SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended September 30, 1997
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
Commission file number 1-7172
BRT REALTY TRUST
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(Exact name of registrant as specified in its charter)
Massachusetts 13-2755856
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
60 Cutter Mill Road, Great Neck, New York 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 516-466-3100
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Shares of Beneficial New York Stock Exchange
Interest, $3.00 Par Value
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate 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 III of this Form 10-K or any
amendment to this Form 10-K [ ]
The aggregate market value of voting stock of the registrant held by
non-affiliates was approximately $40,651,000 as of December 5, 1997.
As of December 5, 1997 the registrant had 8,159,350 Shares of Beneficial
Interest outstanding (excluding treasury shares).
<PAGE>
Documents Incorporated By Reference
PART III
Item 10 - Directors and Executive Officers To be included in
of the Registrant the Proxy Statement
to be filed pursuant
Item 11 - Executive Compensation to Regulation 14A
not later than
Item 12 - Security Ownership of Certain January 28, 1998,
Beneficial Owners and Management except for information
concerning executive
Item 13 - Certain Relationships and Related officers, which is
Transactions included in Part I.
PART IV - See Item 14.
<PAGE>
PART I
Item l. Business.
General
BRT Realty Trust ("BRT" or the "Trust") is a real estate investment
trust organized in 1972 under the laws of the Commonwealth of Massachusetts. Its
primary business activity is to originate and hold for investment for its own
account senior real estate mortgage loans secured by income producing real
property or interests therein, and, to a lesser extent, junior real estate
mortgage loans secured by income producing real property and senior mortgage
loans secured by undeveloped real property. The Trust emphasizes loans with
terms ranging from six months to three years to persons requiring short term
funds for the acquisition of a property, for the purchase (normally at a
discount) of a mortgage applicable to a property owned by the borrower, for
rehabilitating a property or for converting an apartment house or commercial
property to condominium or cooperative ownership. The Trust does not finance new
construction.
At September 30, 1997 ("Fiscal Year End") the Trust had $43,865,000
principal amount of loans outstanding, 89% of which were secured by properties
located in New York City, Nassau and Suffolk counties in New York, New Jersey
and Connecticut.
The major portion of the mortgage loans originated and held by the
Trust bear interest at a floating rate related to the prime rate and the
interest rate adjusts when the prime rate changes. Since borrowings the Trust
makes under its outstanding Credit Agreement (discussed below under the caption
"Investment Policy") is related to prime or Libor, the Trust minimizes interest
rate fluctuation risks. Interest on mortgage loans held by the Trust is payable
monthly. The Trust receives an origination fee on all mortgage loans made by it
and an extension fee in connection with the extension of most loans. These fees
are paid at the time a loan is funded or extended. Origination and extension
fees are taken into income on an accrual basis over the life of the commitment
and/or the loan. If a loan is not taken by the borrower, the fee is recognized
at the expiration of the commitment. A non-refundable processing fee is received
on substantially all commitments.
On occasion, the Trust will originate a participating mortgage loan. A
participating mortgage loan provides for a floating interest rate which is
somewhat less than the rate charged for short term mortgages, will be for a
longer term (normally five years), and will provide for the Trust to participate
in the incremental value of the property securing the loan either at the time of
sale, refinancing or at maturity. A participating loan will usually be a first
mortgage loan. The Trust also, on ocassion, may seek to enhance the yield on its
mortgage investments by selling a senior participation in a mortgage loan in its
portfolio at a positive spread. In the current fiscal year, the Trust intends to
become more active in the origination of conventional first mortgage loans
secured by income producing multi-family properties, and further intends to seek
to enhance its yield on such mortgages by selling a senior participation in the
mortgage loan to institutions, at a positive spread retaining the origination
and processing fees and the servicing the mortgages.
<PAGE>
At Fiscal Year End the Trust's portfolio consisted of 56 mortgage loans
totaling $37,909,000 in aggregate principal amount (net of allowances),
representing 47% of the Trust's total assets. Non-earning loans, which total
$3,835,000 at Fiscal Year End, are fully reserved. Of the principal amount of
loans outstanding at Fiscal Year End, 85% represented first mortgage loans and
15% represented second mortgage and wrap-around loans. Substantially all of the
mortgage loans originated by the Trust in the year ended September 30, 1997
("Fiscal 1997") were first mortgage loans.
Except for purchase money financing taken back in connection with the
sale of real estate owned, including the sale of cooperative residential units,
the Trust did not engage in any lending activities in Fiscal 1996 and Fiscal
1995 due to restrictions contained in a Restated Credit Agreement. The balance
due under the Restated Credit Agreement was repaid in full in August 1996
affording the Trust the opportunity to become active once again in real estate
lending activities.
In Fiscal 1997 the Trust, in addition to originating mortgage loans,
was engaged in managing its loan portfolio, supervising and maintaining real
estate owned by the Trust (real estate acquired by the Trust in foreclosure
actions or by deed in lieu of foreclosure) and leasing and selling real estate
owned. Approximately, 30% of the Trust's total assets at Fiscal Year End or an
aggregate of $24,357,000 (after valuation allowances) was represented by real
estate assets. Approximately 25% of the Trust's net investment assets (either
mortgages or real estate assets) related to cooperative apartments at Fiscal
Year End.
With respect to real estate which the Trust has taken back in
foreclosure or deed in lieu thereof, it is the policy of the Trust to offer for
sale all such real estate at prices which management believes represents fair
value in the geographical area in which the property is located. If the Trust's
management determines that it will not, in the near term, be able to sell a
specific parcel of real estate at an acceptable price management may seek first
mortgage financing secured by the specific parcel of real estate. In many
instances, the Trust, through an independent contractor, has caused the property
to be renovated, engaged in leasing activities, negotiated and completed the
sale of real estate owned, (if the selling price is deemed acceptable by
management) and provided purchase money financing in connection with the sale of
real estate owned. It has been the experience of the Trust that in connection
with the sale of cooperative apartments it is necessary in many instances for
the Trust to provide purchase money financing on a competitive basis. In Fiscal
1997 the Trust disposed of real estate, other than cooperative apartments,
having an aggregate net book value of $22,027,000, for an aggregate
consideration of $22,714,000 resulting in a gain on sale of real estate of
$687,000. During Fiscal 1997 the Trust sold shares (and related proprietary
leases) in cooperative apartments resulting in net proceeds of approximately
$672,000.
<PAGE>
Investment Policy
The Trust's current investment policy emphasizes short-term senior real
estate mortgage loans secured by income producing real property and to a lesser
extent junior real estate mortgage loans secured by income producing real
property and senior real estate mortgage loans secured by undeveloped real
property. Junior mortgage loans are subordinate to one or more prior liens.
Junior mortgage loans placed by the Trust may be wrap-around loans which are
subject to prior underlying mortgage indebtedness. In the case of a wrap-around
mortgage loan, the principal amount on which interest payable to the Trust is
calculated is the outstanding balance under the prior existing mortgage loan
plus the amount actually advanced by the Trust under the wrap-around loan. The
terms of a wrap-around loan normally requires that a borrower make principal and
interest payments directly to the Trust and the Trust in turn pays the holder of
the prior mortgage loan. It is not the present intent of the Trust management to
cause the Trust to invest in any mortgages secured by property located outside
the United States and Puerto Rico.
The Trust has no fixed policy or limitation upon the amount or
percentage of its assets which it may invest in a single mortgage loan. However,
as a general business practice, the Trust does not make loans to one borrower
where the amount involved exceeds 10% of the Trust's total assets. At Fiscal
Year End the average loan originated in Fiscal 1997 was approximately
$1,700,000.
Loan approvals are based on site visits to the property by at least one of
the Trust's officers, a title review of the underlying property, in-house
property appraisals, a review of the financial statements of a prospective
borrower, and final approval by a loan committee made up of the Trust's senior
executive officers. The Trust does not require a property appraisal by an
independent appraiser.
The Trust uses its own capital for investing in mortgage loans. In
addition it has arranged a credit facility to make funds available for real
estate mortgage lending. In October 1996 the Trust entered into a revolving
credit facility ("Credit Agreement") with CS First Boston Mortgage Capital Corp.
("First Boston"), which provides that the Trust may borrow a maximum of
$25,000,000 on a revolving basis, i.e., funds can be borrowed, repaid and
borrowed again. The credit facility matures October 17, 1998 and the Trust has
the right to extend the loan for two additional six month periods upon 30-days
prior notice and the payment of a 1/4 of 1% commitment fee. No new borrowings
may be made during the second extension period. The Trust has the right to
reduce the availability under the Credit Agreement to $15,000,000 and First
Boston has the right to lower the commitment to $20,000,000 under limited
circumstances.
The Trust pays a commitment fee to First Boston of 1/2 of 1% of the
difference between the daily average outstanding loan balance and the commitment
amount. If the loan balance is less than $14,000,000, $2,084 per month is added
to the commitment fee. Borrowings under the Credit Agreement bear interest at
the lower of Libor plus 3% or prime plus 1%, adjusted monthly. The loan is
collateralized by specific receivables and the Trust's equity in specific real
property and the loan amount can never exceed 75% of the agreed upon collateral
amount. The Trust, at any time, can substitute collateral for pledged
collateral. Most of the subsidiaries of the Trust have guaranteed the loan. The
Trust is required to maintain a $50,000,000 tangible net worth and the Credit
Agreement also provides that the net worth of the Trust minus the net worth of
any non-guaranteeing subsidiary must exceed $40,000,000. The Credit Agreement
prohibits the Trust from obtaining recourse financing but it is permitted to
obtain non-recourse mortgage financing.
As of September 30, 1997 there were no amounts outstanding under the
Credit Agreement.
The mortgage loans in which the Trust invests are not ordinarily
insured or guaranteed. In the event of a default by the Borrower on a mortgage
loan, the Trust will have to foreclose the mortgage or protect its investment
through negotiations with the borrower and or other interested parties which may
involve further cash outlays. Further, during a mortgage foreclosure proceeding
the Trust will usually not receive interest payments under its mortgage.
Foreclosure proceedings in certain jurisdictions, including New York State, can
take a considerable period of time (up to two years in many instances). In
addition, if the Trust's borrower files for protection under the federal
bankruptcy laws during the foreclosure process delays may be greater than two
years. In the usual foreclosure proceeding, the Trust will seek to have a
receiver appointed by the Court to preserve the rental income stream and the
maintenance of the property. At the conclusion of the foreclosure process (after
the property is sold at auction to a third party purchaser or bought in by the
Trust) the amounts collected by the receiver, less costs and expenses of
operating the property and the receiver's fees, are paid over to the Trust.
The mortgages securing the Trust's mortgage loans may in certain
circumstances be subordinate to mechanics liens or governmental liens and in
instances in which the Trust invests in junior mortgage loans or wrap-around
loans to liens of senior mortgages. At Fiscal Year End approximately 15% of the
Trust's real estate mortgages were represented by junior or wrap-around mortgage
loans. In the event the underlying asset value is not sufficient to satisfy both
the senior and junior lienholder, the junior lienholder could lose all or a
portion of its investment. In certain cases, the Trust may find it advisable to
make additional payments in order to maintain the current status of prior liens
or to discharge them entirely or to make working capital advances to support
current operations. It is possible that the total amount which may be recovered
by the Trust in cases in which it holds a junior lien may be less than its total
investment less allowances for possible losses.
Current Loan Status
As of September 30, 1997 the Trust had 56 mortgage loans in its
mortgage portfolio, totaling $43,865,000 in aggregate principal amount
(including $3,835,000 of non-earning loans, all of which are fully reserved) and
$37,909,000 after allowances for possible losses. In Fiscal 1997 $11,278,000 of
outstanding loans were repaid. The three largest mortgage loans outstanding,
after allowances for possible losses, represent 10.47%, 8.4%, and 8.27%,
respectively of the Trust's total assets. No other mortgage loan accounted for
more than 6.79% of the Trust's total assets at Fiscal Year End. The mortgage
loan which accounted for 10.47% of mortgage loans outstanding as of September
30, 1997 was repaid in full subsequent to year end.
Information regarding the Trust's mortgage loans outstanding at
September 30, 1997:
Not No.
Earning Earning Prior of
Total Interest Interest Liens Loans
(Amounts in thousands)
First Mortgage Loans:
Long-term:
Residential $ 756 $ 756 $ - $ - 22
Short-term (five years
or less):
Shopping centers/retail 13,035 11,574 1,461 - 12
Industrial buildings 3,568 3,568 - - 2
Office buildings 6,998 6,998 - - 3
Residential
(multiple family units) 9,623 9,623 - - 9
Hotel 1,105 1,105 - - 1
Unimproved Land 1,918 - 1,918 - 1
Miscellaneous 487 487 - - 2
Second Mortgage Loans:
Residential
(multiple family units) 3,969 3,968 1 14,349 2
Wraparound mortgages 2,406 1,951 455 3,285 2
----- ----- ----- ------ --
$43,865 $40,030 $3,835 $17,634 56
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At Fiscal Year End the Trust had an allowance for possible losses on
its real estate mortgage loans of $5,956,000 compared to an allowance of
$7,773,000 at September 30, 1996. In determining the allowance for possible loan
losses, the Trust takes into account numerous factors including a market
evaluation of the underlying collateral, the underlying property's estimated
cash flow during the projected holding period and estimated sales value computed
by applying an expected capitalization rate to the stabilized net operating
income of the specific property, less estimated selling costs. The Trust also
takes into account the extent of liquidity in the real estate industry,
particularly in the New York metropolitan area, where approximately 89% of the
portfolio is located. Management reviews the loan portfolio on a quarterly basis
to determine if allowances are needed.
When a mortgage loan is in default, the Trust may acquire the
underlying property through foreclosure or may take other legal action as is
necessary to protect its investment. In negotiated workouts the Trust seeks to
acquire title to a property and in certain cases affords the borrower the
opportunity to reacquire the property at a fixed price over a specified period
of time.
Real Estate Assets
The materially important real property owned by the Trust (materially
important meaning property with a book value amounting to 10% or more of the
total assets of the Trust) consists of the following at Fiscal Year End:
<PAGE>
Dover, Delaware - A 474,000 square foot enclosed facility owned in fee,
containing approximately 249,000 square feet of retail space and 225,000 square
feet of office space located on approximately 58 acres. The total site contains
approximately 90 acres. The property is located on Route 113 approximately two
miles from the state capital complex. In addition to the enclosed (former
shopping mall) facility there are 5 free standing buildings on the property (one
of which containing 24,000 square feet is vacant except for a month to month
tenancy for a small portion of the space) containing approximately 55,000 square
feet of rentable space. The Trust has converted the two "anchor" locations at
this center to office space and has entered into a 10 year lease expiring
December 31, 2004 (with options to renew totalling ten years) with a major
insurance company for approximately 68,613 square feet of space, and a 10 year
lease expiring March 31, 2005 (with options to renew totalling ten years) with a
major bank for 79,000 square feet of space. The renovation for the insurance
company was substantially completed in December, 1994, and for the banking
entity in May, 1995. Each of the two tenants at the "anchor" locations has an
option to expand their space and a right to early termination. If the insurance
company exercises its early termination right, which it can do at any time, the
tenant must pay to BRT an amount equal to the rentals due to the lease
expiration date, discounted to present value. The bank has an early termination
right, during its sixth lease year only. If the bank exercises its early
termination right, it must pay to BRT a specified termination fee. No other
tenant occupies ten percent or more of the rentable space at this facility. The
Trust has been converting this facility to a corporate center and mall. Although
the Trust does not have any proposal or plans to renovate, improve or develop
the property, it will construct a new building on the property or renovate mall
space at the Center in order to lease to a qualified tenant. Tenants occupying
outparcels at the property include a Bridgestone/Firestone auomotive center, a
day care center, the Delaware National Guard and a credit union. There is no
major retail tenant at the property.
In the opinion of management the property is adequately covered by
insurance.
The occupancy rate of this property (including the five free standing
buildings) since the Trust acquired title to this property in October 1993 and
the effective annual rental per square foot is as follows:
Fiscal Year End Base Rental per
September 30, Occupancy Rate square foot occupied
------------- -------------- --------------------
1994 38% $5.07
1995 53% $5.08
1996 63% $6.38
1997 66% $5.61
<PAGE>
The schedule of lease expirations for each of the next ten fiscal years
for this property (including the five outparcels) is as follows:
# of Tenants whose Total Area Annual Base % of Gross Annual
leases expire* Covered Rental Base Rental
-------------- ------- ------ -----------
Fiscal
1998 30 105,793 627,333 37.2
1999 3 4,039 25,098 1.5
2000 3 10,040 128,365 7.6
2001 1 3,500 48,125 2.9
2002 1 2,500 20,000 1.2
2003 1 18,271 82,318 4.9
2004 0 - - -
2005 2 147,613 754,889 44.7
2006 0 - - -
2007 0 - - -
*All information provided assumes that the two major anchor tenants who
occupy a total of 147,613 square feet do not exercise their right to terminate
prior to lease expiration. Fiscal 1998 includes all month to month tenants and
tenants occupying space under short term leases. Landlord has converted many
tenants to month to month tenancies and entered into short term leases to
provide it with the flexibility to assemble large blocks of space for larger
users of space.
Since this property is held for sale it is not being depreciated for
accounting purposes.
The realty tax rate in Dover is based on applying four mil rates to the
assessed valuation. Real estate taxes with respect to this property were
$156,200 for the last tax year.
In July 1995 two separate but related loans aggregating $9,250,000 were
closed with respect to this property; one loan in principal amount of $6,000,000
is collateralized by a first mortgage on the building occupied by the insurance
company (an additional $1,000,000 can be drawn down for tenant improvements if
the insurance company exercises any of its expansion options) and the other loan
in the principal amount of $3,250,000 is collateralized by the facility leased
to the bank. Both loans are cross collateralized and are secured by a negative
pledge on the balance of the property and a mortgage on the balance of the mall.
The loans mature on July 1, 2005, provide for a fixed interest rate of 8.07% and
provide an amortization schedule intended to fully amortize the loan over the
ten year period. The principal balance due on these mortgages at September 30,
1997 was $8,042,000. The Borrower may prepay this mortgage loan, in full or in
part at any time provided that the Borrower pays a prepayment premium calculated
to give the Lender a specified yield to maturity (discounted to present value).
<PAGE>
The following sets forth information concerning other real estate owned
by the Trust (such real estate not being materially important) as of September
30, 1997:
Rock Springs, Wyoming - A 151,105 square foot shopping center,
consisting of 138,191 square feet of retail space (30 retail stores), 12,914
square feet of office space, a free standing restaurant and a free standing film
kiosk. The Trust holds a leasehold interest in this property subject to a first
leasehold mortgage which matures on November 1, 2000 and provides for interest
at the rate of 8.44% per annum. At September 30, 1997 there was a principal
balance of $1,298,000 due on the leasehold mortgage and on the maturity date
there will be $548,000 due thereon. The retail space was approximately 99%
occupied and the office space was approximately 82% occupied at Fiscal Year End.
Hoboken, New Jersey - A 32,500 square foot parcel of undeveloped land.
The property is leased to a parking lot operator under a 10 year lease. The
lease contains provisions for early termination upon development of the
property. The property is owned free and clear of mortgages. In March, 1996 the
Trust contributed the real estate to a joint venture which intends to develop on
this site and adjacent sites a 300 unit apartment complex containing a 560 car
garage. The Trust has a 41% interest in the joint venture and may be required to
contribute up to an additional $1,500,000 to the development project. The other
joint venturers have contributed $1,200,000, and may be required to contribute
up to an additional $3,000,000. The total cash requirement of the project is
estimated to be $50,000,000, of which $42,000,000 will be provided by
construction and take out permanent financing. The joint venture is currently
negotiating with construction lenders. There can be no assurance that
construction financing will be obtained, that the property will be developed
pursuant to plan and that once developed it will have a positive cash flow.
Montreal, Canada - The Trust owns fee title to a parcel of land in
downtown Montreal, free and clear of mortgages. The property, improved with a 23
story office building, is net leased for a term expiring in 2061. Subsequent to
September 30, 1997, the property was sold to an unaffiliated entity resulting in
a nominal gain to the Trust.
New York, New York - Two six story residential buildings located on
West 172nd Street in Manhattan, New York, containing 82 apartments and 13 grade
level retail stores with 9,264 square feet of retail space. This property is
leased under a net lease which expires in 2015. In July, 1996 a $2,250,000 first
mortgage loan secured by the Trust's fee position was closed with respect to
this property. The mortgage matures on August 1, 2001, provides for an interest
rate of 8.75% and amortizes over a 25 year period. At Fiscal Year End there was
a principal balance of $2,222,000 due on this mortgage and at maturity there
will be $2,093,000 due thereon.
At September 30, 1997, the Trust owned 519 cooperative apartment units
in 5 separate projects, 2 of which containing 155 units are located in Nassau
County, New York, 1 containing 117 units is located in Manhattan, 1 containing
246 units located in Queens, New York and 1 unit is located in Suffolk County,
New York. Since the market for the sale of cooperative apartment units in New
York City and Long Island is very competitive, the Trust's policy is to lease
the units owned by it with a number of selective units at some locations being
held vacant for sale. At September 30, 1997 94% of the units were occupied.
Since September 30, 1997, the Trust has sold 250 cooperative apartment units,
including the sale in bulk of the 246 units located in Queens, New York. The 246
units, a second mortgage and an unsecured note receivable held by the Trust from
the cooperative corporation, were sold subsequent to Fiscal Year End resulting
in a gain of approximately $2,000,000.
Competition
With respect to the Trust's real estate lending activities, it competes
for acceptable investments with other REIT's, commercial banks, savings and loan
associations, conduits, pension funds and mortgage banking firms. Competition
for mortgage loans is highly competitive, with lenders competing on rate, fees,
term and service. With respect to real estate acquired by foreclosure and held
for sale, the Trust competes for tenants and potential purchasers of such
properties with owners of comparable real property in the areas in which the
properties are located. With respect to the cooperative units owned by the
Trust, there is a great deal of competition for purchasers and, pending the sale
of cooperative units, the Trust rents out substantially all the units for terms
of up to two years. At present, the apartment rental market in the areas in
which the Trust owns cooperative apartments is satisfactory and the sale market
has been improving.
Employees
The Trust has eight full-time employees. In addition, it has entered
into an agreement with REIT Management Corp. ("REIT") pursuant to which REIT
acts as its advisor. At the present time, REIT, subject to supervision of the
Board of Trustees, administers the Trust's portfolio of mortgages receivable,
engages in negotiations in workout situations with respect to non-earning loans
and supervises and provides support services in litigation activities. REIT also
supervises the maintenance, leasing, sale and/or financing of real estate owned
by the Trust. In addition, REIT participates in originating, investigating and
evaluating investment opportunities. Reference is made to the Trust's Proxy
Statement to be filed pursuant to Regulation 14A for information concerning the
amount and method of computing REIT's fee.
In Fiscal 1996 and 1997, the Trust engaged entities, including entities
affiliated with REIT, to manage properties acquired by the Trust in foreclosure
or deed in lieu of foreclosure. The management services include, among other
things, rent billing and collection, accounting, maintenance, contractor
negotiation, construction management, sales and leasing and mortgage brokerage.
In management's judgment the fees paid to REIT and entities affiliated with REIT
are competitive with or less than fees that would be charged for comparable
services by unrelated entities.
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT
The following sets forth the executive officers of the Trust. The business
history of officers who are also Trustees will be provided in the Trust's proxy
statement to be filed pursuant to Regulation 14A not later than January 28,
1998.
Name Office
Fredric H. Gould (*) Chairman of the Board and
Chief Executive Officer
Jeffrey A. Gould (*) President
Simeon Brinberg Senior Vice President;
Secretary
Eugene J. Keely Vice President
Nathan Kupin Senior Vice President; Trustee
Matthew J. Gould (*) Senior Vice President
David W. Kalish Vice President; Chief
Financial Officer
Karen A. Till Vice President, Financial
Mark H. Lundy Vice President
Joshua D. Gleiber Vice President
Seth Kobay Vice President; Treasurer
(*)Fredric H. Gould is Jeffrey A. and Matthew J. Gould's father.
Jeffrey A. Gould (age 32) has been President of the Trust since March,
1996 and was Executive Vice President and Chief Operating Officer from March,
1994 to March, 1996. For approximately five years prior to March, 1994 Mr. Gould
was a Vice President of the Trust. In June, 1989 Mr. Gould became a Vice
President of One Liberty Properties, Inc. a real estate investment trust engaged
in the ownership of "net leased" real property. He is also a Senior Vice
President of Georgetown Partners, Inc., managing general partner of Gould
Investors L.P.
Simeon Brinberg (age 64), has been Secretary of the Trust since February,
1983 and Senior Vice President since November, 1988. From 1961 to September,
1988 he was a partner in the law firm of Bachner, Tally, Polevoy, Misher &
Brinberg and its predecessor. In October, 1988 Mr. Brinberg became an officer of
BRT and a Vice President of Georgetown Partners, Inc. In June, 1989 he became a
Vice President of One Liberty Properties, Inc. Mr. Brinberg is a director of
Witco Corporation.
Eugene J. Keely (age 62) has been a Vice President of the Trust since
May 1983.
<PAGE>
Matthew J. Gould (age 38) has been President and Chief Operating
Officer of One Liberty Properties, Inc. since June, 1989. He has been a Vice
President of the Trust since 1986 and became a Senior Vice President in March
1993. He is President of Georgetown Partners, Inc. since March 1996 and was a
Vice President from 1986 to 1996. In addition, Mr Gould has been a Vice
President of REIT Management Corp., the Trust's advisor, since 1986, and a Vice
President of Majestic Property Management Corp. and related entities engaged in
real property management and leasing since 1986.
David W. Kalish (age 50) has been a Vice President and Chief Financial
Officer of the Trust since June, 1990. He has also been Vice President and Chief
Financial Officer of One Liberty Properties, Inc. and Georgetown Partners, Inc.
since June, 1990. For more than five years prior thereto, Mr. Kalish, a
certified public accountant, was a partner of Buchbinder Tunick & Company, and
its predecessors.
Karen A. Till (age 35) has been a Vice President of the Trust since
April 1994. For more than four years prior thereto, Ms. Till, a certified public
accountant, was employed by Gould Investors L.P. in an accounting capacity.
Mark Lundy (age 35) has been a Vice President of the Trust since 1993. He
has been Secretary of One Liberty Properties, Inc. since June, 1993 and a Vice
President of Georgetown Partners, Inc. since July, 1990. Mr. Lundy is a member
of the bars of New York and Washington, D.C.
Joshua D. Gleiber (age 30) has been a Vice President of the Trust since
March 1996. From October 1991 to February 1996 Mr. Gleiber was employed by Euram
Management Inc., a subsidiary of ABN AMRO Bank N.V., engaged in asset management
of the commercial real estate owned portfolio.
Seth Kobay (age 43) has been Vice President and Treasurer of BRT since
March 1994. In addition, Mr. Kobay, a certified public accountant, has been the
Vice President of Operations of Georgetown Partners, Inc. for more than the past
five years.
<PAGE>
Item 2. Properties.
The Trust's executive offices are located at 60 Cutter Mill Road, Great
Neck, New York, where it currently occupies approximately 12,000 square feet
with Gould Investors L.P., REIT Management Corp., One Liberty Properties, Inc.
and other related entities. The building in which the executive offices are
located is owned by an affiliate of Gould Investors L.P. The Trust contributed
$79,900 to the annual rent in Fiscal 1997.
For a description of the real estate acquired by the Trust in
foreclosure, see Item 1, Business; Real Estate Owned.
Item 3. Legal Proceedings.
The Trust is not a defendant in any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted during the fourth quarter of the fiscal
year to a vote of the Trust's security holders.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Matters
The Trust's shares of Beneficial Interest ("Beneficial Shares") are
listed on the New York Stock Exchange. The following table shows for the
quarters indicated, the high and low sales prices of the Trust's Beneficial
Shares on the New York Stock Exchange as reported on the Composite Tape.
Fiscal Year Ended September 30, High Low
1997
First Quarter 6 5/8 5 7/8
Second Quarter 7 7/8 6 3/8
Third Quarter 7 3/4 6 5/8
Fourth Quarter 9 3/16 7 1/8
1996
First Quarter 4 1/2 4 1/8
Second Quarter 5 1/8 4 1/8
Third Quarter 5 1/8 4 3/8
Fourth Quarter 6 1/4 4 7/8
As of December 5, 1997 there were approximately 1,800 holders of record
of the Trust's Beneficial Shares.
The Trust did not declare any cash distributions to common shareholders
during the years ended September 30, 1996 and 1997. In the year ended September
30, 1996 the Trust paid $203,000 as dividends on 1,030,000 shares of preferred
stock. The preferred stock, owned by Gould Investors L.P., a related party, was
converted into 1,030,000 Beneficial Shares on July 1, 1996.
The Trust qualifies as a real estate investment trust for Federal
income tax purposes. In order to maintain that status, it is required to
distribute to its shareholders at least 95% of its annual taxable income.
Management believes that as a result of accumulated tax losses the Trust will
not be required to make cash distributions to maintain its real estate
investment trust status until its accumulated tax losses have been fully used or
shall expire. Management does not expect that accumulated tax losses will be
fully used for a number of years and they do not begin to expire until 2005. The
resumption of cash distributions and the amount and timing of future
distributions, if any, will be at the discretion of the Board of Trustees and
will depend upon the Trust's financial condition, earnings, business plan, cash
flow and other factors. The Credit Agreement with First Boston provides that
prior to payment of cash distributions on Beneficial Shares the Trust must give
advance notice to First Boston and certify that payment of such distributions
will not breach the Trust's net worth covenant.
<PAGE>
Item 6. Selected Financial Information
The following table, not covered by the report of the independent
auditors, sets forth selected historical financial data of the Trust for each of
the fiscal periods in the five years ended September 30, 1997. This table should
be read in conjunction with the detailed information and financial statements of
the Trust appearing elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Years Ended
September 30,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Operating statement data:
Total revenues $17,155 $13,556 $16,637 $20,530 $18,003
Provision for possible
loan losses - - 1,021 4,340 3,111
Provision for
valuation adjustment - - 178 993 3,388
Income (loss) before
gain on sale of fore-
closed properties held
for sale 6,646 1,776 (522) (1,312) (4,254)
Net income (loss) 7,333 2,246 2,974 195 (4,068)
Calculation of net income
(loss) applicable to common
shareholders:
Net income (loss) 7,333 2,246 2,974 195 (4,068)
Less: distributions
on preferred stock - 203 270 270 12
Net income (loss)
applicable to common
shareholders 7,333 2,043 2,704 (75) (4,080)
Income (Loss) per
beneficial share-
Primary .86 .26 .37 (.01) (.56)
Fully diluted .86 .26 .35 (.01) (.56)
Balance sheet data:
Total assets 80,315 89,613 104,515 131,467 162,217
Earning real
estate loans (1) 40,030 32,813 43,456 67,156 95,353
Non-earning real
estate loans (1) 3,835 5,905 7,154 10,268 26,750
Real estate assets (1) 24,706 48,438 53,389 55,376 51,162
Notes payable- banks - - 22,900 66,192 92,785
Loans and mortgages
Payable 11,562 25,391 20,756 6,671 10,308
Shareholders' equity 66,537 60,892 57,728 55,024 55,099
</TABLE>
(1) Earning and non-earning loans and real estate owned are presented without
deduction of the related allowance for possible losses or valuation allowance.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Trust engages in the business of originating and holding for
investment senior real estate mortgages, secured by income producing property
and to a lesser extent junior real estate mortgage loans secured by income
producing property and senior mortgage loans secured by unimproved real
property. The Trust's investment policy emphasizes short-term mortgage loans.
Repayments of real estate loans in the amount of $25,036,000 are due during the
twelve months ending September 30, 1998 ("Fiscal 1998"), including $6,678,000 of
which is due on demand. There presently exists a favorable environment for
obtaining mortgage financing secured by real property and for selling real
estate. Accordingly, prior to or at maturity, borrowers should be able to
refinance and repay the indebtedness due to the Trust. However, the Trust cannot
project the portion of loans maturing during the next twelve months which will
be paid or the portion of loans which will be extended for a fixed term or on a
month to month basis.
In October 1996 the Trust entered into a $25,000,000 credit facility
with CS First Boston Mortgage Capital Corp. ("First Boston"). The facility, a
revolving credit facility, permits the Trust to borrow, repay and borrow again.
Interest is charged on the outstanding principal balance at the lower of prime
plus 1% or Libor plus 3% adjusted monthly and matures on October 17, 1998. The
Trust has the right to extend the facility for two additional six-month periods
for a fee of .25% with each extension. The Trust can use funds borrowed under
this facility for any corporate purpose, the primary of which is lending.
Borrowings under the credit facility are secured by specific receivables and
real estate assets held by the Trust, and the credit agreement provides that the
loan amount will never exceed 75% of the agreed value of the collateral. There
was no balance outstanding under the credit facility at September 30, 1997.
During the twelve months ended September 30, 1997, the Trust
generated cash of $7,369,000 from operating activities, $22,961,000 from the
sale of real estate owned, and $10,278,000 from collections from real estate
loans (net of repayments to participating lenders of $1,000,000). These funds in
addition to cash on hand, were used primarily to fund real estate loans of
$15,353,000, payoff a note payable and mortgages payable on real estate sold of
$14,859,000, and purchase 356,820 shares of beneficial interest of the Trust at
an approximate aggregate cost of $2,397,000.
The Trust's Board of Trustees authorized the purchase from time to
time of up to 750,000 shares of beneficial interest of the Trust. Through
September 30, 1997, 409,571 shares have been purchased at an approximate
aggregate cost of $2,701,000. From October 1, 1997 through December 31, 1997 an
additional 208,402 shares have been purchased at an aggregate cost of
$1,700,000.
There will be no effect on the Trust's liquidity relating to the
year 2000 issue because during the last quarter of the 1997 fiscal year the
Trust acquired computer hardware and software to handle the companies accounting
and real estate management. The computer software is capable of handling all
issues relating to the year 2000.
The Trust will satisfy its liquidity needs from cash and liquid
investments on hand, the credit facility with First Boston, interest received on
outstanding real estate loans and net cash flow generated from the operation and
sale of real estate assets.
<PAGE>
Results of Operations
1997 vs. 1996
Interest and fees on real estate loans increased to $4,877,000 for
the year ended September 30, 1997 as compared to $4,516,000 for the year ended
September 30, 1996. The increase of $361,000 was primarily a result of interest
earned on the origination of new loans and the receipt of additional interest
during the first half of Fiscal 1997 of approximately $486,000 upon the payoff
of two loans, one of which was non-earning. Payoffs and pay-downs of various
earning real estate loans offset these increases.
Operating income on real estate assets decreased by $95,000 to
$8,590,000 for Fiscal 1997 from $8,685,000 for the comparable period in the
prior fiscal year. This decrease was the result of the loss of rental income
upon the sale of properties offset in part by an increase in occupancy and
rental rates at various properties and the receipt of a real estate tax refund
of approximately $106,000 as a result of a successful tax appeal.
During fiscal year ended September 30, 1997 the Trust reversed
previously provided allowances of $1,300,000 upon the payoff in full of two real
estate loans and realized $2,105,000 from previously written off provisions.
There were no comparable transactions during Fiscal 1996.
Interest expense on notes and loans payable decreased by $984,000
from $1,134,000 for the year ended September 30, 1996 to $150,000 for Fiscal
1997. This decrease was a direct result of the continued reduction and the
eventual payoff in August 1996 of the outstanding debt under the Trust's old
credit agreement.
The Advisor's fee decreased to $559,000 for Fiscal 1997 from
$615,000 for Fiscal 1996, a decrease of $56,000. This decrease was a result of a
decrease in total invested assets, the basis on which the advisory fee is
calculated.
General and administrative expenses decreased by $410,000 from
$2,666,000 for the fiscal year ended September 30, 1996 to $2,256,000 for the
fiscal year ended September 30, 1997. This decrease is primarily the result of
the recognition during Fiscal 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. There
has also been a reduction in the Trust's general overhead expenses.
Operating expenses relating to real estate assets decreased to
$6,732,000 for Fiscal 1997 from $6,937,000 for the fiscal year ended September
30, 1997 a decrease of $205,000. This decrease was primarily a result of the
sale of foreclosed properties.
Depreciation and amortization increased by $384,000 for the fiscal
year ended September 30, 1997. This increase was a direct result of the
amortization of the remaining deferred mortgage costs associated with the sale
of various real estate assets.
Gain on sale of foreclosed properties for Fiscal 1997 was $687,000
as compared to $470,000 during Fiscal 1996. It is the policy of the Trust to
offer for sale all foreclosed property at prices which management believes
represents fair value in the geographic area in which the property is located.
<PAGE>
1996 vs. 1995
Interest and fees on real estate loans decreased to $4,516,000 for
Fiscal 1996 as compared to $7,862,000 for Fiscal 1995. This decrease of
$3,346,000 was primarily due to a decrease in earning real estate loans as a
result of payoffs (including the payoff in Fiscal 1995 of three participating
loans, one of which produced additional interest of approximately $1,000,000),
recognition of interest earned of approximately $400,000 upon settlement, after
litigation, of a junior interest in a pool of mortgages and a property securing
a real estate loan becoming real estate owned.
Operating income on real estate owned increased by $471,000 to
$8,685,000 for the year ended September 30, 1996 as compared to $8,214,000 for
the comparable period in the prior fiscal year. This increase was principally
the result of income generated from an office building in Fairway, Kansas,
acquired by deed in lieu of foreclosure in October 1995 and an increase in
rental income at the Dover, Delaware property,(acquired in foreclosure)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.
Interest expense decreased by $4,052,000 to $1,134,000 for the year
ended September 30, 1996 from $5,186,000 for the year ended September 30, 1995
due to the continuing decrease and the eventual payoff of outstanding bank debt
in August 1996.
The expenses for Fiscal 1995 include provisions for possible loan
losses of $1,021,000 and provisions for valuation adjustments of $178,000 with
no comparable provisions during Fiscal 1996. Management determined that no
additional provisions for possible loan losses or valuation adjustments were
required for Fiscal 1996.
The Advisor's fee decreased to $615,000 for the twelve months ended
September 30, 1996 from $777,000 for the comparable twelve month period in the
prior year, a decrease of $162,000. This decrease was a result of a decrease in
total invested assets, the basis on which the advisory fee is calculated.
General and administrative expenses decreased by $305,000 from
$2,971,000 for the year ended September 30, 1995 to $2,666,000 for the year
ended September 30, 1996. This decrease is primarily the result of a decrease in
the Trust's executive compensation and related expenses due to a reduction of
staff. This decrease was offset in part by the recognition during Fiscal 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.
Operating expenses relating to real estate owned increased by $535,000
from $6,402,000 for Fiscal 1995 to $6,937,000 for Fiscal 1996. This increase was
primarily due to an increase in interest on mortgages secured by real estate
owned to $1,968,000 for the year ended September 30, 1996 from $441,000 for the
comparable period in 1995, and the Trust taking title to an office building in
October 1995, by deed-in-lieu of foreclosure. This increase was 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 $196,000 for the twelve
months ended September 30, 1996 from the comparable period ended September 30,
1995. This is a result of the reclassification 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, offset in part by
an increase in the amortization of deferred mortgage costs.
Gain on sale of foreclosed properties for the year ended September 30,
1996 was $470,000 as compared to $3,496,000 for the year ended September 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>
Item 8. Financial Statements and Supplementary Data
This information appears in a separate section of this report following Part
IV.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Items 10, 11, 12 and 13 will be included in the Trust's proxy statement to be
filed pursuant to Regulation 14A not later than January 28, 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - The response is submitted in a separate
section of this report following Part IV.
2. Financial Statement Schedules - The response is submitted in a separate
section of this report following Part IV.
3. Exhibits:
3(a). Second Amended and Restated Declaration of Trust dated June 13,
1972. Incorporated by reference to Exhibit 3A to Form 10-K for the year ended
September 30, 1984.
3(b). First Amendment to Second Amended and Restated Declaration of
Trust dated August 20, 1986. Incorporated by reference to the Trust's
Registration Statement on Form S-2 (No.
33-8125).
3(c). Second Amendment to Second Amended and Restated Declaration of Trust
dated March 2, 1987. Incorporated by reference to the Trust's Registration
Statement on Form S-2 (No.33-12172).
3(d). Third Amendment to Second Amended and Restated Declaration of Trust
dated March 2, 1988. Incorporated by reference to Exhibit 3D to Form 10-K for
the year ended September 30, 1988.
3(e). By-laws - Incorporated by reference to the Trust's Registration
Statement on Form S-2 (No. 33-8125).
10(a). Advisory Agreement dated February 7, 1983 between the Trust and
REIT Management Corp. Incorporated by reference to the Trust's Registration
Statement on Form S-2 (No. 33-8125).
10(b). Credit Agreement with CFS First Boston Mortgage Capital Corp. dated
October 17, 1996. Incorporated by reference to Exhibit 7(c) to Form 8-K filed on
October 24, 1996.
21. Subsidiaries - Each subsidiary is 100% owned by the Trust. Exhibit 21
is filed with this Form 10-K.
27. Financial Data Schedule - Filed with electronic filing.
(b) Reports on Form 8-K:
Form 8-K dated September 2, 1997 was filed on September 2, 1997 to reflect
the election of David Herold to the Trust's Board of Trustees. Form 8-K dated
November 28, 1997 was filed on December 1, 1997 to report the disposition of
a property, and a Form 8 amending said Form 8-K was filed on December 18,
1997.
(c) Exhibits - See Item 14(a) 3., above.
(d) See Item 14(a) 2., above.
<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
Date: December 22, 1997 By: (S) Jeffrey A. Gould
---------------------
Jeffrey A. Gould
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
(S) Fredric H. Gould Chairman of the Board December 22, 1997
--------------------
Fredric H. Gould (Principal Executive
Officer)
- --------------------- Trustee December 22, 1997
Patrick J. Callan
(S) Arthur Hurand Trustee December 22, 1997
- ----------------------
Arthur Hurand
(S) Gary Hurand Trustee December 22, 1997
- ----------------------
Gary Hurand
(S) David Herold Trustee December 22, 1997
- ----------------------
David Herold
(S) Nathan Kupin Trustee December 22, 1997
- ----------------------
Nathan Kupin
(S)Herbert C. Lust Trustee December 22, 1997
- ----------------------
Herbert C. Lust II
- ----------------------
Marshall Rose Trustee December 22, 1997
(S) David W. Kalish
- ----------------------
David W. Kalish Vice President December 22, 1997
(Principal Financial
and Accounting Officer)
<PAGE>
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2)
Index to Consolidated Financial Statements and Consolidated Financial
Statement Schedules September 30, 1997
The following consolidated financial statements of BRT Realty Trust are included
in Item 8:
Page No.
Report of Independent Auditors F-1
Consolidated Balance Sheets as of September 30,
1997 and 1996 F-2
Consolidated Statements of Income for the
three years ended September 30, 1997, 1996 and 1995 F-3
Consolidated Statements of Shareholders' Equity
for the three years ended September 30, 1997,
1996 and 1995 F-4
Consolidated Statements of Cash Flows for the
three years ended September 30, 1997, 1996 and
1995 F-5-6
Notes to Consolidated Financial Statements F-7-20
Consolidated Financial Statement Schedules
for the year ended September 30, 1997:
III - Real Estate and Accumulated Depreciation F-21-22
IV - Mortgage Loans on Real Estate F-23-24
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or the notes
thereto.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
COMPANY STATE OF INCORPORATION
Hoboken Front Corp. New Jersey
Huntington-Park Corporation New York
Forest Green Corporation New York
Realty 49 Corp. New York
TRB No. 1 Corp. New York
TRB No. 2 Corp. New York
TRB Cutter Mill Corp. New York
Kew Gardens Realty Corp. New York
Blue Realty Corp. Delaware
3581 Broadway Realty Corp. New York
620 West 172nd Street Realty Corp. New York
Multiple Property Realty Corp. New York
119 Madison Avenue Realty Corp. New York
TRB No. 3 Owners Corp. Wyoming
2190 Boston Post Road Realty Corp. New York
TRB 96th Street Corp. New York
Remson Point Realty Corp. New York
TRB 13 Eighth Avenue Corp. New York
Casa Wrap Holding Corp. Florida
TRB Valley Corp. New York
76 Madison Avenue Realty Corp. New York
2211 Church Avenue Realty Corp. New York
TRB Cruger Avenue Corp. New York
TRB Fairway Office Center Corp. Kansas
TRB East 33rd Street Corp. New York
TRB Abbotts Corp. Pennsylvania
TRB Greenpoint Avenue Realty Corp. New York
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders
BRT Realty Trust
We have audited the accompanying consolidated balance sheets of BRT Realty
Trust (the "Trust") as of September 30, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended September 30, 1997. Our audits also
included the consolidated financial statement schedules listed in the Index at
Item 14(a). These consolidated financial statements and consolidated schedules
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these consolidated financial statements and consolidated
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BRT Realty Trust at September 30, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
ERNST & YOUNG LLP
New York, New York
December 2, 1997
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)
<TABLE>
<CAPTION>
ASSETS
September 30,
----------------
1997 1996
---- ----
<S> <C> <C>
Real estate loans - Notes 2, 4 and 5:
Earning interest $ 40,030 $ 32,813
Not earning interest 3,835 5,905
----- -----
43,865 38,718
Less allowance for possible losses 5,956 7,773
----- ------
37,909 30,945
------ ------
Real estate assets - Notes 3, 4 and 5:
Foreclosed properties held for sale 23,160 48,438
Investment in real estate venture 1,546 -
----- -----
24,706 48,438
Less valuation allowance 349 2,128
--- -----
24,357 46,310
------ ------
Cash and cash equivalents 10,152 6,209
Investment in U.S. Government obligations
at cost, which approximates market - 986
Securities available-for-sale at market 5,382 991
Other assets 2,515 4,172
----- -----
TOTAL ASSETS $ 80,315 $89,613
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable, Gould (a related party) - Note 5 $ - $ 1,030
Loans and mortgages payable - Note 5 11,562 25,391
Accounts payable and accrued liabilities including deposits
of $1,085 and $1,524 2,216 2,300
----- -----
Total liabilities 13,778 28,721
------ ------
Commitments and contingencies - Notes 2, 3, 4, 5, 8 and 9 - -
Shareholders' equity - Note 7:
Preferred shares, $1 par value:
Authorized 10,000 shares, none issued - -
Shares of beneficial interest, $3 par value:
Authorized number of shares, unlimited, issued
- 8,886 and 8,969 shares 26,657 26,906
Additional paid-in capital, net of distributions of $5,171 81,517 81,857
Net unrealized gain on available-for-sale securities 726 17
Accumulated deficit (37,916) (45,249)
------- -------
70,984 63,531
Cost of 518 and 244 treasury shares of beneficial interest (4,447) (2,639)
------ ------
Total shareholders' equity 66,537 60,892
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $80,315 $89,613
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Interest and fees on real estate loans - Note 2 $4,877 $4,516 $7,862
Operating income on real estate owned 8,590 8,685 8,214
Previously provided allowances and write offs 3,405 - -
Other, primarily investment income 283 355 561
--- --- ---
Total Revenues 17,155 13,556 16,637
------ ------ ------
Expenses:
Interest - notes payable and loans payable - Note 5 150 1,134 5,186
Provision for possible loan losses - Note 4 - - 1,021
Provision for valuation adjustment - Note 4 - - 178
Advisor's fees - Note 8 559 615 777
General and administrative - Note 8 2,256 2,666 2,971
Operating expenses relating to real estate owned
including interest on mortgages of $2,214, $1,968 and $441 6,732 6,937 6,402
Amortization and depreciation 812 428 624
--- --- ---
Total Expenses 10,509 11,780 17,519
------ ------ ------
Income (loss) before gain on sale of foreclosed
properties held for sale 6,646 1,776 (522)
Net gain on sale of foreclosed properties held for sale 687 470 3,496
--- --- -----
Net Income $ 7,333 $ 2,246 $ 2,974
======= ======= =======
Calculation of net income applicable to common shareholders:
Net income $7,333 $2,246 $2,974
Less: distributions on preferred stock - 203 270
---- --- ---
Net income applicable to common shareholders $7,333 $2,043 $2,704
====== ====== ======
Income (loss) per share of Beneficial Interest:
Primary $ .86 $ .26 $ .37
====== ====== ======
Fully Diluted $ .86 $ .26 $ .35
====== ====== ======
Weighted average number of common shares outstanding:
Primary 8,527,057 7,825,557 7,346,624
========= ========= =========
Fully Diluted 8,527,057 8,688,508 8,443,139
========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Years Ended September 30, 1995, 1996, and 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Net Unreal-
Shares of Additional ized Gain on Accum-
Preferred Beneficial Paid-In Available-For ulated
Stock Interest Capital Sale Securities Deficit
-------- -------- --------- --------------- -------
<S> <C> <C> <C> <C> <C>
Balances, September 30, 1994 $1,030 $22,614 $84,184 $ - $ (50,469)
Distributions - preferred stock - - (270) - -
Net income - - - - 2,974
-----------------------------------------------------------------------
Balances, September 30, 1995 1,030 22,614 83,914 - (47,495)
Exercise of Stock Options - 1,202 206 - -
Conversion of 1,030 shares of
preferred stock to shares
of beneficial interest (1,030) 3,090 (2,060) - -
Distributions - Preferred Stock - - (203) - -
Unrealized gain on available-
for-sale securities - - - 17 -
Net income - - - - 2,246
----------------------------------------------------------------------
Balances, September 30, 1996 - 26,906 81,857 17 (45,249)
Cancellation of 83 shares of
beneficial interest - (249) (340) - -
Unrealized gain on available-
for-sale securities - - - 709 -
Net income - - - - 7,333
---------------------------------------------------------------------
Balances, September 30, 1997 $ - $26,657 $81,517 $ 726 ($37,916)
===== ======= ======= ===== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,333 $ 2,246 $ 2,974
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 812 428 624
Previously provided allowances (1,300) - -
Net gain on sale of real estate and foreclosed property (687) (470) (3,496)
(Increase) decrease in interest receivable (61) 240 756
Decrease (increase) in prepaid expenses 287 405 (630)
Increase (decrease) in accounts payable and
accrued liabilities 89 (301) (226)
Increase in deferred revenues 301 - -
Decrease (increase) in rent receivable 219 (22) 144
Decrease in escrow deposits 552 112 384
Increase in deferred costs (275) (613) (469)
Other 99 117 (519)
-- --- ----
Net cash provided by operating activities 7,369 2,142 741
----- ----- ---
Cash flows from investing activities:
Collections from real estate loans 11,278 11,148 29,277
Proceeds from participating lenders - 225 50
Additions to real estate loans (15,353) (451) (498)
Repayments to participating lenders (1,000) - (8,445)
Net costs capitalized to real estate owned (854) (1,861) (7,762)
Proceeds from sale of real estate owned 22,961 5,724 12,328
Decrease in deposits payable (439) (443) (238)
Decrease (increase) in investments
in U.S. Government obligations 986 (986) 1,979
(Purchase) sale of marketable securities (3,682) 820 -
Other (33) 163 (133)
--- --- ----
Net cash provided by investing activities 13,864 14,339 26,558
------ ------ ------
Cash flows from financing activities:
Bank repayments - (22,900) (43,292)
Proceeds from mortgages payable - 7,050 19,250
Payoff/paydown of loan and mortgages payable (14,859) (3,179) (3,310)
Exercise of stock options - 1,408 -
Repurchase of shares of beneficial interest,
a portion of which were cancelled (2,397) (304) -
Decrease in restricted cash - 558 6,540
Other (34) (290) (276)
--- ---- ----
Net cash used in financing activities (17,290) (17,657) (21,088)
------ ------- ------
Net increase (decrease) in cash and cash equivalents 3,943 (1,176) 6,211
Cash and cash equivalents at beginning of year 6,209 7,385 1,174
----- ----- -----
Cash and cash equivalents at end of year $ 10,152 $ 6,209 $ 7,385
======== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Continued)
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $ 1,521 $ 2,715 $ 5,987
======== ======== ========
Supplemental schedule of noncash investing and financing activities:
Transfer of nonearning real estate loans
to foreclosed properties at fair value $ 13 $ 34 $ 5,310
Note payable to Gould Investors L.P., a
related party, incurred in connection with
the purchase of marketable securities - 1,794 -
Recognition of valuation allowance upon sale
of real estate owned 1,779 332 -
Recognition of allowance for previously
provided losses 516 1,311 5,258
Purchase money mortgages from sale of real
estate owned (net of an $850 wrap mortgage
in the 1995 period) 425 375 4,138
Write-off of nonrecourse mortgage payable upon
relinquishment of real estate owned - - 1,005
Recognition of valuation allowance upon
relinquishment of real estate owned - - 435
Transfer of foreclosed property to an
investment in a real estate venture 1,553 - -
Conversion of 1,030 shares of preferred stock
to shares of beneficial interest - 3,090 -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in Thousands Except Share Data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation; Basis of Preparation
The consolidated financial statements include the accounts of BRT Realty
Trust, its wholly-owned subsidiaries, and its majority-owned or controlled real
estate entity. For financial statement and economic purposes, the majority-owned
real estate entity is deemed wholly-owned and presented accordingly. Investments
in less than majority-owned entities have been accounted for using the equity
method. 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".
Income Tax Status
The Trust qualifies as a real estate investment trust under Sections
856-860 of the Internal Revenue Code.
The Trustees may, at their option, elect to operate the Trust as a business
trust not qualifying as a real estate investment trust.
Income Recognition
Income and expenses are recorded on the accrual basis of accounting for
both financial reporting and income tax purposes. The Trust does not accrue
interest or rental income on impaired loans or real estate owned where, in the
judgment of management and the Trustees, collection of interest or rent
according to the contractual terms is considered doubtful. Among the factors the
Trust considers in making an evaluation of the collectibility of interest or
rent are, the status of the loan or property, the financial condition of the
borrower or tenant and anticipated future events. Loan discounts are amortized
over the life of the real estate loan using the constant interest method.
Loan commitment and extension fee income is deferred and recorded as income
over the life of the commitment and loan. If a loan subsequently becomes
nonearning, the unamortized portion of the fee is offset against the loan
balance.
Allowance for Possible Losses
The Trust measures the impairment of its real estate loans based upon the
fair value of the underlying collateral which is determined on an individual
loan basis. In arriving at the fair value of the collateral, numerous factors
are considered, including, market evaluations of the underlying collateral,
operating cash flow from the property during the projected holding period, and
estimated sales value computed by applying an expected capitalization rate to
the stabilized net operating income of the specific property, less selling
costs, discounted at market discount rates. If upon completion of the
valuations, the fair value of the underlying collateral securing the impaired
real estate loan is less than the recorded investment in the loan, an allowance
is created with a corresponding charge to expense. Adjustments may be necessary
in the event that effective interest rates, rent-up periods, future economic
conditions including the terms and availability of long term permanent financing
for the property, or other relevant factors vary significantly from those
assumed in estimating the allowance for possible losses. The existing allowances
will be either increased or decreased based upon future valuations, with a
corresponding increase or reduction in the provision for loan losses.
Real Estate Assets
Foreclosed properties (real estate acquired by foreclosure or by a deed in
lieu of foreclosure) are recorded at estimated fair value, net of foreclosure
costs, at the time of foreclosure. In subsequent periods, individual foreclosed
assets held for sale are valued at the lower of the recorded cost or estimated
fair value, as described below, and if required, a valuation allowance is
recognized. Assets acquired through foreclosure and held for sale, are not
depreciated, while assets held long-term for the production of income are
depreciated over their estimated useful lives. Costs incurred in connection with
the foreclosure of the properties collateralizing the real estate loans and
costs incurred to extend the life or improve the assets subsequent to
foreclosure are capitalized. With respect to the operating properties, operating
income and expenses are reflected in the statement of operations. For
residential apartment units acquired through foreclosure which are subject to an
offering for the sale of units or cooperative shares, the net effect of income
and expenses is applied to the basis of the asset to the extent that fair value
is not exceeded.
Valuation Allowance on Real Estate Assets
The Trust reviews each real estate asset owned for which indicators of
impairment are present to determine whether the carrying amount of the asset
will be recovered. Recognition of impairment is required if the undiscounted
cash flows estimated to be generated by the assets are less than the assets'
carrying amount. Measurement is based upon the fair value of the asset.
Real estate assets held for sale are valued at the lower of cost or fair
value, less costs to sell, on an individual asset basis. Upon evaluating the
property, many indicators of value are considered, including current and
expected operating cash flow from the property during the projected holding
period, costs necessary to extend the life or improve the asset, expected
capitalization rates, projected stabilized net operating income, selling costs,
and the ability to hold and dispose of such real estate owned in the ordinary
course of business. Valuation adjustments may be necessary in the event that
effective interest rates, rent-up periods, future economic conditions, and other
relevant factors vary significantly from those assumed in valuing the property
at the time of foreclosure. If future evaluations result in a diminution in the
value of the property, the reduction will be recognized as a valuation
allowance. If the value of the property subsequently increases, the valuation
allowance will be reduced.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and short term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
Investment in U.S. Government obligations: Investment in U.S. Government
obligations are considered "held-to-maturity" and are reported on the balance
sheet at cost.
Securities available-for-sale: Investment in securities are considered
"available-for-sale", and are reported on the balance sheet based upon quoted
market prices.
Real estate loans: The earning mortgage loans of the Trust have either
variable interest rate provisions, which are based upon a margin over the prime
rate, or are currently fixed at effective interest rates which approximate
market. At September 30, 1997 and 1996 these interest rates are reflective of
current market conditions for these loans. Accordingly, the carrying amounts of
the earning, non-impaired mortgage loans approximate their fair values. For
earning loans which are impaired and non-earning loans, the Trust has valued
such loans based upon the fair value of the underlying collateral. Accordingly,
their carrying amounts are recorded at fair value.
Notes, loans and mortgages payable: The Trust determined the estimated fair
value of its debt by discounting future cash payments at their effective rates
of interest, which approximate current market rates of interest for similar
loans. Accordingly, there is no material difference between their carrying
amounts and fair value.
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 year, 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 preferred stock was converted to shares of beneficial
interest on a one for one basis on July 1, 1996. 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 years ended
September 30, 1997, 1996 and 1995, respectively.
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 (where
applicable) to shares of beneficial interest at the year end market price. The
fully diluted per share computation for the years ended September 30, 1996 and
1995 are dilutive with the addition of 1,030,000 shares of preferred stock and
91,858 and 66,515 shares, respectively, upon exercise of common share options.
As for the year ended September 30, 1997, the fully diluted per share
computation is not materially dilutive, and therefore not presented.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("FASB 128"), Earnings Per Share, which is required to be adopted on
December 31, 1997. At that time, the Trust will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share (renamed
basic earnings per share), the dilutive effect of stock options will be
excluded. The impact of FASB 128 on the calculation of primary and fully diluted
earnings per share is not expected to be material.
Cash Equivalents
Cash equivalents consist of highly liquid investments, primarily money
market type U.S. Government obligations, with maturities of three months or less
when purchased.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification of Financial Statements
Certain amounts reported in previous financial statements have been
reclassified in the accompanying financial statements to conform to the current
year's presentation.
Segment Reporting
In June, 1997 the Financial Accounting Standards Board issued Statement No.
131, Disclosure About Segments of an Enterprise and Related Information, which
is effective for financial statements issued for periods beginning after
December 15, 1997. Statement No. 131 requires disclosures about segments of an
enterprise and related information regarding the different types of business
activities in which an enterprise engages and the different economic
environments in which it operates. The Trust does not believe that the
implementation of Statement No. 131 will have a material impact on its financial
statements.
NOTE 2 - REAL ESTATE LOANS
At September 30, 1997, information as to real estate loans is summarized as
follows:
<TABLE>
<CAPTION>
Not
Earning Earning
Total Interest Interest
----- -------- --------
<S> <C> <C> <C>
First mortgage loans:
Long-term:
Residential $ 756 $ 756 $ -
Short-term (five years or less):
Shopping centers/retail 13,035 11,574 1,461
Industrial buildings 3,568 3,568 -
Office buildings 6,998 6,998 -
Residential (multiple family units) 9,623 9,623 -
Hotel 1,105 1,105 -
Unimproved land 1,918 - 1,918
Miscellaneous 487 487 -
Second mortgage loans:
Residential (multiple family units) 3,969 3,968 1
Wraparound mortgages 2,406 1,951 455
----- ----- ---
$ 43,865 $ 40,030 $ 3,835
======== ========= ========
A summary of loans at September 30, 1996 is as follows:
First mortgage loans $ 28,075 $ 25,082 $ 2,993
Second mortgage loans 9,423 6,576 2,847
Wraparound mortgages 1,220 1,155 65
----- ----- --
$ 38,718 $ 32,813 $ 5,905
======== ========= ========
</TABLE>
Of the real estate loans not earning interest at September 30, 1997 and
1996, $3,835 and $5,905, respectively, were deemed impaired, as it is probable
that the Trust will be unable to collect all amounts due according to the
contractual terms. Allowances for possible losses were provided for all such
non-earning loans, with the exception of loans in the amount of $648 at
September 30, 1996. Of the real estate loans earning interest at September 30,
1997 and 1996, $6,248 and $11,766, respectively, were deemed impaired and all
are subject to allowances for possible losses. For the years ended September 30,
1997, 1996 and 1995, respectively, an average $15,470, $18,547 and $20,350 of
real estate loans were deemed impaired, on which $1,827, $1,464 and $2,524 of
interest income was recognized.
Loans originated by the Trust generally provide for interest rates, which
are related to the prime rate. However, purchase money mortgages provided by the
Trust in connection with the sale of foreclosed property held for sale have
fixed interest rates, with incremental annual increases. The weighted average
interest rate on earning loans was 11.31% and 9.31% at September 30, 1997 and
1996, respectively.
Annual maturities of real estate loans receivable during the next five
years reflect revised maturities as a result of debt restructurings and are
summarized as follows:
Years Ending September 30, .......................... Amount
1998 ................................................ $ 25,036
1999 ................................................ 9,163
2000................................................. 4,836
2001................................................. 381
2002 ................................................ 105
2003 and thereafter.................................. 4,344
---- -----
Total $43,865
=======
The Trust's portfolio consists primarily of senior mortgage loans, secured
by residential and commercial property, 89% of which are located principally in
the New York metropolitan area.
If a loan is not repaid at maturity, in addition to foreclosing on the
property, the Trust may either extend the loan or consider the loan past due.
The Trust analyzes each loan separately to determine the appropriateness of an
extension. In analyzing each situation, management examines many aspects of the
loan receivable, including the value of the collateral, the financial strength
of the borrower, past payment history and plans of the owner of the property. Of
the $25,036 of real estate loans receivable which mature in Fiscal 1998, $14,000
were extended during the fiscal year ended September 30, 1997.
If all loans classified as non-earning were earning interest at their
contractual rates for the years ended September 30, 1997, 1996 and 1995,
interest income would have increased by $501, $632 and $729 respectively.
The Trust's interests in wraparound mortgages are subject to underlying
mortgages aggregating $3,285 and $4,632 at September 30, 1997 and 1996
respectively.
At September 30, 1997 the two largest real estate loans had principal
balances outstanding of approximately $3,968 and $3,185, respectively. Of the
total interest and fees earned on real estate loans during the fiscal year ended
September 30, 1997, 7.5% and 7.2% related to these loans, respectively.
Included in the Trust's portfolio, is a real estate loan collateralized by
a 50% interest in a partnership in which the Chairman of the Board of Trustees
of the Trust holds 1/2 of the other 50% partnership interest.The balance of the
loan at September 30, 1997 and 1996 is $2,575 and $2,625, respectively.
<PAGE>
NOTE 3 - REAL ESTATE ASSETS
A summary of foreclosed properties held for sale, for the year ended
September 30, 1997 is as follows:
<TABLE>
<CAPTION>
Sales
September 30, 1996 Costs Collections/ Gain on September 30, 1997
# Properties Amount # Additions Capitalized (b)# Other (a)(c) # Sale # Properties Amount
<S> <C> <C> <C> <C> <C> <C> <C>
Residential units-shares of
cooperative corporations 4 $6,159 1 $ 13 ($96) (1) ($672) 4 $5,404
Shopping centers/retail 3 17,435 137 (2) (14,782) 589 1 3,379
Office 3 20,990 819 (2) (10,632) 98 1 11,275
Improved land 2 3,442 2 3,442
Unimproved land 2 1,559 (6) (1) (1,553) 1 0
- ----- ---- ----- -- -- ------ ---- - -
14 49,585 1 13 854 (6) (27,639) 687 9 23,500
Less:Valuation Allowance 2,128 (1,779) 349
Depreciation/Amortization 1,147 114 (921) 340
--- ----- -- --- ---- --- ---- ---- -- ------
14 $46,310 1 $(101) $854 (6)$(24,939) $687 9 $22,811
== ======= = ===== ==== == ======== ==== = =======
</TABLE>
(a) Unimproved land in Hoboken, New Jersey was contributed by the Trust as
part of a real estate venture in which the Trust has a 41% interest.
(b) A significant portion of the costs capitalized to real estate owned,
approximately $667, related to the office building in Kansas City, Kansas, which
was sold during the year.
(c) During the year ended September 30, 1997, the Trust sold two office
buildings with an aggregate net book value of $10,534 for an aggregate net price
of $10,632 resulting in an aggregate gain of approximately $98. A retail
building with a net book value of $233 was sold for a net sales price of $528
resulting in a gain of $295.
As a result of the sale of the Trust's general and limited partnership
interests in a limited partnership, the Trust conveyed its interest in a
mixed-use property located in Philadelphia, Pennsylvania with a net book value
of $13,960, resulting in a gain of $294.
Future minimum rentals to be received by the Trust, pursuant to
noncancellable operating leases in excess of one year, from properties on which
the Trust has title at September 30, 1997 are as follows:
Years Ending September 30,................................ Amount
1998 .....................................................$ 2,346
1999 ..................................................... 1,895
2000 ..................................................... 1,716
2001 ..................................................... 1,499
2002...................................................... 1,330
NOTE 4 - ALLOWANCE FOR POSSIBLE LOSSES AND VALUATION ALLOWANCE
ON REAL ESTATE OWNED
There has been a continued improvement in the real estate industry over the
past few years as evidenced by an increase in occupancies and rental rates as
well as a more favorable environment for obtaining financing secured by real
property. As a result of this improvement, the Trust was not required to record
provisions for possible loan losses nor valuation adjustments during the years
ended September 30, 1997 and 1996. The most recent provisions for possible
losses and provisions for valuation adjustments taken by the Trust were during
the year ended September 30, 1995 in the amount of $1,021 and $178 respectively.
An analysis of the allowance for possible losses is as follows:
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
Balance at beginning of year $ 7,773 $ 9,084 $ 13,321
Provision for possible loan losses - - 1,021
Previously provided allowances (1,300) - -
Write-off of allowances (517) (1,311) (5,258)
---- ------ ------
Balance at end of year $ 5,956 $ 7,773 $ 9,084
======= ======= ==========
The allowance for possible losses applies to assets aggregating $10,083 at
September 30, 1997, $17,023 at September 30, 1996 and $18,774 at September 30,
1995.
During the year ended September 30, 1997, $2,105 was realized from
previously written off provisions.
The allowance for possible losses consists of the following components:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Excess of carrying value plus estimated cost
to complete and market, over estimated
selling price $ 2,979 $ 1,595 $ 2,720
Valuation adjustment 2,505 5,775 6,141
Estimated holding period costs 472 403 223
--- --- ---
$ 5,956 $ 7,773 $ 9,084
========= ======== ========
An analysis of the valuation allowance is as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 2,128 $ 2,460 $ 2,717
Provision for valuation adjustment - - 178
Write-off of valuation adjustment
upon sale or relinquishment of
real estate owned ( 1,779) (332) (435)
-------- ---- ----
Balance at end of year $ 349 $ 2,128 $ 2,460
========= ======== ========
</TABLE>
The valuation allowance applies to assets aggregating $4,316 at September
30, 1997, $23,434 at September 30, 1996 and $12,742 at September 30, 1995.
NOTE 5 - DEBT OBLIGATIONS
Debt obligations consist of the following:
September 30,
-------------
1997 1996
---- ----
Notes payable, Gould (a related party) $ - $ 1,030
Loans and mortgages payable $ 11,562 $ 25,391
In October 1996 the Trust entered into a $25,000 credit facility
("Facility") with CS First Boston Mortgage Capital Corp. ("First Boston"). The
Facility, a revolving credit facility, permits the Trust to borrow, repay and
borrow again. Interest is charged on the outstanding principal balance at the
lower of LIBOR plus 3% or the prime lending rate plus 1%, adjusted monthly. The
Trust pays a commitment fee which amounted to $97 during the year ended
September 30, 1997. The Facility matures on October 17, 1998 with the right to
extend the Facility for two additional six-month periods for a fee of .25% with
each extension. Borrowings under the Facility are secured by specific
receivables and real estate assets held by the Trust. The Facility provides that
the loan amount will never exceed 75% of the agreed value of the collateral. The
Trust is required to maintain tangible net worth (as defined) of $50,000 and
comply with certain other covenants all of which have been met. There was no
balance outstanding on this Facility at September 30, 1997.
During August, 1996 the Trust purchased common stock of a local savings
bank from Gould Investors L.P. ("Gould"), a related party. The Trust purchased
these shares at Gould's cost, which approximated market and executed a Note
Payable ("Note") to Gould for the full amount of the purchase price. The Note
which bore interest at prime was paid in full in November, 1996. Interest
expense on the Note was $10 and $16 for the years ended September 30, 1997 and
1996.
At September 30, 1997 there are three outstanding mortgages payable, all of
which are secured by individual real estate owned properties with an aggregate
carrying value of $16,621, net of amortization. The mortgages bear interest at
rates ranging from 8.07% to 8.75% and mature between 2000 and 2005.
Scheduled principal repayments during the next five years and thereafter
are as follows:
Years Ending September 30,............................. Amount
1998.................................................. $ 853
1999.................................................. 926
2000.................................................. 1,031
2001.................................................. 3,581
2002.................................................. 911
2003 and thereafter.................................. 4,260
-----
$ 11,562
=========
NOTE 6 - FEDERAL INCOME TAXES
Cumulative taxable loss since inception is less than the cumulative loss
reported for financial statement purposes principally because a portion of the
allowance for possible losses has not yet been deducted for tax purposes.
The taxable income is expected to be $6,400 less than the financial
statement income during Calendar 1997.
At December 31, 1996, the Trust had available tax operating loss
carryforwards of $35,232 of which $2,469 will expire in 2005, $2,638 will expire
in 2006, $13,605 will expire in 2007, $14,288 will expire in 2008, $1,634 will
expire in 2009, $527 will expire in 2010 and $71 will expire in 2011.
NOTE 7 - SHAREHOLDERS' EQUITY
Distributions
There were no distributions on the Trust's shares of beneficial interest
declared during the years ended September 30, 1995, 1996 and 1997.
Stock Options
On March 4, 1991 the Board of Trustees granted, under the 1988 Stock Option
Plan (Incentive/Nonstatutory Stock Option Plan) options to purchase a total of
412,000 shares of beneficial interest at $3.50 per share to a number of officers
and employees of the Trust. On May 20, 1991 the Board of Trustees granted, also
under the 1988 Stock Option Plan, options to purchase a total of 50,000 shares
of beneficial interest at $3.625 per share to certain trustees of the Trust.
During the fiscal year ended September 30, 1995, 15,000 of these options were
cancelled and became available for grant at that time. Options were exercisable
at per share amounts at least equal to the fair market value of the Trust's
beneficial shares at the date of grant. The options were cumulatively
exercisable at the rate of 25% per annum, commencing after six months, and
expired five years after the date of grant. During fiscal 1996, various
officers, employees and Trustees of the Trust exercised 400,700 of these
options. The balance of 46,300 options expired and accordingly, are available
for grant at September 30, 1997.
On December 8, 1995, the Board of Trustees granted, under the 1988 Stock
Option Plan, options to purchase the remaining 53,000 shares of beneficial
interest available under this plan at $4.375 per share to various officers and
employees of the Trust. The options are cumulatively exercisable at a rate of
25% per annum, for a period of five years commencing six months after the date
of grant. At September 30, 1997 options to purchase 26,500 shares are
exercisable, none of which have been exercised.
On December 6, 1996, the Board of Trustees adopted the BRT 1996 Stock
Option Plan (Incentive/Nonstatutory Stock Option Plan), whereby a maximum of
450,000 shares of beneficial interest are reserved for issuance to the Trust's
officers, employees, trustees and consultants or advisors to the Trust.
Incentive stock options are granted at per share amounts at least equal to the
fair value at the date of grant, whereas for nonstatutory stock options, the
exercise price may be any amount determined by the Board, but not less than the
par value of a share.
Also on December 6, 1996, the Board of Trustees granted, under the 1996
Stock Option Plan options to purchase a total of 82,500 shares of beneficial
interest at $6.00 per share to a number of officers, employees and consultants
to the Trust. The options are cumulatively exercisable at a rate of 25% per
annum, commencing after six months, and expire five years after the date of
grant. At September 30, 1997 options to purchase 20,625 shares are exercisable,
none of which have been exercised.
The Trust elected Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB 25"), and related Interpretations in
accounting for its employee stock options. Under APB 25, no compensation expense
is recognized because the exercise price of the Trust's employee stock options
equals the market price of the underlying stock on the date of grant. The
alternative fair value accounting provided for under FASB No. 123, "Accounting
for Stock-Based Compensation", is not applicable because it requires use of
option valuation models that were not developed for use in valuing employee
stock options.
Proforma information regarding net income and earnings per share is
required by FASB No. 123, and has been determined as if the Trust had accounted
for its employee stock options under the fair value method. The fair value for
these options was estimated at the date of the grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1997
and 1996, respectively: risk free interest rate of 6.02% and 5.54%, dividend
yield of 0% in both years, volatility factor of the expected market price of the
Trust's common stock based on historical results of 0.270 and 0.389; and an
expected life for each option grant of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price
volatility. Because the Trust's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate,
management believes the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. The Trust has
elected not to present proforma information because the impact on the reported
net income and earnings per share is immaterial.
Changes in the number of shares under all option arrangements are
summarized as follows:
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
Outstanding at beginning of period 53,000 447,000 462,000
Granted 82,500 53,000 -
Option price per share granted $6.00 $4.375 -
Cancelled - - 15,000
Exercisable at end of period 47,125 13,250 447,000
Exercised - 400,700 -
Expired - 46,300 -
Outstanding at end of period 135,500 53,000 447,000
Option prices per share outstanding $4.375-$6.00 $4.375 $3.50-$3.63
As of September 30, 1997 the outstanding options had a weighted average
remaining contractual life of approximately 3.8 years and a weighted average
exercise price of $5.36.
Preferred Shares
The preferred shares held by Gould, a related party, provided for
cumulative annual dividends of $.2622 per share, payable quarterly, all of which
were paid, and were convertible into shares of beneficial interest on a
one-for-one basis, with one vote per share. On July 1, 1996 Gould converted its
1,030,000 preferred shares into 1,030,000 shares of beneficial interest. There
were no preferred shares outstanding at September 30, 1996 and 1997.
Treasury Shares
On July 2, 1996, the Trust's Board of Trustees authorized the purchase from
time to time of up to 250,000 shares of beneficial interest of the Trust. Two
additional 250,000 share purchase authorizations were approved on January 3,
1997 and August 25, 1997 for a total of 750,000 shares. As of September 30,
1997, 409,571 shares have been purchased (83,128 shares of which have been
cancelled) at an approximate aggregate cost of $2,701. From October 1, 1997
through December 1, 1997 an additional 208,402 shares have been purchased at an
aggregate cost of $1,700. At September 30, 1997, the Trust owns 518,000 shares
of beneficial interest of the Trust at an aggregate cost of $4,447.
NOTE 8 - ADVISOR'S COMPENSATION AND CERTAIN TRANSACTIONS
Certain of the Trust's officers and trustees are also officers, directors
and the shareholder of REIT Management Corp. ("REIT"), to which the Trust pays
advisory fees for administrative services and investment advice. The agreement,
which expires on December 31, 2001, provides that directors and officers of REIT
may serve as trustees, officers and employees of the Trust, but shall not be
compensated for services rendered in such latter capacities. Advisory fees are
charged to operations at a rate of 1%on real estate loans and 1/2 of 1% on other
invested assets. Advisory fees amounted to $559, $615 and $777 for the years
ended September 30, 1997, 1996, and 1995, respectively.
The borrower may pay fees to REIT for services rendered in arranging and
restructuring loans by the Trust. These fees, which are allowed by the advisory
agreement, on loans arranged on behalf of the Trust and which are paid directly
by the borrower to REIT amounted to $155 for the year ended September 30, 1997.
There were no such fees paid to REIT during the years ended September 30, 1996
and 1995.
A company with the same shareholder as REIT manages certain foreclosed
properties for the Trust under renewable year-to-year agreements. Management
fees and leasing, selling and financing commissions incurred for the years ended
September 30, 1997, 1996 and 1995 aggregated $638, $755 and $1,016,
respectively.
A law firm in which the partners are officers of the Trust, received fees
from either the Trust or directly from borrowers of the Trust totaling
approximately $17, $21 and $17 for the years ended September 30, 1997, 1996 and
1995, respectively.
The Chairman of the Board of Trustees of the Trust holds a similar position
in One Liberty, is an executive officer of the managing general partner and is a
general partner of Gould (Note 5). During the years ended September 30, 1997,
1996 and 1995, allocated general and administrative expenses charged to the
Trust by Gould aggregated $979, $1,161 and $1,338, respectively.
NOTE 9 - COMMITMENT
In August 1984, the Board of Trustees approved a non-contributory pension
plan covering eligible employees and officers. Contributions by the Trust are
made through a money purchase plan, based upon a percent of qualified employees'
total salaries. Pension expense approximated $81, $60 and $101 during the years
ended September 30, 1997, 1996 and 1995, respectively.
<PAGE>
NOTE 10 - QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Oct.-Dec. Jan.-March April-June July-Sept. For Year
----------- ----------- ----------- ----------- --------
1997
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $3,936 $4,477 $3,462 $5,280 $17,155
Income before
gain on sale of fore-
closed properties
held for sale $1,463 $1,784 $ 995 $ 2,404 $ 6,646
Net income $1,463 $1,784 $ 995 $ 3,091 $ 7,333
Per share $ .17 $ .21 $ .12 $ .37 $ .86(a)(b)
1996
----------------------------------------------------------------
Revenues $3,440 $3,432 $ 3,347 $ 3,337 $ 13,556
Income before
gain on sale of fore-
closed properties
held for sale $ 363 $ 90 $ 600 $ 723 $ 1,776
Net income $ 590 $ 90 $ 600 $ 966 $ 2,246
Per share $ .07 $ - $ .07 $ .11 $ .26(a)
</TABLE>
Per share earnings represent primary earnings per beneficial share.
(a) Calculated on weighted average shares outstanding for the fiscal year.
(b) Balances do not crossfoot due to rounding.
NOTE 11 - SUBSEQUENT EVENT
On November 24, 1997 the Trust sold its second mortgage on a cooperative
corporation, unsold shares in 246 cooperative apartment units and an unsecured
loan on an apartment complex located in Queens, New York. The assets which had
an aggregate book value of approximately $4,540 were sold for a total of $6,540
resulting in an aggregate gain of approximately $2,000.
On December 5, 1997, the Board of Trustees authorized the repurchase of an
additional 500,000 shares as part of its stock repurchase program, increasing
the total authorized shares to 1,250,000.
<PAGE>
BRT REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1997
(Amounts in Thousands)
<TABLE>
<CAPTION>
Grpss Amount At Which Carried At
Initial Cost To Company September 30, 1997
Buildings Costs Capitalized Buildings
Encum- And Subsequent to Acquisition And
Description brances Land Improvements Improvements Carrying Costs Land Improvements Total
- ----------- ------- ---- ------------ ------------ -------------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
Manhattann, New York $ - $ 594 $ 2,791 $ 892 $ - $594 $3,683 $4,277
Miscellaneous - 218 880 29 - 218 909 1,127
Shopping Center/Retail
Rock Springs, WY 1,298 600 2,483 268 28 600 2,779 3,379
Office
Dover, DE 8,042 775 3,195 7,305 - 775 10,500 11,275
Improved Land
Manhattan 2,222 2,307 - - - 2,307 - 2,307
Miscellaneous - 1,135 - - - 1,135 - 1,135
----- ----- ------ ------ ------ ----- ----- -----
$11,562 $5,629 $9,349 $8,494 $ 28 $5,629 $17,871 $23,500
======= ====== ====== ====== ====== ====== ======= =======
(a) (b)
</TABLE>
<TABLE>
<CAPTION>
Depreciation
Accum. Date Of Date Life For
Deprec. Construction Acquired Statement
------ ------------ -------- ---------
<S> <C> <C> <C> <C>
Manhattann, New York $ - - Apr-90 -
Miscellaneous - - Various -
Shopping Center/Retail
Rock Springs, WY 340 - Jan-92 21-35Years
Office
Dover, DE - - Oct-93 -
Improved Land
Manhattan - - Oct-93 -
Miscellaneous - - Various -
----
TOTAL $340
====
(c) (d)
</TABLE>
<PAGE>
BRT REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1997
(Amounts in Thousands)
Notes to the schedule:
(a) With respect to residential apartment units acquired through
foreclosure which are subject to an offering for sale of units or cooperative
shares, the net effect of income and expenses is applied to the basis of the
asset to the extent that the realizable value is not exceeded. With respect to
other operating properties, all operating income and expenses are reflected in
the Statement of Income.
(b) Total foreclosed properties held for sale $23,500 (1)
Less: Accumulated amortization 340
Valuation allowance 349
---
Net foreclosed properties held for sale $22,811
=======
(1) For federal income tax purposes, the net aggregate cost of foreclosed
properties is approximately $24,000.
(c) Amortization of the Trust's leasehold interest is over the terms of the
respective land leases.
(d) Information not readily obtainable.
(e) A reconciliation of real estate owned is as follows:
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
Balance at beginning of year $ 46,310 $50,248 $ 52,659
Additions:
Foreclosures 13 34 5,310
Capitalization of expenses 854 1,861 7,762
Recognition of valuation allowance upon
sale of property 1,779 332 -
Recognition of valuation allowance upon
relinquishment of property - - 435
---- ---- ---
48,956 52,475 66,166
------ ------ ------
Deductions:
Sales/conveyances 26,031 5,961 13,821
Relinquishment of real estate owned - - 1,441
Provision for valuation adjustment - - 178
Depreciation/amortization 114 204 478
--- --- ---
26,145 6,165 15,918
------ ----- ------
Balance at end of year $22,811 $46,310 $50,248
======= ======= =======
<PAGE>
BRT REALTY TRUST
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 1997
(Amounts in Thousands)
<TABLE>
<CAPTION>
FINAL
DESCRIPTION LOANS RATE DATE PERIODIC PAYMENT TERMS PRIOR LIENS
----------- ----- ---- ---- ---------------------- -----------
<S> <C> <C> <C> <C> <C>
First mortgage loans:
Long term:
Miscellaneous
$0-$299 22 $ -
Short term:
Office Building - Brooklyn, NY 1 9.75% Dec-98 Interest monthly, principal at maturity -
Shopping Center - Seattle, WA 1 Prime + 5.0% Open Interest monthly, principal at maturity -
Retail - New York, NY 1 10% Feb-00 Interest monthly, principal at maturity -
Retail - Brooklyn, NY 1 10% Jan-98 Interest and principal monthly -
Vacant Land -Lynewood Gardens,PA 1 Prime + 5.0% Open Interest monthly, principal at maturity -
Retail/Aparatments - New York, NY 1 Prime + 5.0% Jul-99 Interest monthly, principal at maturity -
Restaurant/Apartments - Brooklyn, NY 1 Prime + 5.0% Mar-98 Interest and principal monthly -
Cooperative Apartments - Islip, NY 1 Prime + 1.5% Oct-98 Interest monthly, principal at maturity -
Apartment Building - New York, NY 1 Prime + 5.0% Mar-98 Interrest and principal monthly -
Office Building - Brooklyn, NY 1 Prime + 1.0% Jun-98 Interest monthly, principal at maturity -
Underlying Mortgage - Bronx, NY 1 Tbill + 2.25% Jan-00 Interest monthly, principal at maturity -
Office Building - Bernardsville, NJ 1 Prime + 5.0% Oct-98 Interest and principal monthly -
Industrial Building - Queens, NY 1 10.5% Apr-98 Interest and principal monthly -
Miscellaneous
$0-$299 4 -
$300-$499 7 -
$500-$1,139 6 -
Junior mortgage loans:
Residential:
Underlying Mortgage-Queens, NY 1 9.0% Aug.-02 Interest monthly, principal at maturity 5,349
Miscellaneous
$0-$1 1 9,000
Wraparound mortgages:
Retail Building-New York, NY 1 Prime + 5.0% Apr-98 Interest monthly, principal at maturity 352
Miscellaneous
$0-$459 1 2,933
---- ------
56 $ 17,634
== ========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
CARRYING OF LOANS SUBJECT
FACE AMOUNT AMOUNT TO DELINQUENT
DESCRIPTION OF MORTGAGES OF MORTGAGES PRINCIPAL OR INTEREST
----------- ------------ ------------ ---------------------
<S> <C> <C> <C>
First mortgage loans:
Long term:
Miscellaneous
$0-$299 $ 756 $597 $ -
Short term:
Office Building - Brooklyn, NY 1,290 1,290 -
Shopping Center - Seattle, WA 1,461 - 1,461
Retail - New York, NY 1,550 1,550 -
Retail - Brooklyn, NY 1,720 1,720 -
Vacant Land -Lynewood Gardens,PA 1,918 - 1,918
Retail/Aparatments - New York, NY 1,966 1,966 -
Restaurant/Apartments - Brooklyn, NY 2,046 2,046 -
Cooperative Apartments - Islip, NY 2,143 2,143 -
Apartment Building - New York, NY 2,194 2,194 -
Office Building - Brooklyn, NY 2,575 2,575 -
Underlying Mortgage - Bronx, NY 2,835 2,200 -
Office Building - Bernardsville, NJ 3,134 3,134 -
Industrial Building - Queens, NY 3,185 3,185 -
Miscellaneous
$0-$299 766 354 -
$300-$499 2,777 2,777 -
$500-$1,139 5,174 4,258 -
Junior mortgage loans:
Residential:
Underlying Mortgage-Queens, NY 3,968 3,968 -
Miscellaneous
$0-$1 1 1 1
Wraparound mortgages:
Retail Building-New York, NY 1,951 1,951 -
Miscellaneous
$0-$459 455 - 455
--- --- ---
$43,865 $37,909 $3,835
======= ======= ======
</TABLE>
<PAGE>
BRT REALTY TRUST
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 1997
(Amounts in Thousands)
Notes to the schedule:
(a) The following summary reconciles mortgages receivable at their carrying
values:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 30,945 $ 41,526 $ 64,103
Additions:
Advances under real estate loans 15,353 451 498
Repayments to participating lenders 1,000 - 8,445
Capitalization of earned interest
income to loan balance in accordance
with agreements 177 - -
Previously provided allowances 1,300 - -
Purchase money mortgages from sale of
real estate owned 425 375 4,138
--- --- -----
49,200 42,352 77,184
------ ------ ------
Deductions:
Collections of principal 11,278 11,148 29,277
Proceeds from participating lenders - 225 50
Provision for possible loan losses - - 1,021
Investments transferred to foreclosed
properties, net 13 34 5,310
-- -- -----
11,291 11,407 35,658
------ ------ ------
Balance at end of year $ 37,909 $ 30,945 $ 41,526
======== ======== ========
(b) The aggregate cost of investments in mortgage loans is the same for
financial reporting purposes and Federal income tax purposes.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000014846
<NAME> BRT REALTY TRUST
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,152
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,315
<CURRENT-LIABILITIES> 0
<BONDS> 11,562
0
0
<COMMON> 26,657
<OTHER-SE> 39,880
<TOTAL-LIABILITY-AND-EQUITY> 80,315
<SALES> 0
<TOTAL-REVENUES> 17,155
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,333
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,333
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
