SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 1-7172
BRT REALTY TRUST
(Exact name of registrant as specified in its charter)
Massachusetts 13-2755856
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Cutter Mill Road, Great Neck, NY 11021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 466-3100
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
8,078,117 Shares of Beneficial Interest,
$3 par value, outstanding on February 6, 1998
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, September, 30
1997 1997
---- ----
(Unaudited) (Audited)
<S> <C> <C>
Assets:
Real estate loans - Note 3:
Earning interest $ 35,464 $ 40,030
Not earning interest 3,835 3,835
---------- ----------
39,299 43,865
Less allowance for possible losses 5,956 5,956
---------- ----------
33,343 37,909
--------- --------
Real estate assets:
Foreclosed properties held for sale 21,702 23,160
Investment in real estate venture 1,551 1,546
---------- ----------
23,253 24,706
Less valuation allowance 349 349
----------- -----------
22,904 24,357
--------- ---------
Cash and cash equivalents 16,088 10,152
Securities available-for-sale at market 5,984 5,382
Other assets 2,461 2,515
---------- ---------
Total Assets $80,780 $80,315
======= =======
Liabilities and Shareholders' Equity
Liabilities:
Loans and mortgages payable $11,352 $11,562
Accounts payable and accrued liabilities,
including deposits of $688 and $1,085 1,428 2,216
--------- --------
Total Liabilities 12,780 13,778
-------- -------
Shareholders' Equity - Note 2:
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 shares at each date 26,657 26,657
Additional paid-in capital, net of distributions of $5,171 81,517 81,517
Net unrealized gain on available-for-sale securities 980 726
Accumulated deficit (34,763) (37,916)
--------- --------
74,391 70,984
Cost of 757 and 518 treasury shares of beneficial interest (6,391) (4,447)
--------- --------
Total Shareholders' Equity 68,000 66,537
--------- -------
Total Liabilities and Shareholders' Equity $80,780 $80,315
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
(In Thousands except for Per Share Data)
Three Months Ended
December 31,
Revenues: 1997 1996
---- ----
<S> <C> <C>
Interest and fees on real estate loans $ 1,282 $ 1,354
Operating income on real estate owned 984 2,159
Reversal of previously provided allowances - 300
Other, primarily investment income 180 123
-------- --------
Total Revenues 2,446 3,936
------- -------
Expenses:
Interest-notes payable and loans payable 25 10
Advisor's fee 121 131
General and administrative 572 540
Operating expenses relating to real estate owned
including interest on mortgages of $235 and $507 643 1,658
Amortization and depreciation 86 134
--------- --------
Total Expenses 1,447 2,473
------- -------
Income before gain on sale of foreclosed
properties held for sale 999 1,463
Gain on sale of foreclosed properties held for sale 2,154 -
-------- ----------
Net Income $ 3,153 $1,463
======= ======
Income per share of Beneficial Interest:
Basic and diluted earnings per share $0.38 $0.17
===== =====
Accumulated deficit, beginning of period ($37,916) ($45,249)
Net income 3,153 1,463
---------- -----------
Accumulated deficit, end of period ($34,763) ($43,786)
========= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
December 31,
1997 1996
---- ----
Cash flow from operating activities:
<S> <C> <C>
Net income $3,153 $1,463
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 86 134
Reversal of previously provided allowances - (300)
Gain on sale of real estate and foreclosed properties (2,154) -
Capitalization of earned interest income to loan balance
in accordance with agreements (154) -
(Increase) decrease in interest receivable (71) 22
Increase in prepaid expenses (9) (32)
Decrease in accounts payable and accrued liabilities (332) (118)
(Decrease) increase in deferred revenues (40) 15
Decrease in rent receivables 46 82
Decrease in escrow deposits 298 231
Increase in deferred costs (5) (262)
Other (114) (13)
-------- -------
Net cash provided by operating activities 704 1,222
------- -------
Cash flows from investing activities:
Collections from real estate loans 6,134 3,995
Additions to real estate loans (1,414) (785)
Net costs capitalized to real estate owned (75) (864)
Proceeds from sale of real estate owned 3,655 316
Decrease in deposits payable (397) (200)
Purchase of marketable securities (347) -
Other (151) 5
-------- ---------
Net cash provided by investing activities 7,405 2,467
------- ------
Cash flow from financing activities:
Payoff/paydown of loan and mortgages payable (210) (1,262)
Repurchase of shares of beneficial interest, a portion of
which were cancelled (1,944) (750)
Other (19) -
--------- ---------
Net cash used in financing activities (2,173) (2,012)
-------- -------
Net increase in cash and cash equivalents 5,936 1,677
Cash and cash equivalents at beginning of period 10,152 6,209
------ -----
Cash and cash equivalents at end of period $16,088 $7,886
======= ======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $ 286 $ 376
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements
as of December 31, 1997 and for the three months ended December 31, 1997 and
1996 reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair statement of the results for such interim
periods. The results of operations for the three months ended December 31, 1997
are not necessarily indicative of the results for the full year.
Certain items on the consolidated financial statements for the
preceding periods have been reclassified to conform with the current
consolidated financial statements.
The consolidated financial statements include the accounts of BRT
Realty Trust, its wholly-owned subsidiaries, and its majority-owned or
controlled real estate entities. For financial statement and economic purposes,
the majority-owned real estate entity is wholly-owned and presented accordingly.
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".
These statements should be read in conjunction with the consolidated
financial statements and related notes which are included in the Trust's Annual
Report on Form 10-K for the year ended September 30, 1997.
Note 2 - Shareholders' Equity
Per Share Data
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("FASB 128"), Earnings Per Share, which the Trust adopted on December
31, 1997. Basic earnings per share excludes dilution. For the quarters ended
December 31,1997 and 1996, basic earnings per share were determined by dividing
net income for the period by the weighted average number of shares of common
stock outstanding during each period which were 8,240,248 and 8,685,652,
respectively. Diluted earnings per share reflects the potential dilutions that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Trust. For the quarters ended
December 31, 1997 and 1996 diluted earnings per share were determined by
dividing net income for the period by the weighted average number of shares of
common stock outstanding and common stock equivalents outstanding which were
8,288,853 and 8,706,246, respectively.
Note 3 - Real Estate Loans
If all loans classified as non-earning were earning interest at
their contractual rates for the three months ended December 31,1997 and 1996,
interest income would have increased by approximately $148,000 and $97,000,
respectively.
<PAGE>
Item 2. 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. The Trust's investment policy emphasizes short-term mortgage
loans. Repayments of real estate loans in the amount of $31,691,000 are due
during the twelve months ending December 31, 1998, including $6,641,000 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 December 31, 1997.
During the three months ended December 31, 1997, the Trust generated
cash of $3,655,000 from the sale of real estate owned and $6,134,000 from
collections from real estate loans. These funds in addition to cash on hand,
were used primarily to fund real estate loans of $1,414,000 and purchase 239,102
shares of beneficial interest of the Trust at an approximate aggregate cost of
$1,944,000. Cash and cash equivalents were $16,088,000 at December 31, 1997.
The Trust's Board of Trustees authorized the purchase from time to
time of up to 1,250,000 shares of beneficial interest of the Trust. Through
December 31, 1997, 648,673 shares have been purchased at an approximate
aggregate cost of $4,645,000. From January 1, 1998 through February 6, 1998 an
additional 50,533 shares have been purchased at an aggregate cost of $395,000.
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 company's 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
Interest and fees on real estate loans decreased to $1,282,000 for
the three months ended December 31, 1997 as compared to $1,354,000 for the three
months ended December 31, 1996. The decrease of $72,000 was primarily a result
of the receipt of additional interest during the quarter ended December 31, 1996
of approximately $394,000 upon the payoff of an earning loan. Payoffs and
pay-downs of various earning real estate loans during the prior fiscal year also
added to this decrease. The decrease was offset by interest earned during the
quarter ended December 31, 1997 of approximately $500,000 on the origination of
new loans.
Operating income on real estate assets decreased by $1,175,000 to
$984,000 for the first quarter of the year ended September 30, 1998 from
$2,159,000 for the comparable period in the prior fiscal year. This decrease was
a direct result of the loss of rental income upon the sale of foreclosed
properties.
During the three months ended December 31, 1996 the Trust reversed
previously provided allowances of $300,000, upon the payoff in full of a real
estate loan. There was no comparable reversal during the three months ended
December 31, 1997.
Other, primarily investment income, increased by $57,000 to $180,000
for the quarter ended December 31, 1997 from $123,000 for the quarter ended
December 31, 1996. This increase is a result of interest and dividends earned on
investment securities.
The Advisor's fee decreased to $121,000 during the first quarter of
the year ended September 30, 1998 from $131,000 during the comparable period in
the prior fiscal year. 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 increased by $32,000 from
$540,000 for the quarter ended December 31, 1996 to $572,000 for the quarter
ended December 31, 1997. The increase was a result of expenses relating to the
generation of new business.
Operating expenses relating to real estate assets decreased to
$643,000 during the three months ended December 31, 1997 from $1,658,000 for the
comparable period in 1996 a decrease of $1,015,000. This decrease was primarily
a result of the sale of foreclosed properties.
Amortization and depreciation decreased to $86,000 during the first
three months of the year ended September 30, 1998 from $134,000 during the first
three months of the year ended September 30, 1997, a decrease of $48,000. There
has been a decrease in deferred mortgage costs to be amortized as a result of
the sale of various real estate assets and the payoff of the underlying debt.
Gain on sale of foreclosed properties for the quarter ended December
31, 1997 was $2,154,000, with no comparable gain for the quarter ended December
31, 1996. It is the policy of the Trust to offer for sale all foreclosed
property at prices that management believes represents fair value.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Trust filed two reports on Form 8-K during the quarter ended December 31,
1997.
On December 1, 1997 the Trust filed a Form 8-K to report the sale of the Trust's
general and limited partnership interests in Stobba Associates, L.P., thereby
conveying its interest in a mixed use property located in Philadelphia,
Pennsylvania. On December 18, 1997 Amendment No. 1 to Form 8-K was filed
containing the pro forma financial information relating to the disposition of
Stobba Associates, L.P. required by Item 7 of Form 8-K.
On December 16, 1997 a Form 8-K was filed by the Trust reporting an increase in
the Trust's stock repurchase program to 1,250,000 shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRT REALTY TRUST
Registrant
02/13/98 /s/ Simeon Brinberhg
Date Simeon Brinberg, Senior Vice President
02/13/98 /s/ David W. Kalish
Date David W. Kalish, Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 16,088
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,780
<CURRENT-LIABILITIES> 0
<BONDS> 11,352
0
0
<COMMON> 26,657
<OTHER-SE> 41,343
<TOTAL-LIABILITY-AND-EQUITY> 80,780
<SALES> 0
<TOTAL-REVENUES> 2,446
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,153
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,153
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
