<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 1-7172
BRT REALTY TRUST
(Exact name of registrant as specified in its charter)
Massachusetts 13-2755856
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Cutter Mill Road, Great Neck, NY 11021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(516) 466-3100
Indicate the number of shares outstanding of each of the issuer's
classes of stock, as of the latest practicable date.
8,755,424 Shares of Beneficial Interest,
$3 par value, outstanding on August 5, 1996
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports),and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X___ No______
<PAGE>
<TABLE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
June 30, September 30,
1996 1995
--------- ---------
(Unaudited) (Audited)
<S> <C> <C>
Assets:
Real estate loans - Note 3:
Earning interest,
less unearned income $ 36,589 $ 44,136
Not earning interest 5,905 7,154
-------- --------
42,494 51,290
Less allowance for possible losses 7,798 9,084
-------- --------
34,696 42,206
-------- --------
Real estate owned:
Foreclosed properties held for sale 49,761 52,029
Less valuation allowance 2,128 2,460
-------- --------
47,633 49,569
-------- --------
Cash and cash equivalents 6,568 7,385
Restricted cash 139 558
Interest receivable 391 594
Other assets 4,071 4,203
-------- --------
Total assets $ 93,498 $104,515
======== ========
Liabilities and Shareholders' Equity
Liabilities:
Notes payable $ 6,000 $ 22,900
Loans and mortgages payable,
nonrecourse 24,957 20,756
Accounts payable and accrued
liabilities, including deposits
of $1,494 and $1,967 2,327 3,131
------- -------
Total liabilities 33,284 46,787
------- -------
Shareholders' Equity - Note 2:
Preferred shares - $1 par value:
Authorized 10,000 shares,
Issued - 1,030 shares 1,030 1,030
Shares of beneficial interest,
$3 par value:
Authorized number of shares -
unlimited
Issued - 7,939 shares 23,817 22,614
Additional paid-in capital net of
distributions of $5,171 and $4,968 83,917 83,914
Accumulated deficit (46,215) (47,495)
------- -------
62,549 60,063
Cost of 192 treasury shares of
beneficial interest (2,335) (2,335)
------- -------
Total shareholders' equity 60,214 57,728
Total liabilities and ------- -------
shareholders' equity $ 93,498 $104,515
======= =======
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands except for Per Share Data)
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
----------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Interest and fees
on real estate loans $ 1,022 $ 2,106 $ 3,511 $ 6,282
Operating income on real
estate owned 2,248 1,965 6,475 6,151
Other, primarily
investment income 77 166 233 420
------ ------ ------ ------
Total revenues 3,347 4,237 10,219 12,853
------ ------ ------ ------
Expenses:
Interest-notes payable
and loans payable 240 1,287 1,080 4,269
Provision for possible
loan losses - - - 1,021
Provision for valuation
adjustment - - - 178
Advisor's fee 148 182 477 608
General and administrative 646 783 2,098 2,381
Operating expenses relating
to real estate owned
including interest
on mortgages of $503 and
$69 for the three month
and $1,459 and $253 for
the nine month periods,
respectively 1,643 1,636 5,241 4,868
Depreciation and
amortization 70 156 270 465
------ ------ ------ ------
Total expenses 2,747 4,044 9,166 13,790
------ ------ ------ ------
Income (loss) before gain
on sale of foreclosed
properties held for sale 600 193 1,053 ( 937)
Gain on sale of foreclosed
properties held for sale - - 227 2,868
------ ------ ------ ------
Net income $ 600 $ 193 $1,280 $1,931
====== ====== ====== ======
Calculation of net income
applicable to common
shareholders:
Net income $ 600 $ 193 $1,280 $1,931
Less: distribution on
preferred stock 68 68 203 203
------ ------ ------ ------
Net income applicable
to common shareholders $ 532 $ 125 $1,077 $1,728
====== ====== ====== ======
Earnings per share of Beneficial
Interest - Note 2:
Primary
Income (loss) before gain on
sale of foreclosed properties
held for sale applicable to
common shareholders $0.07 $0.02 $0.11 $( .15)
Gain on sale of foreclosed
properties held for sale - - 0.03 0.39
------ ------ ------ ------
Net income applicable to
common shareholders $0.07 $0.02 $0.14 $0.24
====== ====== ====== ======
Fully Diluted $0.07 $0.02 $0.14 $0.24
====== ====== ====== ======
Weighted average number
of common shares
outstanding - Note 2:
Primary 7,734,577 7,346,624 7,512,329 7,346,624
========= ========= ========= =========
Fully Diluted 8,773,432 7,346,624 7,512,329 7,346,624
========= ========= ========= =========
STATEMENT OF ACCUMULATED DEFICIT
Accumulated deficit,
beginning of period $(46,815) $(48,731) $(47,495)$(50,469)
Net income 600 193 1,280 1,931
Accumulated deficit, ------ ------ ------ ------
end of period $(46,215) $(48,538) $(46,215)$(48,538)
====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<CAPTION>
Nine Months Ended
June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net income $1,280 $1,931
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for possible loan losses - 1,021
Provision for valuation adjustment - 178
Amortization and depreciation 270 465
Gain on sale of foreclosed properties (227) (2,868)
Decrease in interest receivable 203 672
Decrease (increase) in prepaid expenses 229 (470)
(Decrease)increase in accounts payable
and accrued liabilities (312) 37
Decrease (increase) in rent and other
receivables (46) 32
Decrease in escrow deposits 74 823
Increase in deferred costs (417) (75)
Other 125 (117)
------ ------
Net cash provided by operating activities 1,179 1,629
------ ------
Cash flows from investing activities:
Collections from real estate loans 8,084 21,860
Proceeds from participating lenders 125 25
Additions to real estate loans (405) (214)
Repayments to participating lenders - (5,213)
Net costs capitalized to real estate owned (1,259) (7,381)
Proceeds from real estate owned 2,953 10,930
Decrease in deposits payable (473) (684)
Decrease in investment in U.S.
Government obligations - 1,979
Other 72 (140)
------ ------
Net cash provided by investing activities 9,097 21,162
------ ------
Cash flow from financing activities:
Bank repayments (16,900) (21,892)
Payoff/paydown of loan and mortgages
payable (599) (756)
Proceeds from mortgages payables 4,800 -
Exercise of stock options 1,408 -
Decrease in restricted cash 419 5,205
Other (221) (205)
------ ------
Net cash used in financing activities (11,093) (17,648)
------ ------
Net increase (decrease) in cash
and cash equivalents (817) 5,143
Cash and cash equivalents at
beginning of period 7,385 1,174
Cash and cash equivalents at ------ ------
end of period $6,568 $6,317
====== ======
<PAGE>
</TABLE>
<TABLE>
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(In Thousands)
<CAPTION>
Nine Months Ended
June 30,
---------------
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest expense $ 2,789 $ 4,811
======= =======
Supplemental schedule of noncash
investing and financing activities:
Transfer of nonearning real estate
loans to foreclosed properties at
fair market value $ 34 $ 2,310
Recognition of allowance for previously
provided loan losses 1,286 866
Recognition of valuation allowance
upon sale of real estate owned 332 -
Purchase money mortgages from sale of
real estate owned (net of a $850 wrap
mortgage in the prior period) 327 3,994
Write-off of nonrecourse mortgage payable
upon relinquishment of real estate owned - 1,005
Recognition of valuation allowance upon
relinquishment of real estate owned - 436
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial
statements as of June 30, 1996 and for the three and nine months
ended June 30, 1996 and 1995 reflect all normal recurring
adjustments which are, in the opinion of management, necessary
for a fair statement of the results for such interim periods. The
results of operations for the three and nine months ended June
30, 1996 are not necessarily indicative of the results for the
full year.
Certain items on the consolidated financial statements for
the preceding periods have been reclassified to conform with the
current consolidated financial statements.
The consolidated financial statements include the accounts
of BRT Realty Trust, its wholly-owned subsidiaries, and its
majority-owned or controlled real estate entities. For financial
statement and economic purposes, the majority-owned real estate
entity is wholly-owned and presented accordingly. Material
intercompany items and transactions have been eliminated. Many
of the wholly-owned subsidiaries were organized to take title to
various properties acquired by BRT Realty Trust. BRT Realty
Trust and its subsidiaries are hereinafter referred to as the
"Trust".
These statements should be read in conjunction with the
consolidated financial statements and related notes which are
included in the Trust's Annual Report on Form 10-K for the year
ended September 30, 1995.
Note 2 - Shareholders' Equity
Per Share Data
Primary earnings per share of beneficial interest is based
upon the weighted average number of common shares and the assumed
equivalent shares outstanding during each period, after giving
effect to dividends relating to the Trust's preferred stock. The
preferred stock issued on September 14, 1993, is not considered a
common stock equivalent for the purpose of computing primary
earnings per share. The assumed exercise of outstanding share
options, using the treasury stock method, is not materially
dilutive for the primary earnings per share computation for the
three and nine months ended June 30, 1996 and 1995, respectively.
The preferred stock was converted to shares of beneficial
interest subsequent to June 30, 1996.
<PAGE>
Fully diluted earnings per share of beneficial interest
amounts are based on an increased number of common shares that
would be outstanding assuming the exercise of common share
options and the conversion of preferred stock to shares of
beneficial interest at the period end market price. The fully
diluted per share computation for the three months ended
June 30, 1996 is dilutive with the addition of 1,030,000 shares
upon conversion of the preferred stock and 8,855 shares, upon
exercise of the common share options. The fully diluted
computation is not materially dilutive or anti-dilutive for the
nine months ended June 30, 1996 as well as three and nine months
ended June 30, 1995.
Stock Options
On May 20, 1991 40,000 options to purchase shares of
beneficial interest were granted to the independent Trustees of
the Trust, under the 1988 Stock Option Plan. In April and May
1996, said options were exercised at $3.629 per share, increasing
shareholders equity by $145,150.
Note 3 - Real Estate Loans
If all loans classified as non-earning were earning interest
at their contractual rates for the three and nine month periods
ended June 30, 1996 and 1995, interest income would have
increased by approximately $190,000 and $564,000 in the
respective periods in 1996, and $338,000 and $1,009,000 in the
respective periods in 1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Trust was engaged in the business of making and
participating in short term senior and junior real estate
mortgages, secured by income producing property and to a lesser
extent by unimproved real property. Repayments of real estate
loans in the amount of $24,797,000 are due during the twelve
months ending June 30, 1997, including $12,448,000 which is
due on demand. There is presently an environment that is somewhat
favorable for obtaining mortgage financing secured by real estate
and for selling real estate, but the Trust cannot project the
portion of loans maturing during the twelve months ending June
30, 1997 which will be paid or the portion which will be extended
for a fixed term or on a month to month basis.
In September, 1992, the Trust entered into an Amended and
Restated Credit Agreement ("Restated Credit Agreement") with five
banks and extended the maturity date to June 30, 1997. The
Restated Credit Agreement precluded the Trust from engaging in
any lending activities except for purchase money mortgages in
connection with the sale of real estate. At June 30, 1996 the
Trust was in compliance with its covenants under the Restated
Credit Agreement. On August 2, 1996, the Trust paid off in full
its remaining debt obligation due under the Restated Credit
Agreement.
The Trust at the present time is negotiating a credit
facility in order to become active in mortgage lending
activities. The Trust will continue to manage its existing loan
portfolio, supervise, refurbish and maintain real estate owned,
arrange and negotiate first mortgage loans secured by such real
estate owned and where appropriate negotiate the sale of real
estate owned. The short term liquidity needs of the Trust will
be satisfied from interest received on outstanding real estate
loans, net cash flow generated from the operation of properties
and cash and cash equivalents available.
The Trust's Board of Trustees has authorized the purchase
from time to time of up to 250,000 shares of Beneficial Interest
of the Trust. The Trust will obtain funds for purchases of its
shares from its accumulated funds formerly held in the Cash
Collateral Account. From July 8, 1996 to date 21,700 shares have
been purchased at an aggregate cost of $117,600.
During the nine months ended June 30, 1996, the Trust
had an increase in cash provided by investing activities, as a
result of collections from real estate loans of $8,084,000 and
proceeds from the sale of real estate owned of $2,953,000, not
including purchase money mortgages of $327,000. The $9,097,000
provided by investing activities, the $4,800,000 from the
financing of real estate owned and the receipt of approximately
$1,408,000 from the exercise of employee stock options was used
to reduce bank debt by $16,900,000 to $6,000,000 at June 30,
1996. As of August 2, 1996 the full $6,000,000 was repaid to the
banks primarily from funds received from the payoff of real
estate loans, and the sale of and the refinance of real estate
owned.
Results of Operations
The Trust's loan portfolio at June 30, 1996, before
giving effect to the allowance for possible losses, was
$42,494,000, of which $5,905,000 (14% of total real estate loans)
was categorized as non-earning, as compared to $51,290,000 at
September 30, 1995, of which $7,154,000 (14% of total real
estate loans) was categorized as non-earning. The $8,796,000
decrease in the loan portfolio since September 30, 1995 is
due to receipt of $5,400,000 from the refinancing of a portion
of a first mortgage held by the Trust on a cooperative apartment
complex in Queens, New York, payoff of real estate loans
aggregating approximately $2,090,000 and partial recovery on a
fully reserved mortgage receivable having a book balance of
approximately $1,286,000 prior to allowance for possible losses.
Interest and fees on real estate loans decreased to
$3,511,000 and $1,022,000 for the nine and three months ended
June 30,1996 as compared to $6,282,000 and $2,106,000 for the
nine and three months ended June 30, 1995. These decreases of
$2,771,000 and $1,084,000, respectively, were primarily due to a
decrease in earning real estate loans as a result of payoffs,
including the payoff of two loans secured by property located in
the Texas marketplace which produced additional interest of
approximately $1,000,000 based upon the Trust's profit
participation in the quarter ended March 31, 1995,and a property
securing a real estate loan becoming real estate owned.
Operating income on real estate owned increased by $324,000
and $283,000 to $6,475,000 and $2,248,000 for the nine and
three months ended June 30, 1996 as compared to $6,151,000 and
$1,965,000 for the comparable nine and three month periods in the
prior fiscal year. These increases were principally the result
of income generated from an office building in Fairway, Kansas,
acquired in October 1995 and an increase in rental income at the
Dover, Delaware property, as a result of improved occupancy
directly attributable to the conversion of this property from a
regional mall to an office park, offset in part by the sale of a
number of properties.
Other income, primarily investment income, decreased to
$233,000 and $77,000 for the nine and three months ended June
30, 1996 from $420,000 and $166,000 for the nine and three months
ended June 30, 1995. These decreases of $187,000 and $89,000 are
primarily due to a decrease in cash available to invest in
addition to miscellaneous income of approximately $44,000
received during the quarter ended June 30, 1995.
Interest expense decreased by $3,189,000 and $1,047,000 to
$1,080,000 and $240,000 for the nine and three months ended June
30, 1996 from $4,269,000 and $1,287,000 for the nine and three
months ended June 30, 1995 due to the continuing decrease in the
outstanding bank debt and the average prime interest rate.
The expenses for the nine months ended June 30, 1995 include
provisions for possible loan losses of $1,021,000 and provisions
for valuation adjustments of $178,000 with no comparable
provisions during the nine and three months ended June 30, 1996.
Management determined that no additional provisions for possible
loan losses or valuation adjustments were required for the three
and nine month periods ended June 30, 1996.
The Advisor's fee decreased by $131,000 from $608,000 for
the nine months ended June 30, 1995 to $477,000 for the nine
months ended June 30, 1996 and by $34,000 from $182,000 for the
three months ended June 30, 1995 to $148,000 for the comparable
period in Fiscal 1996. These decreases were a result of a
decrease in total invested assets, the basis on which the
advisory fee is calculated.
General and administrative expenses decreased to $2,098,000
and $646,000 for the nine and three months ended June 30, 1996
from $2,381,000 and $783,000 for the prior year comparable
periods, a decrease of $283,000 and $137,000, respectively.
These decreases are primarily the result of a decrease in the
Trust's executive compensation and related expenses due to a
reduction of staff. These decreases were offset in part by the
recognition during the quarter ended March 31, 1996 of
approximately $187,000 of additional legal, accounting and
investment banking expenses incurred in connection with a
potential transaction which did not proceed beyond the
negotiation stage and which has been terminated.
Operating expenses relating to real estate owned increased
by $373,000 and $7,000 from $4,868,000 and $1,636,000 for the
nine and three months ended June 30, 1995 to $5,241,000 and
$1,643,000 for the nine and three months ended June 30, 1996.
These increases were primarily due to an increase in interest on
mortgages secured by real estate owned to $1,459,000 and $503,000
for the nine and three months ended June 30, 1996 from $253,000
and $69,000 for the comparable periods in 1995, and the Trust
taking title to an office building in October 1995, by
deed-in-lieu of foreclosure. These increases were offset in part
by a combination of the sale of real estate owned and the
completion of extensive repairs at a mixed use property during
the fiscal year ended September 30, 1995.
<PAGE>
Depreciation and amortization decreased by $195,000 and
$86,000 for the nine and three month periods ended June 30, 1996
from the comparable periods ended June 30, 1995. This a result
of the classification of a mixed use property located in
Philadelphia, Pennsylvania from an asset held for the production
of income to an asset held for sale, thereby no longer being
depreciated.
Gain on sale of foreclosed properties for the nine months
ended June 30, 1996 was $227,000 as compared to $2,868,000 for
the nine months ended June 30, 1995. It is the policy of the
Trust to offer for sale all real estate owned at prices which
management believes represents fair value in the geographic area
in which the property is located. <PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
On July 2, 1996, the Trust filed a current report on Form 8-K
with the Securities and Exchange Commission to report that its
Board of Trustees had authorized the purchase from time to time
over the facilities of the New York Stock Exchange, or in private
transactions up to 250,000 shares of Beneficial Interest of the
Trust.
The Trust also reported that on July 1, 1996, the Trust received
notice from Gould Investors L.P. ("Gould"), the sole shareholder
of its outstanding preferred stock, that Gould had elected to
convert the 1,030,000 shares of preferred stock held by it, in
accordance with the Trust's governing instruments, into 1,030,000
shares of Beneficial Interest.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BRT REALTY TRUST
Registrant
8/12/96 /s/ Jeffrey Gould
- ------- ------------------------------
Date Jeffrey Gould, President and
Chief Operating Officer
8/12/96 /s/ David W. Kalish
- ------- -------------------------------
Date David W. Kalish, Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,568
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,498
<CURRENT-LIABILITIES> 0
<BONDS> 24,957
<COMMON> 23,817
0
1,030
<OTHER-SE> 35,367
<TOTAL-LIABILITY-AND-EQUITY> 93,498
<SALES> 0
<TOTAL-REVENUES> 3,347
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 600
<INCOME-TAX> 0
<INCOME-CONTINUING> 600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 600
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
