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 March 31, 1998
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.
8,060,604 Shares of Beneficial Interest,
$3 par value, outstanding on May 11, 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
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Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, September, 30
1998 1997
---- ----
(Unaudited) (Audited)
<S> <C> <C>
Assets:
Real estate loans - Note 3:
Earning interest $ 36,417 $ 40,030
Not earning interest 3,835 3,835
---------- ----------
40,252 43,865
Less allowance for possible losses 5,956 5,956
---------- ----------
34,296 37,909
--------- --------
Real estate assets:
Foreclosed properties held for sale 21,130 23,160
Investment in real estate venture 1,566 1,546
---------- ----------
22,696 24,706
Less valuation allowance 349 349
----------- -----------
22,347 24,357
--------- ---------
Cash and cash equivalents 19,246 10,152
Securities available-for-sale at market 6,309 5,382
Other assets 1,713 2,515
---------- ---------
Total Assets $83,911 $80,315
======= =======
Liabilities and Shareholders' Equity
Liabilities:
Loans and mortgages payable $11,028 $11,562
Accounts payable and accrued liabilities,
including deposits of $523 and $1,085 1,431 2,216
--------- --------
Total Liabilities 12,459 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 1,306 726
Accumulated deficit (31,156) (37,916)
--------- --------
78,324 70,984
Cost of 818 and 518 treasury shares of
beneficial interest (6,872) (4,447)
---------- --------
Total Shareholders' Equity 71,452 66,537
-------- -------
Total Liabilities and Shareholders' Equity $83,911 $80,315
======= =======
See Accompanying Notes to Consolidated Financial Statements.
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BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
(In Thousands except for Per Share Data)
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest and fees on real estate loans $ 1,121 $ 1,074 $ 2,403 $ 2,419
Operating income on real estate owned 1,119 2,327 2,103 4,495
Reversal of previously provided allowances - 1,000 - 1,300
Other, primarily investment income 264 76 444 199
----------- ------------ ----------- ----------
Total Revenues 2,504 4,477 4,950 8,413
---------- ---------- ---------- ---------
Expenses:
Interest-notes payable and loans payable 25 - 50 10
Advisor's fee 123 143 244 274
General and administrative 645 628 1,217 1,168
Operating expenses relating to real estate
owned including interest on mortgages
of $246 and $498 for the three-month
periods and $481 and $1,005 for the six-
month periods, respectively 574 1,782 1,217 3,440
Amortization and depreciation 86 140 172 274
------------ ----------- ----------- -----------
Total Expenses 1,453 2,693 2,900 5,166
---------- ---------- ---------- ----------
Income before gain on sale of foreclosed
properties held for sale 1,051 1,784 2,050 3,247
Gain on sale of foreclosed properties held
for sale 2,557 - 4,711 -
----------- ------------- ----------- --------------
Net Income $ 3,608 $ 1,784 $ 6,761 $ 3,247
========== ========== ========== ==========
Income per share of Beneficial Interest:
Basic and diluted earnings per share $ 0.45 $ 0.21 $ 0.83 $ 0.38
=========== =========== =========== ===========
Diluted earnings per share $ 0.44 $ 0.21 $ 0.82 $ 0.38
=========== =========== =========== ===========
Accumulated deficit, beginning of period $ (34,764) $ (43,786) $ (37,916) $ (45,249)
Net income 3,608 1,784 6,761 3,247
----------- ----------- ----------- -----------
Accumulated deficit, end of period $ (31,156) $ (42,002) $ (31,155) $ (42,002)
========== =========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Six Months Ended
March 31,
1998 1997
<S> <C> <C>
---- ----
Cash flow from operating activities:
Net income $6,761 $3,247
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 172 274
Reversal of previously provided allowances - (1,300)
Gain on sale of real estate and foreclosed properties (4,711) -
Capitalization of earned interest income to loan balance
in accordance with agreements (386) -
(Increase) decrease in interest receivable (2) 9
Decrease (increase) in prepaid expenses 33 (162)
(Decrease) increase in accounts payable
and accrued liabilities (389) 297
Decrease in deferred revenues (104) -
Decrease in rent receivables 77 40
Decrease in escrow deposits 208 42
Increase in deferred costs (5) (268)
Other 197 15
------- --------
Net cash provided by operating activities 1,851 2,194
------- -------
Cash flows from investing activities:
Collections from real estate loans 7,801 6,870
Additions to real estate loans (3,486) (5,904)
Repayments to participating lenders - (1,000)
Net costs capitalized to real estate owned (305) (828)
Proceeds from sale of real estate owned 6,669 412
(Decrease) increase in deposits payable (272) 164
Purchase of marketable securities (347) -
Decrease in investments in US Government obligations - 986
Other 162 (17)
--------- ---------
Net cash provided by investing activities 10,222 683
------- --------
Cash flow from financing activities:
Payoff/paydown of loan and mortgages payable (534) (1,499)
Repurchase of shares of beneficial interest, a portion of
which were cancelled (2,425) (1,367)
Other (20) (3)
--------- ---------
Net cash used in financing activities (2,979) (2,869)
-------- -------
Net increase in cash and cash equivalents 9,094 8
Cash and cash equivalents at beginning of period 10,152 6,209
------ -----
Cash and cash equivalents at end of period $19,246 $6,217
======= ======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $ 546 $ 710
====== ======
Supplemental schedule of non-cash investing and financing activities:
Transfer of foreclosed property to an investment
in a real estate venture $ - $1,552
See Accompanying Notes to Consolidated Financial Statements.
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BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Basis of Preparation
The accompanying interim unaudited consolidated financial statements
as of March 31, 1998 and for the three and six months ended March 31, 1998 and
1997 reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair statement of the results for such interim
periods. The results of operations for the three and six months ended March 31,
1998 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 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share. Statement 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.
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 8,089,500 and 8,165,702 for the three and six
month periods ended March 31, 1998 and 8,570,942 and 8,628,927 for the three and
six month periods ended March 31, 1997, respectively. Diluted earnings per share
reflects the potential dilution 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 three and six months ended March 31, 1998 and 1997 diluted
earnings per share was determined by dividing net income for the period by the
total of the weighted average number of shares of common stock outstanding plus
the dilutive effect of the Trust's outstanding options using the treasury stock
method which aggregated 8,134,254 and 8,212,429 and 8,601,674 and 8,653,673,
respectively.
Note 3 - Real Estate Loans
If all loans classified as non-earning were earning interest at
their contractual rates for the three and six months ended March 31, 1998 and
1997, interest income would have increased by approximately $153,000 and
$301,000 and $166,000 and $317,000, respectively.
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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. Repayments of real estate loans in the amount of $31,203,000
are due during the twelve months ending March 31, 1999, including $6,604,000 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 March 31, 1998.
During the six months ended March 31, 1998, the Trust generated cash
of $6,669,000 from the sale of real estate owned and $7,801,000 from collections
from real estate loans. These funds in addition to cash on hand, were used
primarily to fund real estate loans of $3,486,000 and purchase 300,248 shares of
beneficial interest of the Trust at an approximate aggregate cost of $2,425,000.
Cash and cash equivalents were $19,246,000 at March 31, 1998.
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
March 31, 1998, 818,225 shares have been purchased at an approximate aggregate
cost of $6,872,000. From April 1, 1998 through May 11, 1998 an additional 6,900
shares have been purchased at an aggregate cost of $49,000.
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.
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Results of Operations
- ---------------------
Interest and fees on real estate loans increased by $47,000 to
$1,121,000 for the three months ended March 31, 1998 as compared to $1,074,000
for the corresponding period in 1997. The increase was primarily due to a higher
average balance of earning real estate loans during the current quarter. This
category decreased by $16,000 to $2,403,000 for the six months ended March 31,
1998 as compared to $2,419,000 for the corresponding period in 1997. The
decrease was primarily due to a lower average balance of earning real estate
loans during the current six month period.
Operating income on real estate owned decreased by $1,208,000 to
$1,119,000 for the three months ended March 31, 1998 as compared to $2,327,000
for the corresponding period in 1997. This category decreased by $2,392,000 to
$2,103,000 for the six months ended March 31, 1998 as compared to $4,495,000 for
the corresponding period in 1997. The decreases in both the three and six month
periods were primarily the result of the loss of rental income associated with
the sale of foreclosed properties.
During the three and six month periods ended March 31, 1997, there were
reversals of previously provided allowances of $1,000,000 and $1,300,000,
respectively. There were no such reversals in either of the periods in 1998.
Other, primarily investment income increased by $188,000 to $264,000
for the three months ended March 31, 1998 as compared to $76,000 for the
corresponding period in 1997. This category increased by $245,000 to $444,000
for the six months ended March 31, 1998 as compared to $199,000 for the
corresponding period in 1997. The increases in both the three and six month
periods were primarily the result of increased interest and dividends on higher
average balances of cash and investments.
The Advisor's fee decreased by $20,000 to $123,000 for the three-month
period ended March 31, 1998 as compared to $143,000 for the corresponding period
in 1997. This category decreased by $30,000 to $244,000 for the six months ended
March 31, 1998 as compared to $274,000 for the corresponding period in 1997. The
decreases in both periods were a result of a decline in total invested assets,
the basis on which the fee is calculated.
General and administrative expenses increased by $17,000 to $645,000
for the three months ended March 31, 1998 as compared to $628,000 for the
corresponding period in 1997. This category increased by $49,000 to $1,217,000
for the six months ended March 31, 1998 as compared to $1,168,000 for the
corresponding period in 1997. The increases in each of the periods were
primarily the result of increased expenses associated with the generation of new
business.
Operating expenses relating to real estate assets decreased by
$1,208,000 to $574,000 for the three months ended March 31, 1998 as compared to
$1,782,000 for the corresponding period in 1997. This category decreased by
$2,223,000 to $1,217,000 for the six months ended March 31, 1998 as compared to
$3,440,000 for the corresponding period in 1997. The decreases in both the three
and six month periods were primarily the result of the sale of foreclosed
properties.
Amortization and depreciation decreased by $54,000 to $86,000 for the
three months ended March 31, 1998 as compared to $140,000 for the corresponding
period in 1997. This category decreased by $102,000 to $172,000 for the six
months ended March 31, 1998 as compared to $274,000 for the corresponding period
in 1997. The decrease is primarily the result of lower deferred mortgage costs
to be amortized as a result of the sale of various real estate assets and the
payoff of the underlying debt.
<PAGE>
Gain on sale of foreclosed assets was $2,557,000 and $4,711,000 for the
three and six-month periods ended March 31, 1998, respectively. There were no
comparable gains in either period in 1997. It is the policy of the Trust to
offer for sale all foreclosed property at prices that management believes
represent fair value.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Shareholders of the Trust ("Annual Meeting"), was held on
March 23, 1998. At the meeting, the following Trustees were elected for a term
of three years or until their respective successors are elected and shall
qualify:
Name Votes Cast For Votes Withheld
---- -------------- --------------
Arthur Hurand 7,509,446 47,693
Herbert C. Lust, II 7,509,895 47,244
Marshall Rose 7,510,860 46,279
The following Trustees remained in office after the Annual Meeting:
Fredric H. Gould, David Herold, Nathan Kupin, Gary Hurand, Patrick J. Callan
and Jeffrey A. Gould.
The Annual Meeting also considered the appointment of Ernst & Young LLP as the
Trust's independent auditors for the fiscal year ending September 30, 1998. With
respect to the appointment, 7,516,901 shares voted in favor, 16,578 shares
against and 23,660 shares abstained.
Item 6. Exhibits and Reports on Form 8-K
The Trust did not file any reports on Form 8-K during the quarter ended March
31, 1998.
<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
05/13/98 /s/ Simeon Brinberg
- -------- -------------------
Date Simeon Brinberg, Senior Vice President
05/13/98 /s/ David W. Kalish
- -------- -------------------
Date David W. Kalish, Senior Vice President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 19,246
<SECURITIES> 6,309
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,911
<CURRENT-LIABILITIES> 0
<BONDS> 11,028
0
0
<COMMON> 26,657
<OTHER-SE> 44,795
<TOTAL-LIABILITY-AND-EQUITY> 83,911
<SALES> 0
<TOTAL-REVENUES> 2,504
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,608
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,608
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,608
<EPS-PRIMARY> .45
<EPS-DILUTED> .44
</TABLE>
