143,000
Other 866,000 656,000 1,245,000
Gain on sales of realty 281,000 1,439,000 317,000
interests, net
Gain on commercial paper - - 711,000
Equipment leasing and vending 512,000 1,562,000 1,315,000
Income from equity investments 641,000 763,000 -
Other 62,000 79,000 69,000
----------- ----------- ------------
33,824,000 39,563,000 31,683,000
----------- ----------- ------------
COSTS AND EXPENSES:
Cost of home and lot sales 7,927,000 9,702,000 6,576,000
Rental expense 6,594,000 6,854,000 7,345,000
Hotel expense 5,004,000 5,333,000 1,584,000
Land development expense 107,000 178,000 509,000
General and administrative 2,082,000 2,617,000 2,673,000
Interest expense 3,267,000 3,700,000 3,439,000
Loss from equity investments - - 12,532,000
Equipment leasing and vending 448,000 815,000 858,000
Provision for loss on real 200,000 16,834,000 9,898,000
estate
Other 673,000 - -
----------- ----------- ------------
26,302,000 46,033,000 45,414,000
----------- ----------- ------------
NET INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
MINORITY INTEREST 7,522,000 (6,470,000) (13,731,000)
PROVISION FOR INCOME TAXES (BENEFIT) 3,087,000 (2,336,000) (5,305,000)
----------- ----------- ------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM AND MINORITY INTEREST 4,435,000 (4,134,000) (8,426,000)
EXTRAORDINARY ITEM:
Debt elimination (Net of
income tax of $942,000 in
1995, $4,075,000 in 1994,
and $1,776,000 in 1993) 1,736,000 7,513,000 3,275,000
NET INCOME (LOSS) BEFORE MINORITY
INTEREST 6,171,000 3,379,000 (5,151,000)
MINORITY INTEREST (31,000) 25,000 18,000
NET INCOME (LOSS) $ 6,140,000 $ 3,404,000 $ (5,133,000)
EARNINGS PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM $ 1.57 $ (1.45) $ (2.96)
EXTRAORDINARY ITEM .61 2.65 1.15
EARNINGS PER COMMON SHARE $ 2.18 $ 1.20 $ (1.81)
</TABLE>
The accompanying notes are an integral part of these statements.
-32-
<PAGE>
BRESLER & REINER, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
CAPITAL IN TOTAL
COMMON EXCESS OF RETAINED TREASURY SHAREHOLDERS'
STOCK PAR EARNINGS STOCK EQUITY
------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 $28,000 $7,565,000 $46,393,000 $ (40,000) $53,946,000
Net (loss) - - (5,133,000) - (5,133,000)
------- ---------- ----------- --------- -------------
BALANCE, December 31, 1993 28,000 7,565,000 41,260,000 (40,000) 48,813,000
Net income - - 3,404,000 - 3,404,000
Purchase of Treasury stock - - - (3,000) (3,000)
------- ---------- ----------- --------- -------------
BALANCE, December 31, 1994 28,000 7,565,000 44,664,000 (43,000) 52,214,000
Net income - - 6,140,000 - 6,140,000
Purchase of Treasury stock - - - (385,000) (385,000)
------- ---------- ----------- --------- -------------
BALANCE, December 31, 1995 $28,000 $7,565,000 $50,804,000 $(428,000) $57,969,000
======= ========== =========== ========= =============
</TABLE>
The accompanying notes are an integral part of these statements.
-33-
<PAGE>
BRESLER & REINER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) before extraordinary
item $ 4,404,000 $ (4,109,000) $(8,408,000)
Extraordinary item, net of tax 1,736,000 7,513,000 3,275,000
----------- ------------ -----------
Net income (loss) 6,140,000 3,404,000 (5,133,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities-
Extraordinary item - gain on debt (2,678,000) (11,588,000) (5,051,000)
forgiveness
Depreciation and amortization 2,434,000 2,368,000 2,109,000
Recognition of deferred income - - (325,000)
Gain on commercial paper - - (711,000)
Gain on sales of realty interests, net (281,000) (1,439,000) (317,000)
Investment in direct financing leases - (54,000) (38,000)
Direct financing lease payments 1,429,000 2,779,000 3,317,000
Amortization of investment in direct (141,000) (329,000) (572,000)
financing leases
Proceeds from sale of equipment under
direct financing leases 789,000 1,484,000 6,000
(Gain) loss from equity investments (641,000) (763,000) 12,532,000
Provision for loss on real estate 200,000 16,834,000 9,898,000
Deferred income taxes 80,000 1,960,000 (5,622,000)
Other (92,000) (781,000) 4,000
Changes in other assets and
liabilities-
(Increase) decrease in:
Construction in process 2,619,000 3,322,000 376,000
Homes held for sale (1,496,000) (2,154,000) -
Land held for sale 162,000 (793,000) -
Mortgages and notes receivable 1,857,000 3,290,000 823,000
Income taxes receivable 1,742,000 (1,675,000) (928,000)
Other assets (4,361,000) (4,866,000) 1,125,000
All other liabilities (548,000) (3,424,000) (1,946,000)
----------- ------------ -----------
Total adjustments to reconcile net
income (loss) to net cash provided
by operating activities 1,074,000 4,171,00 14,680,000
----------- ------------ -----------
Net cash provided by operating
activities 7,214,000 7,575,000 9,547,000
</TABLE>
The accompanying notes are an integral part of these statements.
-34-
<PAGE>
BRESLER & REINER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures $ 1,485,000 $ 1,337,000 $(2,911,000)
Investment in commercial paper - - 1,961,000
Purchase of treasury stock (385,000) (3,000) -
Other (504,000) 619,000 (727,000)
----------- ------------ -----------
Net cash provided by (used in)
investing activities 596,000 1,953,000 (1,677,000)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (4,089,000) (11,490,000) (9,033,000)
Proceeds from notes payable - 6,500,000 -
----------- ------------ -----------
Net cash used in financing
activities (4,089,000) (4,990,000) (9,033,000)
----------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND 3,721,000 4,538,000 (1,163,000)
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of 7,200,000 2,662,000 3,825,000
year ----------- ------------ -----------
CASH AND CASH EQUIVALENTS, end of year $10,921,000 $ 7,200,000 $ 2,662,000
=========== ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for-
Interest $ 3,293,186 $ 3,675,000 $ 5,221,000
Income taxes 1,109,138 949,000 1,999,000
SUPPLEMENTAL DISCLOSURES OF NONCASH
ACTIVITIES:
Escrowed cash deposits received 176,325 214,000 228,000
Escrowed cash deposits refunded 151,980 193,000 280,000
Transfer of construction in process
to rental property and equipment - - 21,000
Transfer of construction in process
to advances to/from affiliates - - 22,000
Acquisition of rental property and
mortgage note payable - - 13,836,000
REAL ESTATE ASSETS TRANSFERRED IN
SATISFACTION OF LIABILITIES:
Land held for development - 33,908,000 -
Land 171,000 - -
Building & equipment, net 553,000 - -
Accounts receivable and other assets 128,000 - -
Mortgage payable 4,177,000 42,851,000 -
Accounts payable - 2,535,000 -
Accrued expenses 8,000 2,610,000 -
</TABLE>
The accompanying notes are an integral part of these statements.
-35-
<PAGE>
BRESLER & REINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995, 1994, AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Bresler & Reiner,
Inc., and its wholly and majority-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated.
The Company's activities include residential land development and construction
and rental property ownership and management primarily in Maryland, Virginia and
the District of Columbia.
INVESTMENTS IN AND ADVANCES TO JOINT VENTURES AND PARTNERSHIPS
The Company includes its share of the earnings or losses of unconsolidated joint
ventures and partnerships under the equity method of accounting.
REVENUE RECOGNITION
The Company accounts for revenue from sales of homes and condominiums and sales
of real property in accordance with the provisions of the Statement of Financial
Accounting Standards ("SFAS") No. 66, "Accounting for Sales of Real Estate."
Rental, construction, and management service fees are generally recorded when
earned. Leasing fees are recorded over the life of the lease.
RENTAL PROPERTY AND EQUIPMENT AND DEPRECIATION
Rental property and equipment are stated at cost. Depreciation is recorded
using the straight-line method over the estimated useful lives of the related
assets.
CONSTRUCTION IN PROCESS AND LAND HELD FOR DEVELOPMENT
Construction in process and land held for development are stated at the lower of
cost or net realizable value. When construction commences, costs are
transferred to construction in process where they are accumulated by project.
Other project costs included in construction in process include property taxes,
materials, labor, and allocated overhead. These costs are charged to costs of
homes sold on a pro rata basis as homes are sold, in accordance with SFAS No.
67, "Accounting for Costs and Initial Rental Operations of Real Estate
Projects." The Company generally finances its homebuilding operations from
internal cash flow. The
-36-
<PAGE>
Company reviews its accumulated costs to determine that costs in excess of net
realizable value are charged to operations.
DIRECT FINANCING LEASES
The Company's leasing operations consist principally of the leasing of computer
equipment, tractors and trailers, rental store fixtures, and manufacturing plant
equipment. The Company accounts for these leases as direct financing leases in
accordance with SFAS No. 13, "Accounting for Leases."
INCOME TAXES
Deferred income taxes result principally from temporary differences related to
the timing of the recognition of real estate sales, lease income, interest
expense and real estate taxes during development, and depreciation for tax and
financial reporting purposes.
EARNINGS PER COMMON SHARE
Earnings per common share is based upon the weighted average number of shares
outstanding during each year (2,823,866 shares in 1995, 2,836,481 shares in
1994, and 2,836,621 shares in 1993).
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
CASH DEPOSITS HELD IN ESCROW
The Company treats the cash accounts of its management companies as restricted
for the exclusive use of the properties under management.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
LONG-LIVED ASSETS
Statement of Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of" ("SFAS 121") was
issued in March, 1995. This statement addresses how entities should measure the
impairment of long-lived assets. SFAS 121 is required to be implemented by the
Company in 1996. The adoption of SFAS 121 is not expected to have a material
effect on the Company's 1996 consolidated financial statements.
-37-
<PAGE>
RECLASSIFICATIONS
Certain 1994 and 1993 amounts have been reclassified in order to conform to the
1995 presentation.
2. RENTAL PROPERTY AND EQUIPMENT, NET:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Land $ 3,278,000 $ 3,448,000
Buildings and improvements 54,650,000 56,234,000
Equipment 3,268,000 3,002,000
------------ ------------
61,196,000 62,684,000
Less- Accumulated depreciation (23,178,000) (22,347,000)
------------ ------------
$ 38,018,000 $ 40,337,000
============ ============
</TABLE>
Buildings and improvements and equipment are depreciated over the useful lives
of the related assets ranging from 5 to 40 and 3 to 12 years, respectively.
Substantially all rental property and equipment is pledged as collateral for
financing.
3. LAND HELD FOR SALE:
Land held for sale represents land intended to be sold on the open market. The
land is recorded at the lower of cost or realizable value.
4. HOMES HELD FOR SALE:
Homes held for sale represents homes that have been substantially completed for
over one year and are held for sale on the open market. These homes are
recorded at the lower of cost or realizable value.
5. GAIN ON SALES OF REALTY INTERESTS, NET:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------- ----------
<S> <C> <C> <C>
Sales price $ 98,000(a) $ 485,000(a) $ -
Cost of sales 167,000 458,000 -
-------- ---------- ---------
(Loss) gain recognized,
current year transactions (69,000) 27,000 -
Gain recognized from prior
years' sales recorded using
the installment method 350,000 1,412,000(b) 317,000
-------- ---------- ---------
$281,000 $1,439,000 $317,000
======== ========== =========
</TABLE>
(a) The Company sold one convenience store property in 1995 and three
convenience store properties in 1994 which are accounted for using the
full accrual method.
-38-
<PAGE>
(b) During 1992, the Company sold a nursing home to an unaffiliated nursing
home operator. The Company received a note, and therefore accounted for the
gain on the transaction under the installment method of accounting and
deferred profit to the extent of the note received. In 1994, the Company
received the balance on the note and, therefore, the remaining deferred
profit related to this transaction of $1,145,000 was recognized.
6. OTHER CONSTRUCTION, NET:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Other construction revenues $ 2,137,000 $ 1,920,000 $ 1,409,000
Other construction costs 797,000 950,000 848,000
----------- ----------- -----------
Total $ 1,340,000 $ 970,000 $ 561,000
=========== =========== ===========
</TABLE>
7. NOTES PAYABLE:
<TABLE>
<CAPTION>
MATURITIES
FOR DEBT
OUTSTANDING
1995* 1994 AT 12/31/95
----------- ----------- ------------
<S> <C> <C> <C>
Mortgages payable,
5.25% to 9.75% and
prime plus .125%,
(or 8.625% at
December 31, 1995)
collateralized by
rental properties $33,634,000 $40,045,000 1997-2001
Notes payable, 4% 500,000 1,000,000 1996
Notes payable, 9.85%
to 11.5%,
collateralized by
equipment 95,000 1,450,000 1996-1997
</TABLE>
* Interest rates relate to the 1995 balances.
In connection with the assignment of leasehold interests in certain properties,
the Company received notes secured by the interests assigned. The proceeds of
the notes received, as the result of the assignment of these interests, are used
to pay the original underlying mortgages on these properties. These mortgages
remain on the Company's books, as of December 31, 1995 and 1994, at balances of
$7,713,000 and $8,671,000, respectively, and are included in mortgages payable
above.
Of the mortgages and notes payable, $10,192,000 are recourse to the Company at
December 31, 1995. In addition, the Company has recourse obligations totaling
$1,196,000 related to guarantees given to creditors in certain of the Company's
investments in joint ventures. See Note 10.
-39-
<PAGE>
Annual principal payments are as follows.
<TABLE>
<CAPTION>
NOTES NOTES
NOTES PAYABLE, PAYABLE,
PAYABLE, LAND AND LEASING
MORTGAGES DEVELOPMENT EQUIPMENT
----------- ----------- ---------
<S> <C> <C> <C>
1996 $ 1,782,000 $500,000 $59,000
1997 1,932,000 - 36,000
1998 12,757,000 - -
1999 9,169,000 - -
2000 1,582,000 - -
2001 and thereafter 6,412,000 - -
----------- -------- -------
$33,634,000 $500,000 $95,000
=========== ======== =======
</TABLE>
. Included in Mortgages on Rental Properties above is a renegotiated mortgage
secured by an office building in Manassas, Virginia, which is substantially
leased. At December 31, 1993, the note was in default and had a balance of
$2,121,000. The mortgage was extended in 1994 for the principal balance at
9.75% interest due December 1, 1998. As of December 31, 1995, the outstanding
balance was $2,077,000.
. Included in Mortgages on Rental Properties as of December 31, 1994, was a
$4,177,000 mortgage in default on a property for which the Company had not
made required principal and interest payments since June 1992. The Company
guaranteed the loan in an amount not to exceed $480,000. During 1992, the
Company offered to tender a deed to the property in partial satisfaction of
the debt, which was refused by the noteholder. The note was then acquired by
a noteholder who purchased the note from the Resolution Trust Corporation.
The new noteholder had a receiver appointed who took possession of the
property on September 22, 1993. The Resolution Trust Corporation then brought
suit against the Company under the mortgage and guarantee. In May 1995, the
note holder foreclosed on the property, and in August 1995, the Court ratified
the foreclosure sale. At the time of foreclosure, the outstanding mortgage
balance was $4,177,000 and the related net book value of the property, which
approximated management's estimate of fair value, plus the guarantee and
related expenses was $1,499,000 resulting in an extraordinary gain of
$2,678,000. The gain is presented as an extraordinary item net of tax in
1995.
. Paradise Sudley North Limited Partnership, 99 percent owned by the Company,
was in default on a loan with the former National Bank of Washington. the
loan was secured by two of the four buildings owned by the partnership. The
noteholder, the Federal Deposit Insurance Corporation ("FDIC"), had demanded
payment in full of the outstanding principal balance of $8,121,000 plus all
accrued and unpaid interest. Of this debt, 50 percent was guaranteed by the
Company. The FDIC had refused to fund tenant improvements and other
obligations under the loan and had refused to extend the loan pursuant to its
original terms. In the opinion of management, the FDIC was obligated to
fulfill the original terms of the National Bank of Washington loan. In June
1993, the company and the FDIC negotiated terms in which the Company paid
approximately $5.0 million in full satisfaction of the debt resulting in a
gain of $4.9 million due to the elimination of debt. The gain is presented as
an extraordinary item net of tax in 1993.
-40-
<PAGE>
. Included in Notes Payable, Land, at December 31, 1993, was $25,399,000, which
was settled on February 10, 1994. The Company entered into an agreement with
the holder of the first and second mortgages relating to the property owned by
Country Club Associates Partnership whereby the Company paid $3,500,000,
including a two-year secured note for $1,000,000, for the release of the
Company's guaranty of the first trust loan, the second trust note, the land
exchange liability, any mechanics liens, real estate taxes, and unknown
recourse claims. Based on continuing negotiations to tender the asset in
satisfaction of the debt, the Company recorded a provision for loss on real
estate of $9,898,000 in 1993 to reduce the asset to its estimated fair value
of $19,000,000 at December 31, 1993. In accordance with generally accepted
accounting principles, the Company recorded an extraordinary gain of
approximately $6,398,000 due to satisfaction of the debt in the first quarter
of 1994. The gain is presented as an extraordinary item net of tax.
. Included in Notes Payable, Land, at December 31, 1993, were nonrecourse
mortgage notes totaling $18,452,000 that were secured by approximately 57
acres of land held for development. During 1994, the Company reevaluated its
investment and concluded that the long term development plans for the property
were no longer warranted given the continued softness in the commercial real
estate market and the inability of the lenders to agree to continued debt
modifications. As a result, the Company recorded a write down of $16.8
million representing the Company's estimate of the property value based on
immediate liquidation. In December 1994, one of the lenders took a deed in
lieu of foreclosure on a 17 acre tract and took possession of the property.
The Company tendered the deed in lieu of foreclosure to the seller on the
remaining 40 acres. As a result of this debt defeasance, the Company
recognized an extraordinary gain of $5.2 million. The gain is presented as an
extraordinary item net of tax in 1994.
8. MORTGAGES AND NOTES RECEIVABLES, AFFILIATES:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Mortgages and notes:
Due 2001 (a) $ 473,000 $ 545,000
Due 2009 1,322,000 1,331,000
Installment sales:
Due 1999 (b) 1,883,000 1,948,000
Due 2000 (c) 2,293,000 2,534,000
---------- ----------
$5,971,000 $6,358,000
========== ==========
</TABLE>
(a) In payment of construction costs, the Company accepted a second mortgage
note with an office building pledged as collateral. The note is due in
monthly installments of principal and interest of $10,000, at 8.5 percent,
from a limited partnership in which the Company is the general partner and
has a 46 percent interest. Certain of the Company's officers and directors
own 4.5 percent of the limited partnership. The note matures in 2001.
-41-
<PAGE>
(b) Amounts due are net of deferred gains of $1,454,000 and $1,504,000 in 1995
and 1994, respectively. The amounts are due in monthly installments of
$36,600, including interest at 9.5 percent through 1999, with a final
payment due 1999 of approximately $2,838,000, from a limited partnership in
which the Company is the sole general partner and has a 1 percent interest.
The building sold is pledged as collateral for the note with no further
recourse to the partnership. Certain of the Company's officers and
directors own 9 percent of the limited partnership.
(c) Amounts due are net of deferred gain of $2,725,000 and $3,011,000 in 1995
and 1994, respectively. The amounts are due in monthly installments of
$95,700, including interest at 10 percent, through 2000, with a final
payment of approximately $1,031,000, from a limited partnership in which the
Company is a sole general partner and has a 1 percent interest. The
building sold is pledged as collateral for the note with no further recourse
to the partnership. Certain of the Company's officers and directors own 37
percent of the limited partnership.
9. MORTGAGES AND NOTES RECEIVABLES, OTHER:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Mortgages and notes:
Home sales, 8% to 12.5%, due $ 433,000 $ 639,000
through 2020
Sale of partnership interests, - 562,000
8% to 10%
Condominium sales, 8% to 13%,
net of deferred gain of 189,000 202,000
$195,000 in 1995 and $208,000
in 1994
Notes receivable:
Other, 8% to 10% 567,000 975,000
Tenant improvement,
10% 39,000 39,000
---------- ----------
$1,228,000 $2,417,000
========== ==========
</TABLE>
Substantially all notes are collateralized by first trusts on houses,
residential property or undeveloped land.
10. INVESTMENT IN AND ADVANCES TO
JOINT VENTURES AND PARTNERSHIPS:
The Company has general and limited partnership interests in entities that are
developing or operating properties located in Northern Virginia, Washington,
D.C., Baltimore, Maryland, and Orlando, Florida.
-42-
<PAGE>
The Company held a 40 percent interest in the Colonnade Limited Partnership (the
"Colonnade")which owned a mixed-use property including a 119 unit condominium, a
125-room hotel and restaurant and approximately 16,000 square feet of retail
and office space. The Colonnade has been in various forms of default on the
underlying mortgage, which culminated in a public trustee sale of the property
on September 13, 1993, at which time the uptown Hotel Corporation ("Uptown") a
wholly owned subsidiary of the Company purchased the hotel, commercial spaces,
six condominium units and certain parking spaces. As a result of these
activities the Company, in 1993, recorded a loss in their equity investment of
$13,828,000, which is the result of writing down the Company's investment to
fair value and recording the Colonnade's operating losses for 1993. The
property which is now wholly owned, and the related results of operations are
consolidated in the 1995 and 1994 financial statements.
The following is a summary of joint ventures and partnerships in which the
Company holds ownership interests.
<TABLE>
<CAPTION>
COMPANY INTERESTS AS OF DECEMBER 31, 1995
----------------- -----------------------
GENERAL LIMITED CURRENT STATUS PARTNERSHIP
PARTNER PARTNER OF PARTNERSHIPS ASSETS RECOURSE DEBT NONRECOURSE DEBT EQUITY (DEFICIT)
-------- ------- ----------------- --------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Entities Accounted for
Under the Equity Method:
Town Center East, L.P. 1% 45% Owns and
operates an
office building
in Southwest
Washington, D.C. $5,261,000 $ - $2,118,000 $ 4,207,000
SEW Associates 1% - Owns and
operates a
segment of a
Shopping Mall in
Southwest,
Washington, D.C. 5,379,000 - 5,018,000 151,000
Third Street S.W. Investors 1% - Owns and
operates 256 Apt
units in
Southwest
Washington, D.C. 1,548,000 - 4,658,000 (4,018,000)
Tech High Leasing 50% - Leveraged
equipment leasing 3,572,000 458,000 1,433,000 1,662,000
Builders Leasing 20% - Leveraged
equipment leasing 3,592,000 1,256,000 2,885,000 (760,000)
Pine Club II - 64% Owns and
Operates 160
Apt. units in
Orlando, FLA. 6,276,000 - 5,424,000 420,000
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
The Company is contingently liable for $1,196,000 of outstanding liabilities of
nonconsolidated partnerships and joint ventures in which it has investments at
December 31, 1995. The Company also pledged their interests in the General
Services Administration's ("GSA")lease to the lender as security for Town Center
East, L.P.'s mortgage and Trilon Plaza Company's (an entity affiliated with the
Company) mortgages totaling $8.7 million.
-43-
<PAGE>
The Company was the holder of $2.5 million of short-term commercial paper of
Washington Bancorporation ("WBC"), the holding company of the National Bank of
Washington. The commercial paper represented an unsecured obligation of WBC.
In August 1990, WBC defaulted on its commercial paper and filed for protection
under Chapter 11 of the Federal Bankruptcy Act. In 1990, the Company recorded a
$1.25 million reserve for potential losses on the commercial paper and ceased
accruing interest. In June 1993, the Company received $1,961,000 in settlement
of its commercial paper claim. As a result, the Company recognized a $711,000
gain in the 1993 financial statements.
During 1990 and 1989, the Company purchased limited partnership interests in
limited partnerships, which are operating low income housing units. The
required capital contributions over the next 5 years are projected to aggregate
$2,630,000. The amount of projected contributions are to be adjusted annually
to be a percentage of tax benefits derived. The Company anticipates that the
annual tax benefits will be more than sufficient to fund the annual capital
contributions.
At December 31, 1995, the Company had approximately $3,998,000 of outstanding
letters of credit representing performance guarantees for land improvements in
home building and land development operations.
The Company and other related entities are defendants in a suit filed in October
1990 by certain present and former employees of the Environmental Protection
Agency ("EPA"), which leases office space at the Waterside Mall Complex (a
portion of which is owned by the Company). The complaint alleges claims of
negligence, breach of contract, and other allegations relating to certain
renovations performed at the Waterside Mall Complex. The complaint seeks
$40,000,000 in damages. The claims of six plaintiffs were heard in a jury trial
from October 25, 1993, to December 23, 1993, with verdicts for the plaintiffs
totaling $948,000. The Company appealed the verdicts and, in 1995, received a
judgment that reduced the total damages to $232,000. No punitive damages were
awarded. The cases of the other plaintiffs remain to be tried. Management
believes, based on consultations with outside counsel, that the claims are
without merit and that the litigation should not have a material adverse effect
on results of operations or the financial position of the Company.
The EPA occupies a significant amount of the space in the Company's portion of
the Waterside Mall. The lease expired in September 1992 and in 1993, the
Company negotiated a new lease with the GSA including new terms and conditions
for lease of space to EPA. The lease was signed retroactively for the five-year
period beginning September 1992. The catch-up payment was received in August
1993 and the Company recorded $2,078,000 as income representing its share of the
payment.
The new GSA lease provided that the rent is to be reduced, if GSA elected,
before December 31, 1994, to extend the lease for a further five years. In
November 1994, GSA elected to extend the lease resulting in a reduction of the
annual rent. The lease extension and resulting reduction in rent is accounted
for prospectively over the remaining lease term. As a result of extending the
lease, GSA has the option to cancel the lease on certain space effective any
time during the second five years and on certain other space at any time after
the eighth year.
-44-
<PAGE>
12. DIRECT FINANCING LEASES:
The Company engages in personal property leveraged equipment leasing. These
leases involve computer equipment, tractors and trailers, rental store fixtures,
and manufacturing plant equipment.
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Total minimum lease
payments to be received $ 125,000 $1,690,000
Unamortized initial direct
costs 3,000 57,000
Estimated residual values
of leased property (not
guaranteed) 906,000 1,476,000
---------- ----------
1,034,000 3,223,000
Less unearned income 12,000 216,000
---------- ----------
Net investment in direct
financing leases $1,022,000 $3,007,000
========== ==========
</TABLE>
Future minimum lease payments to be received under the above noncancelable lease
agreements as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
MINIMUM
LEASE PAYMENTS
--------------
<S> <C>
1996 $ 83,000
1997 42,000
1998 -
1999 -
2000 -
--------
$125,000
--------
</TABLE>
13. INCOME TAXES:
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." SFAS No. 109 establishes financial
accounting and reporting standards for the effects of income taxes that result
from the Company's activities during the current and preceding years. It
requires an asset and liability approach in accounting for income taxes, as
such, balance sheet accruals for income taxes are adjusted to reflect changes in
tax rates in the period such changes are enacted.
-45-
<PAGE>
The Company and its subsidiaries file a consolidated Federal income tax return.
The provision (benefit) for income taxes includes the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes
Current $3,007,000 $(4,296,000) $ 317,000
Deferred tax (benefit) 80,000 1,960,000 (5,622,000)
---------- ----------- -----------
Total provision for
income taxes (benefit) 3,087,000 (2,336,000) (5,305,000)
---------- ----------- -----------
Extraordinary item -
income tax effect 942,000 4,075,000 1,776,000
---------- ----------- -----------
Total income tax expense
(benefit) $4,029,000 $ 1,739,000 $(3,529,000)
========== =========== ===========
</TABLE>
A reconciliation between the amount of income tax computed by multiplying income
before income taxes by the applicable statutory Federal income tax rate and the
income tax provision (benefit) shown on the consolidated income statements
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% (34.0)%
Alternative Minimum Tax - - 14.0
Increase (decrease) resulting from:
State taxes, net of Federal
income tax benefit 3.8 3.8 4.0
Low income housing tax benefits (5.2) (3.8) (14.0)
Other 8.4 - (10.7)
----- ----- ------
41.0% 34.0% (40.7)%
===== ===== ======
</TABLE>
Deferred income taxes result from temporary differences in the recognition of
revenue and expense for income tax and financial statement reporting purposes.
The sources of these differences and the estimated tax effect of each are as
follows:
<TABLE>
<CAPTION>
DEFERRED TAX LIABILITY
DEFERRED INCOME TAX (ASSET) FOR THE YEAR ENDED
PROVISION (BENEFIT) DECEMBER 31,
FOR THE YEAR ENDED ----------------------------
DECEMBER 31, 1995 1995 1994
------------------ ------------ ------------
<S> <C> <C> <C>
Basis in property $(113,000) $ 2,103,000 $ 2,216,000
Investment in
partnerships 48,000 1,541,000 1,493,000
Installment sales (359,000) 176,000 535,000
Leases (45,000) 885,000 930,000
Debt elimination 529,000 (1,137,000) (1,666,000)
Other 20,000 (697,000) (717,000)
--------- ----------- -----------
Total $ 80,000 $ 2,871,000 $ 2,791,000
========= =========== ===========
</TABLE>
-46-
<PAGE>
14. OPERATING LEASES:
AS A LESSEE
At December 31, 1995, the Company was obligated under a land lease, on which the
Company owns commercial properties, with the District of Columbia Redevelopment
Land Agency with aggregate annual rental payments of approximately $43,000 plus
certain expenses. The lease expires in 2058.
At December 31, 1995, the Company was obligated under a land lease for 8
parcels, on which the Company owns commercial property. The lease expires in
2000 and contains three renewal options of five years. Pursuant to the terms of
the lease, the aggregate annual rental is approximately $39,000, and the Company
has the option to purchase the land parcels at any time during the initial lease
term or renewal periods.
Rent expense for the years 1995, 1994, and 1993 was approximately $78,000,
$93,000, and $107,000, respectively.
Although certain leases require the Company to pay real estate taxes, insurance
and certain other operating expenses of the property, the basic rental payment
for each lease is used in presenting minimum rentals below.
Minimum rentals to be paid under all noncancelable leases at December 31, 1995,
are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
1996 $ 77,000
1997 78,000
1998 79,000
1999 80,000
2000 50,000
2001 and thereafter 154,800
--------
Total $518,800
========
</TABLE>
AS A LESSOR
Substantially all noncancelable leases of residential property are for a term of
one year or less. Minimum future rentals to be received for commercial property
subject to noncancelable leases are as follows:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
1996 $10,025,000
1997 9,906,000
1998 9,708,000
1999 7,686,000
2000 7,323,000
2001 and thereafter 19,010,000
-----------
Total $63,658,000
===========
</TABLE>
-47-
<PAGE>
15. TRANSACTIONS WITH AFFILIATES:
The Company has business transactions with several affiliates that are owned in
part by certain of the Company's shareholders, officers, and/or directors.
These transactions are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Leasing fees $ 725,000 $ 776,000 $1,008,000
Management Fees 825,000 879,000 835,000
Interest 1,112,000 1,213,000 1,143,000
Cost and expenses:
Lumber and millwork 11,000 25,000 13,000
Insurance 677,000 740,000 789,000
</TABLE>
See Notes 7, 8, 10, and 11 for additional information regarding related party
transactions.
16. PENSION PLAN:
The Company and certain of its subsidiaries have a noncontributory defined
benefit pension plan (the "Plan") covering substantially all full-time
employees. The Plan provides for benefits to be paid to eligible employees at
retirement based primarily upon years of service with the Company and their
compensation rates for the five years preceding retirement. The Company's
funding policy is consistent with the funding requirements of federal law and
regulations. Plan assets consist principally of mortgage notes receivable and
cash equivalents.
The net periodic pension costs for 1995, 1994, and 1993 are computed as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Services cost - benefits
earned during the year $ 300,000 $ 383,000 $ 338,000
Interest cost on projected
benefit obligation 409,000 442,000 392,000
Return on Plan assets (455,000) (314,000) (315,000)
Amortization of
unrecognized net obligation 57,000 57,000 57,000
Asset gain recognized - (211,000) (153,000)
Loss recognized on settlements - 3,000 -
--------- --------- ---------
Net periodic pension cost $ 311,000 $ 360,000 $ 319,000
========= ========= =========
</TABLE>
-48-
<PAGE>
The following table details the Plan's net pension asset at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Actuarial Present Value of Benefit
Obligation:
Vested benefits $6,121,000 $ 5,756,000
Nonvested benefits 54,000 35,000
---------- -----------
Accumulated benefit obligation 6,175,000 5,791,000
Effect of projected future
compensation increases 1,032,000 1,663,000
---------- -----------
Projected benefit obligation 7,207,000 7,454,000
Plan assets at fair value 7,970,000 7,497,000
---------- -----------
Plan assets in excess of projected
benefit obligation 763,000 43,000
Unrecognized net (gain) loss (681,000) 293,000
Unrecognized net obligation at date
of adoption being recognized over
22 years 794,000 851,000
---------- -----------
Net pension asset $ (876,000) $(1,187,000)
========== ===========
</TABLE>
The net periodic pension cost is treated as a reduction of the net pension asset
in the accompanying consolidated financial statements.
<TABLE>
<CAPTION>
Interest assumptions used were:
1995 1994
---- ----
<S> <C> <C>
Preretirement discount rate 6.00% 6.25%
Postretirement discount rate 6.00 6.00
Rate of increase in future
compensation 4.00 5.00
Long-term rate of return on
Plan assets 7.00 7.05
</TABLE>
17. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
In December 1991, the Financial Standards Accounting Board issued SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments." SFAS No. 107 requires
all entities to disclose the fair value of financial instruments, both assets
and liabilities, recognized and not recognized in the statements of financial
condition, for which it is practicable to estimate fair value. If estimating
fair value is not practicable, SFAS No. 107 requires disclosure of descriptive
information pertinent to estimating the fair value of a financial instrument.
SFAS No. 107 is generally effective for financial statements issued for fiscal
years ending after December 15, 1992.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
-49-
<PAGE>
. Cash and Cash Equivalents, and Cash Deposits Held In Escrow
Cash balances represent demand and short-term deposits with depository
institutions as well as short-term liquid investments. The carrying amount is
a reasonable estimate of fair value.
. Receivables
The fair value of mortgage receivables is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
For short-term loans, defined as those maturing or repricing in 90 days or
less, the carrying amount is a reasonable estimate of fair value. Other
receivables represent short-term receivables for which the carrying amount is
a reasonable estimate of fair value.
. Notes Payable
Based on borrowing rates currently available to the Company for financing on
similar terms for borrowers with similar credit ratings, the fair value of the
notes payable approximates their carrying value at December 31, 1995.
Additionally, for short-term notes payable, the carrying amount is a
reasonable estimate of fair value.
. Accounts Payable, Trade and Due to Affiliates
The fair value of accounts payable, trade and due to affiliates is the
carrying amount payable at the reporting date.
The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------- ----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $10,921,000 $10,921,000 $ 7,200,000 $ 7,200,000
Cash deposits held in escrow 11,215,000 11,215,000 7,165,000 7,165,000
Receivables-
Mortgages and notes, affiliates 5,971,000 7,522,000 6,358,000 7,970,000
Mortgages and notes, others 1,228,000 1,246,000 2,417,000 2,289,000
Other 1,838,000 1,838,000 3,457,000 3,457,000
Financial liabilities:
Notes payable-
Mortgages 33,634,000 33,901,000 40,045,000 40,045,000
Land and development 500,000 498,000 1,000,000 922,000
Accounts payable, trade 2,703,000 2,703,000 3,259,000 3,259,000
</TABLE>
-50-
<PAGE>
Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values. Management is concerned that reasonable
comparability between companies may not be likely due to the wide range of
permitted valuation techniques and numerous estimates that must be made given
the absence of active secondary markets for many of the financial instruments.
This lack of uniform valuation methodologies also introduces a greater degree of
subjectivity to these estimated fair values.
18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995
-------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues $9,098,000 $ 7,855,000 $ 8,585,000 $ 8,286,000
Net income before income taxes,
minority interest and
extraordinary items 2,007,000 2,650,000 1,308,000 1,557,000
Net income before
extraordinary items 1,296,000 1,693,000 855,000 591,000
Extraordinary item-
Debt elimination, net of tax - - 1,736,000 -
Net income 1,296,000 1,693,000 2,591,000 591,000
Earnings per common share before
extraordinary item .46 .59 .30 .21
Earnings per common share .46 .59 .91 .21
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------
MARCH 31, 1994 JUNE 30, 1994 SEPTEMBER 30, 1994 DECEMBER 31, 1994
-------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues $7,350,000 $11,016,000 $ 9,913,000 $11,284,000
Net income (loss) before
income taxes, minority
interest and
extraordinary items 1,537,000 3,512,000 (1,558,000) (9,961,000)
Net income (loss) before
extraordinary items 1,008,000 2,292,000 (1,013,000) (6,396,000)
Extraordinary item-
Debt elimination, net of tax 4,148,000 - - 3,365,000
Net income (loss) 5,156,000 2,292,000 (1,013,000) (3,031,000)
Earnings per common share
before extraordinary item .36 .80 (.35) (2.26)
Earnings per common share 1.82 .80 (.35) (1.07)
</TABLE>
-51-
<PAGE>
BRESLER & REINER, INC.
----------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(dollars in thousands)
<TABLE>
<CAPTION>
COLUMN C COLUMN D COLUMN E
-------------------- ---------------------- ---------------------------
COST CAPITALIZATION GROSS AMOUNT AT
INITIAL COST TO SUBSEQUENT TO WHICH CARRIED AT
COLUMN A COLUMN B COMPANY ACQUISITION CLOSE OF PERIOD
- -------------------------- ------------ -------------------- ---------------------- ---------------------------
BUILDING BUILDING
AND CARRYING AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COST LAND IMPROVEMENTS TOTAL
- -------------------------- ------------ ------ ------------ ------------ -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995:
Allentown
Apartments
(Apartments in
Suitland, Maryland) $ - $ - $ - $ - $ - $ - $ -
Charlestown North
(Apartments in
Greenbelt,
Maryland) - 2,179 358 - - 2,340 2,340
Commons (Apartments
in Washington,
D.C.) 277 1,047 429 - 387 1,388 1,775
Waterside Mall East
(Shopping Center
in Washington,
D.C.) - 6,631 13,131 111 - 15,533 15,533
Georgian Gardens
(Apartments in
Oxon Hill,
Maryland) - 289 397 - - 668 668
Lakeview Manor
Nursing Home
(Lakewood, New
Jersey) 100 4,026 - - 101 4,026 4,127
Uptown (Hotel in
Baltimore,
Maryland) - 7,368 125 - - 5,980 5,980
Allentown Road
Motel (Suitland,
Maryland) 378 2,793 411 - 378 3,384 3,762
Egap (Convenience
stores in Florida,
Louisiana, and
North Carolina) 58 3,388 - - 142 2,334 2,476
Nations Bank
Building (Office
Building in
Manassas, Virginia) 63 798 43 - 90 787 877
Paradise/Sudley
North (4 office
buildings in
Manassas, Virginia) 2,216 12,679 3,758 - 1,898 16,342 18,240
7800 Building
(Office building
in Manassas,
Virginia) 317 1,636 399 - 283 1,917 2,200
------ ------- ------- ---- ------ ------- -------
$3,409 $42,834 $19,051 $111 $3,279 $54,699 $57,978
====== ======= ======= ==== ====== ======= =======
<CAPTION>
COLUMN F COLUMN G COLUMN H COLUMN I
------------ ------------ -------- ----------------
LIFE ON WHICH
DEPRECIATION
ON LATEST
ACCUMULATED DATE OF DATE INCOME STATEMENT
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
- ------------------------------ ------------ ------------ -------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995:
Allentown
Apartments
(Apartments in
Suitland, Maryland) $ - 1971 5-40 years
Charlestown North
(Apartments in
Greenbelt,
Maryland) 1,601 1971 5-40 years
Commons (Apartments
in Washington,
D.C.) 889 1971 5-40 years
Waterside Mall East
(Shopping Center
in Washington,
D.C.) 8,937 1975 8-40 years
Georgian Gardens
(Apartments in
Oxon Hill,
Maryland) 607 Various 20 years
Lakeview Manor
Nursing Home
(Lakewood, New
Jersey) 2,129 1984 5-30 years
Uptown (Hotel in
Baltimore,
Maryland) 303 1993 (a)
Allentown Road
Motel (Suitland,
Maryland) 1,475 1987 19 years
Egap (Convenience
stores in Florida,
Louisiana, and
North Carolina) 1,171 1987 19 years
Nations Bank
Building (Office
Building in
Manassas, Virginia) 101 1991 31-1/2 years
Paradise/Sudley
North (4 office
buildings in
Manassas, Virginia) 3,619 1987 31-1/2 years
7800 Building
(Office building
in Manassas,
Virginia) 464 1990 15-31-1/2 years
-------
$21,296
=======
</TABLE>
(a) Asset acquisition recorded December 31, 1993
-52-
<PAGE>
BRESLER & REINER, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(dollars in thousands)
<TABLE>
<CAPTION>
COLUMN C COLUMN D COLUMN E
-------------------- ---------------------- ---------------------------
COST CAPITALIZATION GROSS AMOUNT AT
INITIAL COST TO SUBSEQUENT TO WHICH CARRIED AT
COLUMN A COLUMN B COMPANY ACQUISITION CLOSE OF PERIOD
- -------------------------- ------------ -------------------- ---------------------- ---------------------------
BUILDING BUILDING
AND CARRYING AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COST LAND IMPROVEMENTS TOTAL
- -------------------------- ------------ ------ ------------ ------------ -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1994:
Allentown
Apartments (Apartments in
Suitland, Maryland) $ 170 $ 1,180 $ 295 $ - $ 170 $ 1,444 $ 1,614
Charlestown North
(Apartments in
Greenbelt, Maryland) - 2,179 322 - - 2,304 2,304
Commons (Apartments
in Washington, D.C.) 277 1,047 393 - 388 1,352 1,740
Waterside Mall East
(Shopping Center
in Washington, D.C.) - 6,631 13,131 111 - 15,485 15,485
Georgian Gardens
(Apartments in
Oxon Hill, Maryland) - 289 397 - - 668 668
Lakeview Manor
Nursing Home
(Lakewood, New Jersey) 100 4,026 - - 100 4,026 4,126
Uptown (Hotel in
Baltimore, Maryland) - 7,368 125 - - 6,020 6,020
Allentown Road Hotel
(Suitland, Maryland) 378 2,793 402 - 378 3,375 3,753
Egap (Convenience stores
in Florida, Louisiana,
and North Carolina) 58 3,388 - - 142 2,575 2,717
Nations Bank Building
(Office Building in
Manassas, Virginia) 63 798 43 - 90 787 877
Paradise/Sudley North
(4 office buildings in
Manassas, Virginia) 2,216 12,679 3,698 - 1,898 16,282 18,180
7800 Building (Office
building in Manassas,
Virginia) 317 1,636 399 - 283 1,909 2,192
-------- -------- --------- ----- ------- --------- -------
$3,579 $44,014 $19,205 $111 $3,449 $56,227 $59,676
======== ======== ========= ===== ======= ======= =======
<CAPTION>
COLUMN F COLUMN G COLUMN H COLUMN I
------------ ------------ -------- ----------------
LIFE ON WHICH
DEPRECIATION
ON LATEST
ACCUMULATED DATE OF DATE INCOME STATEMENT
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
- ------------------------------ ------------ ------------ -------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1994:
Allentown Apartments
(Apartments in
Suitland, Maryland) $ 955 1971 5-40 years
Charlestown North (Apartments
in Greenbelt, Maryland) 1,528 1971 5-40 years
Commons (Apartments
in Washington, D.C.) 835 1971 5-40 years
Waterside Mall East
(Shopping Center
in Washington, D.C.) 8,655 1975 8-40 years
Georgian Gardens
(Apartments in Oxon
Hill, Maryland) 572 Various 20 years
Lakeview Manor Nursing
Home (Lakewood, New Jersey 1,994 1984 5-30 years
Uptown (Hotel in Baltimore,
Maryland) 148 1993 (a)
Allentown Road Motel
(Suitland, Maryland) 1,306 1987 19 years
Egap (Convenience stores in
Florida, Louisiana, and
North Carolina) 1,157 1987 19 years
Nations Bank Building
(Office Building in
Manassas, Virginia) 76 1991 31-1/2years
Paradise/Sudley North (4
office buildings in
Manassas, Virginia) 3,045 1987 31-1/2years
7800 Building (Office
building in Manassas,
Virginia) 383 1990 15-31-1/2 years
-------
$20,654
=======
</TABLE>
(a) Asset acquisition recorded December 31, 1993
-53-
<PAGE>
BRESLER & REINER, INC.
----------------------
NOTES TO SCHEDULE III
(dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
LAND AND BUILDING AND IMPROVEMENTS:
Balance, January 1 $59,676 $61,206
Additions during period-
Improvements 241 605
------- -------
59,917 61,811
Deductions during period-
Write-off of fully - 23
depreciated assets
Other 1,939 2,112
------- -------
Balance, December 31 $57,978 $59,676
======= =======
ACCUMULATED DEPRECIATION:
Balance, January 1 $20,654 $19,014
Additions during period-
Depreciation expense 1,713 1,800
------- -------
22,367 20,814
Deductions during period-
Write-off of fully - 23
depreciated assets
Other 1,071 137
------- -------
Balance, December 31 $21,296 $20,654
======= =======
</TABLE>
-54-
<PAGE>
BRESLER & REINER, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H
- --------------------------- ------------- ------------ ----------------- --------- -------------- ------------- ------------
PRINCIPAL
AMOUNT OF
LOANS
SUBJECT TO
CARRYING DELINQUENT
MATURITY PERIODIC PAYMENT PRIOR FACE AMOUNT AMOUNT OF PRINCIPAL OR
DESCRIPTION INTEREST DATE TERMS LIENS OF MORTGAGES MORTGAGES INTEREST
- --------------------------- ------------- ------------ ----------------- --------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1995:
Related parties-
Second mortgages:
3rd Street Southwest
Investors (S.W.
Washington, D.C.) 9 1/2% 1999 $36,600/mo. (a) None $4,350,000 $1,883,000 None
SEW Investors (S.W.
Washington, D.C.) 10% 2000 95,700/mo. (b) None 9,300,000 2,293,000 None
Town Center East
Investors (S.W.
Washington, D.C.) 8 1/2% 2001 9,670/mo. None 1,200,000 473,000 None
3rd Street Southwest
Investors (S.W.
Washington, D.C.) 9 1/2% 2009 11,200/mo. (c) None 1,333,000 1,322,000 None
----------
$5,971,000
----------
Other-
First mortgages:
Home loans (Montgomery
County, Maryland) Various
($50,000 to $159,000) 9 1/2% to through
(3 units) 13 1/2% 2013 $ 294,000 None
Developed land loans
(St. Mary's County, Various
Maryland) ($20,000 through
to $50,000) (6 units) 14 1/2% 2013 139,000 None
Condominium loans
(Oxon Hill, Maryland)
($10,000 to $20,000)
(38 units) 8% to 13% 2004 189,000 None
----------
622,000
----------
$6,593,000
==========
</TABLE>
-55-
<PAGE>
BRESLER & REINER, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H
- --------------------------- ------------- ------------ ----------------- --------- -------------- ------------- ------------
PRINCIPAL
AMOUNT OF
LOANS
SUBJECT TO
CARRYING DELINQUENT
MATURITY PERIODIC PAYMENT PRIOR FACE AMOUNT AMOUNT OF PRINCIPAL OR
DESCRIPTION INTEREST DATE TERMS LIENS OF MORTGAGES MORTGAGES INTEREST
- -------------------------- ------------- ------------ ----------------- --------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1994:
Related parties-
Second mortgages:
3rd Street Southwest
Investors (S.W.
Washington, D.C.) 9 1/2% 1999 $36,600/mo. (a) None $4,350,000 $1,948,000 None
SEW Investors (S.W.
Washington, D.C.) 12% 1995 95,700/mo. (b) None 9,300,000 2,534,000 None
Town Center East
Investors (S.W.
Washington, D.C.) 8 1/2% 1996 9,670/mo. None 1,200,000 545,000 None
3rd Street Southwest
Investors (S.W.
Washington, D.C.) 9 1/2% 2009 11,200/mo.(c) None $1,333,000 $1,331,000 None
----------
$6,358,000
==========
Other-
First mortgages:
Home loans (Montgomery
County, Maryland)
($50,000 to $159,000)
(5 units) 9 1/2% to 13 1/2% Various through 2013 $ 484.00 None
Developed land loans
(St. Mary's County,
Maryland) ($20,000
to $50,000) (7 units) 141/2% Various through 2013 155,000 None
Condominium loans
(Oxon Hill, Maryland)
($10,000 to $20,000)
(38 units) 8% to 13% 2004 202,000 None
PNHG, Inc.
(Philadelphia, PA) 9% 2012 -- None
----------
841,000
----------
$7,199,000
==========
</TABLE>
-56-
<PAGE>
BRESLER & REINER, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H
- --------------------------- ------------- ------------ ----------------- --------- -------------- ------------- ------------
PRINCIPAL
AMOUNT OF
LOANS
SUBJECT TO
CARRYING DELINQUENT
MATURITY PERIODIC PAYMENT PRIOR FACE AMOUNT AMOUNT OF PRINCIPAL OR
DESCRIPTION INTEREST DATE TERMS LIENS OF MORTGAGES MORTGAGES INTEREST
- --------------------------- ------------- ------------ ----------------- --------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1993:
Related parties-
Second mortgages:
3rd Street Southwest
Investors (S.W.
Washington, D.C.) 9 1/2% 1994 $36,600/mo. (a) None $4,350,000 $2,008,000 None
SEW Investors (S.W.
Washington, D.C.) 12% 1995 95,700/mo. (b) None 9,300,000 2,741,000 None
Town Center East
Investors (S.W.
Washington, D.C.) 8 1/2% 1996 9,670/mo. None 1,200,000 611,000 None
----------
$5,360,000
----------
Other-
First mortgages:
Home loans (Montgomery
County, Maryland)
($50,000 to $159,000)
(8 units) 9 1/2% to 13 1/2 % Various through 2013 $ 729,000 None
Developed land loans
(St. Mary's County,
Maryland) ($20,000
to $50,000) (11 units) 141/2% Various through 2013 273,000 None
Condominium loans
(Oxon Hill, Maryland)
($10,000 to $20,000)
(38 units) 8% to 13% 2004 214,000 None
PNHG, Inc.
(Philadelphia, PA) 9% 2012 2,461,000 None
----------
3,677,000
----------
$9,037,000
==========
</TABLE>
-57-
<PAGE>
Bresler & Reiner, Inc.
Notes to Schedule IV
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
Carrying value at January 1 $7,199,000 $ 9,038,000 $9,585,000
Additions during period-
New mortgage loans 80,000 1,333,000 139,000
----------- ------------ -----------
7,279,000 10,371,000 9,724,000
Deductions during period-
Collections of pricipal 686,000 3,172,000 687,000
----------- ------------ -----------
Carrying value at December 31 $6,593,000 $ 7,199,000 $9,037,000
=========== ============ ===========
</TABLE>
(a) The terms of this agreement call for a final payment of $2,838,000 due in
1999.
(b) The terms of this agreement call for a final payment of $1,031,000 due in
2000.
(c) The terms of this agreement call for a final payment of $1,082,000 due in
2009.
-58-
<PAGE>
S I G N A T U R E S
-------------------
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BRESLER & REINER, INC.
----------------------
(Registrant)
Date: March 27, 1996 /s/ Charles S. Bresler
------------------------------
Charles S. Bresler, Chairman
of the Board
(Chief Executive Officer)
Date: March 27, 1996 /s/ William L. Oshinsky
------------------------------
William L. Oshinsky, Treasurer
(Chief Financial and Chief
Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
The following persons constitute a majority of the Board of
Directors of Registrant.
Date: March 27, 1996 /s/ Charles S. Bresler
------------------------------
Charles S. Bresler, Director
Date: March 27, 1996 /s/ William L. Oshinsky
------------------------------
William L. Oshinsky, Director
Date: March 27, 1996 /s/ Edwin Horowitz
------------------------------
Edwin Horowitz, Director
Date: March 27, 1996 /s/ Burton J. Reiner
------------------------------
Burton J. Reiner, Director
Date: March 27, 1996 /s/ Stanley S. DeRisio
------------------------------
Stanley S. DeRisio, Director
-59-
<PAGE>
(c) Exhibits.
Index to Exhibits
-----------------
Exhibit 3
(i) Articles of Incorporation
A. Restated Certificate of Incorporation of Registrant filed
February 23, 1971, Amendment filed August 12, 1987, and Amendment filed May 31,
1991.
(Incorporated by reference to Exhibit 3A of Registrant's Quarterly
Report on Form 10Q for the second quarter of 1991, dated August 14, 1991, filed
with the Securities and Exchange Commission.)
(ii) By-Laws
B. Revised By-laws of Registrant.
(Incorporated by reference to Exhibit 3B of Registrant's Report on
Form 10-K for 1994, dated March 31, 1995, filed with the Securities and Exchange
Commission.)
Exhibit 10 - Material Contracts.
C. (i) Amendment No. 1 to Agreement of December 2, 1974 among Trilon
Plaza Company, Town Center East Investors and Registrant, dated April 14, 1982.
(ii) Amendment dated March 10, 1983 to Agreement of December 2,
1974, among Trilon Plaza Company, Town Center East Investors and Registrant.
(Exhibits C(i) and C(ii) are incorporated by reference to Exhibits 19A and B to
Registrant's Report on Form 10-K for 1982, dated March 23, 1983, filed with the
Securities and Exchange Commission).
D. Partnership Agreement of Builders Leasing Company dated December
14, 1983 among the Registrant and Robert J. Schattner, Charles Bresler, Philip
Friedman, Edwin Horowitz, Lloyd Needle and Burton J. Reiner.
(Incorporated by reference to Exhibit 10D to Registrant's Report on
Form 10-K for 1983, dated March 21, 1984, filed with the Securities and Exchange
Commission).
E. (i) Deed of Trust Note dated September 3, 1986 from Paradise
Developers to Paradise Associates, Inc. (Manassas property)
-60-
<PAGE>
(Incorporated by reference to Exhibit 10E(i) to Registrant's Report
on Form 10-K for 1986, dated March 24, 1987, filed with the Securities and
Exchange Commission.)
(ii) Deferred Purchase Money Deed of Trust dated September 3,
1986 from Paradise Developers to Paradise Associates, Inc.
(Incorporated by reference to Exhibit 10E(ii) to Registrant's Report
on Form 10-K for 1986 dated March 24, 1987, filed with the Securities and
Exchange Commission.)
Exhibit 21 Subsidiaries of Registrant. 62
Exhibit 27 Financial Data Schedule. 63
-61-
<PAGE>
EXHIBIT 21. Subsidiaries of Registrant
--------------------------
Percentage of Voting
Securities of Sub-
sidiaries Owned by
Place of Registrant as of
Name Incorporation December 31, 1995 (1)(2)
- ---- ------------- ------------------------
Charles Burton
Builder, Inc. Maryland 100%
Town Center District of
Management Corp. Columbia 100%
Bresler & Reiner
Investment Co., Inc. Delaware 100%
Maplewood Manor
Convalescent Center,
Inc. Pennsylvania 100%
Allentown Road
Motel Corporation Maryland 100%
Uptown Hotel Corp. Maryland 100%
WMC Management Co., Inc. District of
Columbia 100%
Sudley Corporation Virginia 100%
(1) The names of certain subsidiaries have been omitted because, considered
in the aggregate as a single subsidiary, they do not constitute a
significant subsidiary.
(2) Included in the consolidated financial statements as significant
subsidiaries.
-62-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 22,316,000
<SECURITIES> 0
<RECEIVABLES> 10,059,000
<ALLOWANCES> 0
<INVENTORY> 14,279,000
<CURRENT-ASSETS> 0
<PP&E> 61,196,000
<DEPRECIATION> 23,178,000
<TOTAL-ASSETS> 101,395,000
<CURRENT-LIABILITIES> 0
<BONDS> 34,229,000
0
0
<COMMON> 28,000
<OTHER-SE> 57,941,000
<TOTAL-LIABILITY-AND-EQUITY> 101,395,000
<SALES> 9,457,000
<TOTAL-REVENUES> 33,824,000
<CGS> 7,927,000
<TOTAL-COSTS> 7,927,000
<OTHER-EXPENSES> 15,108,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,267,000
<INCOME-PRETAX> 7,522,000
<INCOME-TAX> 3,087,000
<INCOME-CONTINUING> 4,404,000
<DISCONTINUED> 0
<EXTRAORDINARY> 1,736,000
<CHANGES> 0
<NET-INCOME> 6,140,000
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.18
</TABLE>
