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
For the fiscal year ended September 30, 2000
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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
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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 11010
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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
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Shares of Beneficial New York Stock Exchange
Interest, $3.00 Par Value
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(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 $23,675,000 as of December 1, 2000.
As of December 1, 2000 the registrant had 7,170,263 Shares of
Beneficial interest out-standing, 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 29, 2001,
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>
Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and
information publicly disseminated by BRT Realty Trust ("BRT" or the "Trust"),
contains certain-forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. BRT intends such forward-looking statements to
be covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 and includes
this statement for purposes of complying with these safe harbor provisions.
Forward-looking statements which are based on certain assumptions and describe
BRT's future plans, strategies and expectations, are generally identifiable by
use of the words "believe", "expect", "intend", "anticipate", "estimate",
"project" or similar expressions. You should not rely on forward-looking
statements since they involve known and unknown risks, uncertainties and other
factors which are, in some cases, beyond the Trust's control and which could
materially affect actual results, performance or achievements. Factors which may
cause actual results to differ materially from current expectations include, but
are not limited to (1) general economic conditions affecting the New York
Metropolitan Area and other geographic areas in which BRT has involvement, (2)
general and local real estate conditions, (3) changes in governmental laws and
regulations, (4) the level and volatility of interest rates, and (5) increased
competition from entities engaged in mortgage lending. Accordingly, there can be
no assurance that the Trust's expectations will be realized.
PART 1
Item l. Business.
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General
BRT is a real estate investment trust organized in 1972 under the laws
of the Commonwealth of Massachusetts (all references herein to "BRT" or the
"Trust" include BRT's wholly-owned subsidiaries). BRT's 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 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.
BRT emphasizes loans with terms ranging from six months to three years to
persons requiring short term funds, among other reasons, for the acquisition of
a property, the purchase (normally at a discount) of a mortgage applicable to a
property owned by the borrower, rehabilitating or renovating a property or
converting a commercial property to residential use. BRT does not finance new
construction. During the fiscal year ending September 30, 2000 ("Fiscal 2000"),
BRT also originated for its own account participating mortgage loans and became
an equity participant in joint ventures which acquired real property (see
"Investment Policy" below).
At September 30, 2000 BRT had $43,663,000 principal amount of loans
outstanding, of which 71% were secured by properties located in New York City,
Nassau and Suffolk counties. During Fiscal 2000, BRT originated $31,865,000
principal amount of loans, it had payoffs and paydowns of $32,884,000 principal
amount of loans and it earned $775,000 of loan related fees.
Substantially all mortgage loans originated and held by BRT bear
interest at a floating rate related to the prime rate. The interest rate adjusts
when the prime rate changes. Interest on mortgage loans held by BRT is payable
monthly and BRT usually holds escrows, also paid monthly, for real estate taxes
and insurance (casualty and liability) premiums. BRT receives a commitment fee
on all mortgage loans it originates and usually receives an extension fee in
connection with the extension of a loan. These fees are generally paid at the
time a loan is funded or extended. Commitment and extension fees are taken into
income 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 (which includes an advance against projected legal
fees to be incurred by BRT and other projected miscellaneous costs) is received
on substantially all commitments.
In the fiscal year ended September 30, 1998 ("Fiscal 1998"), BRT,
through BRT Funding Corp. (a wholly-owned subsidiary), originated longer term
senior real estate mortgage loans secured by income producing real property,
primarily multi-family properties. These loans provide for a fixed rate of
interest, had an initial five-year term and provide for amortization of
principal over 20 to 25 years. The borrower is usually afforded the option to
extend the loan for an additional five years at a market rate of interest. In
the fiscal year ended September 30, 1999 ("Fiscal 1999") BRT Funding Corp. sold
to a banking institution, at par, senior participations in $9,399,000 principal
amount of loans originated by it, with BRT Funding Corp. retaining a junior
participation in the loans sold. The senior participant acquired, at par,
between 70% and 90% of the face value of each loan purchased, with BRT Funding
Corp. retaining between 10% and 30%. The interest rate paid to the institution
acquiring the senior participation is somewhat less than the interest rate
provided for in the applicable loan documents, thereby enhancing the return to
BRT on the retained junior position. Since the junior position is subordinate to
the payment in full of the senior position, it is a riskier investment and in
the event of a default under the mortgage, BRT will have to determine if it will
protect its position by paying out the senior portion and in the event of a
default it may lose all or part of its investment. At September 30, 2000,
$6,234,000 principal amount of loans originated by BRT Funding Corp. and
$628,000 principal amount of junior participations in loans originated by BRT
Funding Corp., were held in BRT's mortgage portfolio. In view of the highly
competitive market for this conventional lending activity, BRT Funding Corp. has
not been active in this market since December 1998.
At September 30, 2000 BRT's mortgage portfolio consisted of 43 mortgage
loans totaling $42,282,000 in aggregate principal amount (net of allowances of
$1,381,000), representing 48% of BRT's total assets. At September 30, 2000 all
outstanding loans, except for two first mortgage loans in the principal amount
of $2,615,000 (net of an allowance of $635,000) were earning interest. The two
mortgage loans not earning interest represent 6.2% of the outstanding loan
portfolio and 3% of total assets at September 30, 2000. BRT expects to recover
at least the full principal amount (net of allowances) and any unpaid interest
on these two non-earning loans. Of the principal amount of loans outstanding at
September 30, 2000, 90% represented first mortgage loans and 10% represented
second mortgage and wrap-around loans and junior participations in loans
originated by BRT Funding Corp. There were no loans outstanding secured by
undeveloped real property.
In Fiscal 2000, in addition to originating mortgage loans, BRT was
engaged in managing its loan portfolio, supervising and maintaining assets owned
by BRT, supervising the activities of joint ventures in which BRT is involved as
an equity participant and leasing and selling real estate assets. Approximately,
14% of BRT's total assets at September 30, 2000 or an aggregate of $11,976,000
(after valuation allowances) was represented by real estate assets, including
investments in joint ventures. Approximately 27% of BRT's net investment assets
(either real estate loans or real estate assets) related to cooperative
apartments at September 30, 2000.
In Fiscal 1999 and Fiscal 2000, the Trust experienced an increased
level of competition in mortgage lending activities. The competition was
primarily in terms of rate and in the amounts lenders were willing to lend
vis-a-vis the underlying value of the real estate (loan to value ratio). BRT
adhering to its underwriting policies, originated approximately the same
principal amount of new loans in Fiscal 1999 and Fiscal 2000 as there were
principal repayments. As a result of this factor and cash generated in Fiscal
1999 from operations and the sale of securities, real property and senior loan
participations, BRT had $28,757,000 of cash and cash equivalents, available on
October 1, 1999, which amount increased in the first quarter of the 2000 Fiscal
Year.
In December 1999 (the first quarter of the 2000 Fiscal Year), BRT's
management recommended to its Board of Trustees and the Board of Trustees
authorized the investment of a portion of BRT's available cash in securities of
other publicly traded real estate investment trusts. The recommendation of
management and the authorization by the Board of Trustees was based on the
following considerations: (1) in the opinion of management and the Board of
Trustees the securities of many publicly traded real estate investment trusts
were significantly undervalued; (2) the yields on the securities of real estate
investment trusts was significantly greater than the yields obtainable from
other REIT qualifying investments without a substantial increase in risk, and
(3) investments in the securities of other real estate investment trusts are
qualifying investments for REIT qualification purposes. Purchases of securities
of other publicly traded real estate investment trusts commenced in December
1999, subsequent to the Board's authorization. At September 30, 2000, BRT's
balance sheet reflects an investment of $16,310,000 in the securities of other
real estate investment trusts (18% of total assets), of which $14,403,000 (16%
of total assets) represents an investment in the common shares of Entertainment
Properties Trust ("EPR"). BRT currently owns 1,355,600 shares of Common Stock of
EPR, or 9.24% of EPR's outstanding shares, at a cost of $17,806,000. At
September 30, 2000, BRT has an unrealized loss on its investment in EPR of
$3,403,000, offset by a $270,000 unrealized gain in the securities of other real
estate investment trusts. For a further discussion of BRT's investment in EPR
and the business of EPR, see "Investment in EPR" below.
With respect to real estate which BRT has taken back in foreclosure or
deed in lieu thereof, it has been BRT's policy to offer for sale all such real
estate at prices which management believes represents fair value in the
geographic area in which the property is located. In the year ended September
30, 2000, BRT sold shares (and assigned the related proprietary leases) in
cooperative apartments resulting in net proceeds of approximately $1,873,000 and
gain on sale of $1,715,000. There were no other sales of real estate assets in
Fiscal 2000.
Investment Policy
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BRT's investment policy emphasizes short-term senior real estate
mortgage loans secured by first liens on income producing real property. BRT
will also make junior real estate loans secured by income producing real
property and from time-to-time senior real estate mortgage loans secured by
undeveloped real property. Junior mortgage loans are subordinate to one or more
prior liens. Junior mortgage loans 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 is calculated is the
outstanding balance under the prior existing mortgage loan plus the amount
actually advanced under the wrap-around loan. The terms of a wrap-around loan
normally require that a borrower make principal and interest payments directly
to BRT and BRT in turn pays the holder of the prior mortgage loan.
The Trust also originates participating mortgage loans. A participating
mortgage loan provides for a floating interest rate (related to the prime rate)
which is usually at a somewhat lesser base rate than the rate charged by BRT on
short term mortgages, will usually be for a longer term and will provide for
payment of "additional interest" either at the time of the sale or refinancing
of the property securing the loan or at the maturity of the loan. The additional
interest can be calculated based on the incremental value of the property
securing the mortgage, the period of time the loan is outstanding, profit
generated by the borrower on the sale of the property securinig the loan or
other negotiated criteria. At September 30, 2000 BRT had $9,260 ,000 of
participating mortgage loans outstanding. A participating mortgage loan in the
principal amount of $7,710,000 was repaid in full in November, 2000, with BRT
receiving "additional interest" of $710,000 from this transaction.
In Fiscal 2000, the Trust originated short term mortgage loans (first
and second mortgage loans) to joint ventures in which BRT became an equity
venturer. BRT was presented with opportunities in Fiscal 2000 to originate loans
secured by real property and to make an equity investment in such real property
assets. In a limited number of situations, after underwriting and evaluating the
investment and determining that the investment provided an opportunity for above
market returns, BRT made an equity investment in some such properties on a pari
passu basis with its borrower, and made a short term loan to the venture. At
September 30, 2000, as a consequence of transactions concluded in Fiscal 2000,
BRT had $955,380 invested in unconsolidated joint ventures and $850,000 of
second mortgage loans outstanding to these joint ventures (after repayment
during the year of $100,000). In Fiscal 2000, BRT also invested $1,138,000 in a
consolidated joint venture and advanced to the venture a mortgage loan in the
principal amount of $2,400,000 to acquire this property. Subsequent to the end
of Fiscal 2000, a first mortgage from an unaffiliated party was placed on this
property, and BRT's advance was repaid in full. A mortgage loan to a joint
venture is secured by the property owned by the venture. In these joint venture
transactions, the BRT loan must be paid in full before any distributions can be
made to joint venturers.
BRT has no fixed policy or limitation upon the amount or percentage of
its assets which it may invest in a single mortgage loan. During the year ended
September 30, 2000 the average loan originated was approximately $1,900,000 and
the largest loan originated was $7,750,000. It is not the present intent of
BRT's management to cause BRT to invest in any mortgages secured by property
located outside the United States and Puerto Rico.
Loan approvals and approval of joint venture investments of the type
described above are based on a review of an application that is prepared and
submitted by the proposed borrower, site visits to the property by at least two
officers of BRT, a title review of the underlying property, in-house property
appraisals, a review of the results of operations of the property, the financial
statement of the prospective borrower, and final approval by a loan committee
made up of executive officers of BRT. In addition, in most instances, BRT has an
engineering inspection and a Phase I environmental study conducted. BRT does not
require a property appraisal by an independent appraiser.
BRT uses its own capital for investing in mortgage loans. In addition,
it has arranged for a credit facility to make funds available for real estate
mortgage lending. In May, 1999 BRT entered into a revolving credit agreement
("Credit Agreement") with TransAmerica Business Credit Corporation
("TransAmerica"), which provides that it may borrow a maximum of $45,000,000 on
a revolving basis (funds can be borrowed, repaid and borrowed again). The credit
facility matures May 18, 2002. BRT pays a fee ("unused fee") to TransAmerica of
.125% per annum, payable monthly, on the difference between the loan balance and
the maximum loan amount of $45,000,000. Borrowings under the Credit Agreement
bear interest at either Libor plus 3.25% or prime plus .50%, adjusted monthly.
Subject to certain timing and size requirements BRT can choose between the two
interest rates. The loan is collateralized by specific receivables and BRT's
equity in specific real property. The loan amount can never exceed 80% of
approved collateral. BRT can substitute collateral for pledged collateral. The
Trust is required to maintain a $70,000,000 tangible net worth (as defined) and
it cannot permit the interest coverage ratio (net income plus interest expense
to interest expense) to be less than 1.75:1.00 over specified periods. The
Credit Agreement contains additional affirmative and negative covenants, all of
which have been and continue to be met. As at September 30, 2000 there was
$3,400,000 available for borrowing under the Credit Agreement and $88,000
outstanding. Additional collateral is being reviewed by TransAmerica for
approval, which should, in the normal course, increase the amount available for
borrowing.
The mortgage loans which BRT originates are usually with full recourse,
but are not insured, in whole or in part, as to collectability. BRT will obtain
a personal guarantee or "walk-away guarantee" from the principal or principals
of the borrower for most loans originated. A "walk-away guarantee" provides in
substance that the guarantee terminates if the borrower conveys the property to
BRT, provided that at the time of conveyance interest and amortization payments
to BRT are current, real estate taxes are current and outstanding bills related
to the property's operations are current. The "walk-away guarantee" is intended
to provide an incentive to the principals of a borrower to deed a property to
BRT, thereby eliminating the need for foreclosure, in situations in which the
borrower is not financially able or capable of operating the property on a cash
flow positive basis and runs the risk of losing the property in a foreclosure.
In the event of a default by the borrower on a mortgage loan, BRT will
foreclose the mortgage or seek to protect its investment through negotiations
with the borrower and or other interested parties, which may involve further
cash outlays. During a mortgage foreclosure proceeding BRT 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
(two years or more in many instances). In addition, if the borrower files for
protection under the federal bankruptcy laws during the foreclosure process,
delays may be longer. In a foreclosure proceeding, BRT will seek to have a
receiver appointed by the Court or an independent third party property manager
appointed (with the borrower's agreement) in order to preserve the rental income
stream and provide for the maintenance of the property. At the conclusion of the
foreclosure or negotiated workout process (after the property is sold at auction
to a third party purchaser or acquired by BRT or another investor or the workout
process results in the borrower or its designee retaining the property) the
amounts collected by the receiver or the third party manager, less costs and
expenses of operating the property and the receiver's or manager's fees, are
usually paid over to BRT. During the year ended September 30, 2000 no
foreclosure proceedings were commenced, but one foreclosure proceeding involving
a first mortgage loan with an unpaid principal balance of $3,400,000 was
pending. The current carrying value of this loan is $2,835,000.
In instances in which BRT invests in junior mortgage loans, sells
senior participations in loans (retaining the junior position) or invests in
wrap-around loans, the mortgages securing BRT's loans are subordinate to the
liens of senior mortgages or senior participations. At September 30, 2000
approximately 10% of BRT's real estate mortgages were represented by junior
mortgages, junior participations or wrap-around mortgage loans. Although the
Trust seeks to protect itself by obtaining title insurance in connection with
each loan it originates, in certain circumstances a mortgage owned by BRT may be
subordinate to mechanics liens or government liens. 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, BRT 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 in cases in which BRT holds a junior
lien or junior participation may be less than its total investment less
allowances for possible losses.
<PAGE>
Current Loan Status
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As of September 30, 2000 BRT had 43 mortgage loans in its mortgage
portfolio, totaling $43,663,000 in aggregate principal amount and $42,282,000
after allowances for possible losses of $1,381,000. During the year ended
September 30, 2000 $31,865,000 of mortgage loans were originated and $32,884,000
of outstanding loans were repaid in whole or in part. The three largest mortgage
loans outstanding at September 30, 2000 represent 8.7%, (repaid in full on
November 1, 2000), 3.9% and 2.9%, respectively, of the BRT's total assets. No
other mortgage loan accounted for more than 2.7% of BRT's total assets at
September 30, 2000.
Information regarding BRT's mortgage loans outstanding at September 30, 2000:
<TABLE>
<CAPTION>
Prior No. of
Total(1) Liens Loans
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(Amounts in thousands)
<S> <C> <C> <C>
First Mortgage Loans:
Long-term:
Residential 2,968 - 6
Shopping centers 4,603 - 5
Short-term (five years or less):
Shopping centers/retail 2,329 - 4
Industrial buildings 3,300 - 2
Office buildings 3,955 - 4
Residential (multiple family units) 18,067 - 10
Hotel 3,890 - 2
Miscellaneous 182 - 2
Second Mortgage Loans,
wraparound mortgages and
junior participations 4,369 19,141 (2) 8
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$43,663 $19,141 43
====== ======= ==
(1) Except for two loans in the outstanding amount of $3,250,000 (net
of allowances), all loans outstanding at September 30, 2000 were earning
interest.
(2) Includes $5,652,000 of senior participations. BRT holds junior
participations of $628,000 in these loans.
</TABLE>
At September 30, 2000 and 1999 BRT had allowances for possible losses
on its real estate mortgage loans of $1,381,000. In determining the allowance
for possible loan losses, BRT 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. BRT
also takes into account the extent of liquidity in the real estate industry,
particularly in the New York metropolitan area, where approximately 71% 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, BRT may acquire the underlying
property through foreclosure or may take other legal action as is necessary to
protect its investment. In negotiated workouts BRT 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.
Investment in EPR
-----------------
As of September 30, 2000, BRT owned 1,355,600 common shares of Entertainment
Properties Trust (NYSE:EPR), constituting approximately 9.24% of the 14,679,549
common shares of EPR outstanding. The shares were purchased for a total
consideration of $17,806,000, or an average cost of $13.14 per share. BRT has
advised EPR that it desires to make a more significant investment in EPR and to
have two of its designees elected to the Board of Directors of EPR. In order for
BRT to make an additional investment in EPR shares, EPR would have to waive a
provision of its Amended and Restated Declaration of Trust which effectively
limits ownership to 9.8% in number of shares or value of outstanding shares of
any class of common stock or preferred stock of EPR. BRT has advised EPR in
writing that the stated reason for the 9.8% ownership limitation, to insure that
the five or fewer rule contained in Section 856 of the Internal Revenue Code is
not compromised, is not applicable to BRT since BRT is a REIT with many
shareholders and therefore BRT is not deemed to be one owner or holder of shares
but its ownership is "sprinkled" down to its "shareholders". EPR has to date
rejected BRT's request to make an additional investment in EPR, to have the 9.8%
limitation waived as it relates to BRT, and to have its designees elected to
EPR's Board of Directors. BRT intends to propose one of BRT's designees for
election to the EPR Board at the next Annual Meeting of Shareholders of EPR,
which is scheduled to be held in May, 2001.
EPR's Annual Report on Form 10K for the year ended December 31, 1999 states the
following with respect to EPR's business:
"Entertainment Properties Trust ("Company") was formed on August 22, 1997 as a
Maryland real estate investment trust ("REIT") to capitalize on the
opportunities created by the development of destination entertainment and
entertainment-related properties, including megaplex movie theatre complexes.
The Company completed an initial public offering ("IPO") of its common shares of
beneficial interest ("Shares") on November 18, 1997. The Company is the first
publicly-traded REIT formed exclusively to invest in entertainment-related
properties.
The Company is a self-administered REIT. As of December 31, 1999, the Company's
real estate portfolio was comprised of 23 megaplex theatre properties located in
eleven states and one entertainment-theme related center ("ETRC") development
property located in Westminister, Colorado. The Company also owns land parcels
and related properties adjacent to several of its theatre properties. The
Company's theatre properties are leased to leading theatre operators, including
American Multi-Cinema, Inc. ("AMC"), a subsidiary of AMC Entertainment, Inc.
("AMCE"), Consolidated Theatres ("Consolidated"), Muvico Entertainment LLC
("Muvico"), Edwards Theatre Circuits, Inc. ("Edwards") and Loews Cineplex
Entertainment ("Loews").
Megaplex theatres typically have at least 14 screens with predominately stadium
- style seating (seating with elevation between rows to provide unobstructed
viewing) and are equipped with amenities that significantly enhance the audio
and visual experience of the patron. The Company believes the development of
megaplex theatres has accelerated the obsolesce of many existing movie theatres
by setting new standards for movie-goers, who, in the Company's experience, have
demonstrated their preference for the more attractive surroundings, wider
variety of films, superior customer service and more comfortable seating typical
of megaplex theatres . . ."
Discussion in this Form 10K of the business of EPR is taken verbatim from EPR's
Form 10-K for the year ended December 31, 1999. BRT has only included those
portions of the Annual Report of EPR which it determined was necessary for an
understanding of the business of EPR, and the above discussion of EPR's business
is qualified in its entirety by reference to EPR's Form 10K for the year ending
December 31, 1999, (including a discussion of the Risk Factors applicable to
EPR's business, the financial statements of EPR, and Management's Discussion and
Analysis of Financial Condition and Results of Operations), as well as all Form
10Q's and Form 8K's filed by EPR since January 1, 2000. BRT has no knowledge of
the business, financial condition or results of operations of EPR, other than as
set forth in the reports filed by EPR with the Securities and Exchange
Commission, published industry reports related to the exhibition of motion
pictures and analysts reports relating to EPR. Reference is made to EPR's Form
10-K for the year ended December 31, 1999, its Form 10-Q for the quarters ended
March 31, June 30 and September 30, 2000 and to its Forms 8-K, as filed with the
Securities and Exchange Commission for information concerning EPR's business,
financial condition and results of operations.
Competition
-----------
With respect to it's real estate lending activities, BRT competes for
acceptable investments with other REITs, commercial banks, savings and loan
associations, conduits, pension funds and mortgage banking firms. Competition
for mortgage loans, particularly mortgages secured by multi-family residential
properties, is highly competitive, with lenders competing on rate, fees, amounts
committed, term and service. Due to the competitive nature of the lending market
in 2000, the repayment of outstanding loans in fiscal 2000 exceeded by
$1,019,000 the principal amount of loans originated.
Employees
---------
BRT has 10 full-time employees, of which 4 are engaged primarily in
loan origination activities. In addition, BRT has entered into an agreement with
REIT Management Corp. pursuant to which REIT Management Corp. acts as its
advisor. At the present time, REIT Management, subject to supervision of BRT's
Board of Trustees, administers BRT's portfolio of mortgages receivables, engages
in negotiations in workout situations with respect to non-earning and delinquent
loans and supervises and provides support services in litigation activities.
REIT Management Corp. also supervises the maintenance, leasing, sale and/or
financing of real estate owned by BRT and joint ventures in which BRT is
involved as a venturer. In addition, REIT Management Corp. participates in
originating, investigating and evaluating investment opportunities. Reference is
made to BRT's Proxy Statement to be filed pursuant to Regulation 14A for
information concerning the amount and method of computing REIT Management
Corp.'s fee.
In the years ended September 30, 2000 and 1999, BRT engaged entities,
including entities affiliated with REIT Management Corp., to manage properties
(including cooperative apartments) acquired by BRT in foreclosure or deed in
lieu of foreclosure and joint ventures in which BRT has an interest. The
management services include, among other things, rent billing and collection,
accounting, property maintenance, contractor negotiation, construction
management, sales, leasing and mortgage brokerage. In management's judgment the
fees paid to REIT Management Corp. and entities affiliated with REIT Management
Corp. 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 BRT. The business
history of officers who are also Trustees will be provided in BRT's proxy
statement to be filed pursuant to Regulation 14A not later than January 29,
2001.
Name Office
---- ------
Fredric H. Gould (*) Chairman of the Board and
Chief Executive Officer
Jeffrey A. Gould (*) President and Chief Operating Officer
Simeon Brinberg Senior Vice President;
Secretary
Eugene J. Keely Vice President
Matthew J. Gould (*) Senior Vice President
David W. Kalish Senior Vice President, Finance
George E. Zweier Vice President, Chief Financial Officer
Mark H. Lundy Vice President
Israel Rosenzweig Senior Vice President
Seth Kobay Vice President; Treasurer
(*)Fredric H. Gould is Jeffrey A. and Matthew J. Gould's father.
Simeon Brinberg (age 67), has been Secretary of BRT since 1983 and Senior
Vice President since 1988. In October, 1988 Mr. Brinberg became a Vice President
of BRT and a Vice President of Georgetown Partners, Inc., the managing general
partner of Gould Investors L.P. Gould Investors L.P. is primarily engaged in the
ownership and operation of real estate properties held for investment. In June,
1989 he became a Vice President of One Liberty Properties, Inc., a real estate
investment trust engaged in the ownership of "net leased" real property. Mr.
Brinberg is a member of the New York Bar and was engaged in the private practice
of law for approximately thirty years prior to joining BRT in 1988.
Eugene J. Keely (age 65) has been a Vice President of BRT since May
1983.
<PAGE>
Matthew J. Gould (age 41) was President of One Liberty Properties, Inc.
from June, 1989 to December 1999. In December 1999 he became a Director and
Senior Vice President of One Liberty Properties, Inc. He has been a Vice
President of BRT since 1986 and became a Senior Vice President in March 1993. He
has been President of Georgetown Partners, Inc., the managing general partner of
Gould Investors L.P. since March 1996 and since December 1999 he has devoted a
substantial portion of his business time to the business of Gould Investors L.P.
In addition, Mr. Gould has been a Vice President of REIT Management Corp., BRT'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.
Mr. Gould is a member of the New York bar.
David W. Kalish (age 53) was Vice President and Chief Financial Officer of
BRT from June, 1990 until August, 1998. Since August, 1998, Mr. Kalish has been
Senior Vice President, Finance of BRT. 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 to June, 1990, Mr. Kalish, a
certified public accountant, was a partner of Buchbinder Tunick & Company, and
its predecessors.
George E. Zweier (age 36) has been employed by BRT since June 1998 and
was elected Vice President, Chief Financial Officer in August, 1998. For
approximately five years prior to joining BRT, Mr. Zweier, a certified public
accountant, was an accounting officer with the Bank of Tokyo - Mitsubishi
Limited, in New York and for more than five years prior thereto he was an
accounting and audit officer with the Dime Savings Bank of New York, Uniondale,
New York.
Mark H. Lundy (age 38) has been a Vice President of BRT 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.
Israel Rosenzweig (age 53) has been a Senior Vice President of BRT since
April, 1998 and has served as President of BRT Funding Corp. since April 1998.
He has been a Vice President of Georgetown Partners, Inc. and One Liberty
Properties, Inc. since May, 1997. From December 1993 to April 1997 Mr.
Rosenzweig was Executive Vice President and a Director of Bankers Federal FSB
which was acquired by Dime Savings Bank in April, 1997. He is a Director of
Nautica Enterprises, Inc.
Seth Kobay (age 46) 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.
----------
BRT'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 is owned by an affiliate of Gould Investors L.P.
BRT contributed $124,000 to the annual rent of $309,000 paid by Gould Investors
L.P., REIT Management Corp., One Liberty Properties, Inc., and related entities
in the year ended September 30, 2000.
At September 30, 2000, BRT did not own any significant real property
(significant meaning a property with a book value amounting to 10% or more of
BRT's total assets). It has been BRT's policy to offer for sale all real estate
assets acquired by it in foreclosure or deed in lieu of foreclosure at prices
which management believes represents fair value in the geographic area in which
the property is located. In Fiscal 2000, the only real estate assets sold by BRT
were shares and related proprietary leases in cooperative apartments which were
sold for a total of $1,873,000 resulting in a gain on sale of $1,715,000.
Item 3. Legal Proceedings.
-----------------
BRT 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 year
ended September 30, 2000 to a vote of BRT's security holders.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Matters
-------------------------------------------------------------
The shares of Beneficial Interest ("Beneficial Shares") of BRT are
listed on the New York Stock Exchange. The following table shows for the periods
indicated, the high and low sales prices of the Beneficial Shares on the New
York Stock Exchange as reported on the Composite Tape.
Fiscal Year Ended September 30, High Low
------------------------------ ---- ---
2000
First Quarter 9 6 5/8
Second Quarter 8 13/16 7 1/2
Third Quarter 8 1/8 7 1/2
Fourth Quarter 8 1/2 8 1/16
1999
First Quarter 6 1/8 5 7/8
Second Quarter 7 6
Third Quarter 8 3/8 6 7/8
Fourth Quarter 8 3/4 7 13/16
As of December 1, 2000 there were approximately 1,150 holders of record
of BRT's Beneficial Shares.
BRT did not declare any cash distributions to common shareholders
during the years ended September 30, 1999 and 2000.
BRT 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 BRT 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. Accumulated tax losses were
$9,486,000 at December 31, 1999 and are projected to be approximately $2,200,000
at December 31, 2000. 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 BRT's financial condition, earnings, business
plan, cash flow and other factors. It is the intention to make the required cash
distributions in order for BRT to maintain its qualification as a real estate
investment trust for Federal income tax purposes. The credit agreement with
TransAmerica provides that BRT may pay cash distributions to the extent
necessary to maintain its status as an entity taxed as a real estate investment
trust for federal income taxes provided BRT is not in monetary default under the
Credit Agreement or any other indebtedness.
<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 BRT for each of the
fiscal periods in the five years ended September 30, 2000. This table should be
read in conjunction with the detailed information and financial statements of
BRT appearing elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Years Ended
September 30,
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Operating statement data:
Total revenues $10,886 $12,173 $10,197 $17,155 $13,556
Income (loss) before
gain on sale of real estate loans
and real estate assets and
available-for-sale securities 5,690 5,058 4,241 6,646 1,776
Net income 7,635 11,646 13,588 7,333 2,246
Calculation of net income
applicable to common
shareholders:
Net income 7,635 11,646 13,588 7,333 2,246
Less: distributions
on preferred shares - - - - 203
Net income
applicable to common
shareholders 7,635 11,646 13,588 7,333 2,043
Income per
beneficial share:
Basic 1.07 1.63 1.72 .86 .26
Diluted 1.05 1.61 1.71 .86 .26
Balance sheet data:
Total assets 88,456 84,609 85,810 80,315 89,613
Earning real
estate loans (1) 40,413 44,682 51,175 40,030 32,813
Non-earning real
estate loans (1) 3,250 - - 3,835 5,905
Real estate assets (1) 12,325 6,765 17,235 24,706 48,438
Notes payable-credit
facility 88 331 5,500 - -
Loans and mortgages
payable - 841 8,494 11,562 25,391
Shareholders' equity 85,147 80,624 69,747 66,537 60,892
(1) Earning and non-earning loans and real estate assets are presented without
deduction of the related allowance for possible losses or valuation allowance.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
----------------------------------------------------------------------
of Operations
-------------
Liquidity and Capital Resources
-------------------------------
BRT 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. It's
investment policy emphasizes short-term mortgage loans. It also has originated
longer term senior real estate mortgages secured by multifamily apartment
properties and participating mortgage loans. Repayments of real estate loans in
the amount of $21,846,000 are due during the twelve months ending September 30,
2001, including $6,501,000 due on demand. The availability of mortgage financing
secured by real property and the market for selling real estate is cyclical.
Accordingly, BRT 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 May 1999 the Trust entered into a $45,000,000 credit facility
with TransAmerica Business Credit Corporation ("TransAmerica"). 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 .50% or Libor plus 3 1/4% adjusted monthly and matures on May 18, 2002. The
Trust can use funds borrowed under this facility to originate and acquire
mortgage loans and for ongoing working capital. Borrowings under the credit
facility are secured by approved receivables and real estate assets held by the
Trust, and the credit agreement provides that the loan amount will never exceed
80% of approved collateral. There was $3,400,000 available for borrowing under
the credit agreement as of September 30, 2000 and $88,000 was outstanding at
September 30, 2000. Additional collateral is being reviewed by TransAmerica for
approval, which should, in the normal course, increase the amount available for
borrowing under the credit agreement.
During the twelve months ended September 30, 2000, BRT generated
cash of $5,256,000 from operating activities, $1,972,000 from the sale of
available for sale real estate properties, $32,884,000 from collections from
real estate loans, $1,315,000 from the sale of securities and $4,620,000 from
the collection of a receivable. These funds, in addition to cash on hand, were
used primarily to fund real estate loans of $31,865,000, to payoff a mortgage
payable of $841,000, to paydown the credit facility by $243,000, to purchase
securities of publicly traded real estate investment trusts in the amount of
$20,626,000 and to purchase real estate and to make joint venture investments in
the aggregate amount of $4,937,000. In the year ended September 30, 2000,
repayment of the principal amount due on outstanding loans exceeded new
originations by $1,019 ,000.
BRT will satisfy its liquidity needs in the year ending September
30, 2001 from cash and cash investments on hand, the credit facility with
TransAmerica, interest and principal payments received on outstanding real
estate loans and net cash flow generated from the operation and sale of real
estate assets. BRT also has the ability to borrow, on margin, using the
securities which it owns ($16,310,000 in market value at September 30, 2000) as
collateral.
<PAGE>
Results of Operations
---------------------
2000 vs. 1999
-------------
Interest and fees on loans decreased to $6,205,000 for the year ended September
30, 2000 as compared to $7,283,000 for the year ended September 30, 1999. The
decrease of $1,078,000 was primarily the result of a decrease in the average
balance of loans outstanding during the year. The average balance of loans
declined from $51,036,000 in fiscal 1999 to $43,075,000 causing a decline in
interest income of $1,087,000. During the current fiscal year two loans were
classified as non accrual. These loans caused an additional decline in interest
income of $226,000. These declines were offset by an increase in the average
interest rate earned on the loan portfolio. The average interest rate on loans
increased 65 basis points from 14.27% in fiscal 1999 to 14.92% in fiscal 2000.
This accounted for an increase of $235,000 in interest income.
Operating income on real estate assets which is composed primarily of rental
income, decreased $2,477,000 from $3,425,000 for the year ended September 30,
1999 to $948,000 for the year ended September 30, 2000. This decline was the
result of BRT's contribution of a property to an LLC at the end of the prior
fiscal year. This contribution resulted in a decline in rental income of $
2,557,000. This property is now accounted for using the equity method of
accounting and its results are no longer consolidated with the financial
statements of the Trust. This decline was offset by an $80,000 increase in other
rental revenues.
The 1999 fiscal year was favorably affected by revenues of $660,000 recognized
from the recovery of previously provided allowances and write offs. This was
related to a loan that paid off in full in Fiscal 1999. There was no comparable
revenue item in the current fiscal year.
Equity in earnings in unconsolidated ventures increased in the fiscal year ended
September 30, 2000 to $626,000, from a loss of $50,000 in the prior fiscal year
ended September 30, 1999. In the prior fiscal year BRT contributed a property to
an LLC which is now accounted for using the equity method. This accounted for
$525,000 of the increase. The remaining increase is due to increased rents on
the existing joint venture and rents received from joint ventures entered into
during the current fiscal year
Other revenues, which is primarily composed of investment income, increased $
2,252,000 from $855,000 in the fiscal year ended September 30, 1999 to
$3,107,000 in the current fiscal year. The average balance of cash and
investable funds increased by $14,424,000, from $18,865,000 in the prior fiscal
year, to $ 33,289,000 in the current fiscal year. This caused investment income
to increase $955,000. In addition, the Trust invested a significant portion of
its excess funds into higher yielding REIT securities and treasury securities
and out of lower earning money market funds. The average rate earned on
investable funds increased 633 basis points from 6.04% in the prior fiscal year
to 12.37% in the current fiscal year. This increase accounted for the remaining
increase of $1,279,000.
Interest expense on notes and loans payable decreased by $343,000 from $420,000
for the year ended September 30, 1999 to $77,000 for the year ended September
30, 2000. This decrease was a direct result of lower average outstanding
balances under the credit facility during 2000.
General and administrative expenses decreased by $170,000 from $3,223,000 for
the fiscal year ended September 30, 1999 to $3,053,000 for the fiscal year ended
September 30, 2000.
<PAGE>
In the prior year, the Trust incurred costs in connection with the potential
acquisition and/or start up of a financial institution. No similar expenses were
incurred in the current fiscal year
Other taxes decreased $212,000 from $386,000 in the fiscal year ended September
30, 1999 to $174,000 in the fiscal year ended September 30, 2000. This decline
is the result of a decrease in the amount of federal alternative minimum tax the
Trust paid in the current year.
Operating expenses relating to real estate assets decreased to $938,000 for the
current fiscal year from $2,148,000 for the fiscal year ended September 30,
1999. This decline of $1,210,000 was primarily the result of BRT contributing a
property to an LLC which is now accounted for using the equity method of
accounting. This accounted for $1,724,000 of the difference. The decline was
offset by $ 538,000 in legal and other professional expenses incurred in
connection a litigation related to a property sold by BRT in which BRT is
involved as a defendant. BRT was granted summary judgment in this litigation and
reimbursement of its legal fees. Plaintiff is seeking to reverse the summary
judgment in a rehearing. The amount of reimbursement of legal fees is subject to
negotiation and ultimate determination by the Court and there can be no estimate
given as to the amount, if any, of such reimbursement.
Gain on the sale of foreclosed properties declined in the fiscal year ended
September 30, 2000 to $1,814,000 from $5,719,000 in the prior fiscal year. This
decline of $3,905,000 was the result of a decline in the number of sales in the
current fiscal year caused, in large part, by the sale in prior fiscal year of
substantially all foreclosed properties. During the current fiscal year BRT sold
cooperative apartments in two projects and recognized gains of $ 1,715,000 In
the prior fiscal year BRT sold several properties for a gain of $ 3,973,000. In
the prior fiscal year the Trust also recognized a gain of $1,746,000 on the
payoff in full of two loans that were previously written off. There was no such
gain in the current fiscal year. In the current fiscal year, the Trust also
recognized miscellaneous gains totaling $ 100,000.
1999 vs. 1998
-------------
Interest and fees on real estate loans increased to $7,283,000 for
the year ended September 30, 1999 as compared to $5,267,000 for the year ended
September 30, 1998. The increase of $2,016,000 was caused by an increase in the
average balance of loans outstanding from $42,505,000 in fiscal 1998 to
$51,036,000 in fiscal 1999. The change in average balance accounted for
$1,137,000 of the increase. In addition, the average yield earned on these
assets increased 188 basis points to 14.27% in 1999 from 12.39% in 1998. This
increase accounted for the remaining $879,000. The increase in the average
volume of loans is due to the Trust's ability to generate a greater volume of
loans at the end of the prior fiscal year and their full impact on the current
year earnings. In addition, the Trust was able to replace some of its lower
yielding loans with higher yielding short term loans.
Operating income on real estate assets decreased from $4,104,000 for
the year ended September 30, 1998 to $3,425,000 for the year ended September 30,
1999, a decline of $679,000. This decline is the result of the loss of rental
income upon the sale of properties during the fiscal year. During the year the
Trust sold one real estate property and contributed another to a LLC. The
property sold resulted in a decrease of rental income of $350,000 in the current
fiscal year. BRT's contribution of the property to the LLC resulted in a decline
of rental income of $90,000. This property is now accounted for using the equity
method of accounting and its operations are no longer consolidated in the
financial statements of the Trust. These declines were offset by increases in
rental income of $61,000 on a commercial property. The 1998 figure includes
approximately $300,000 of non-rental income. This consists of residual income
from the closing and settlement on a construction litigation relating to a mixed
use property that was previously owned by the Trust and from purchase money
mortgages which were granted to purchasers of cooperative units acquired through
foreclosure.
The 1999 fiscal year was favorably affected by revenues of $660,000
recognized from the recovery of previously provided allowances and write offs.
This allowance was related to a loan that paid off in full in the current year.
There were no comparable revenue items in 1998.
Equity in earning of unconsolidated ventures decreased $50,000 in
the current fiscal year ended September 30, 1999 from -0- in the prior fiscal
year to a loss of $50,000 in the current fiscal year. This loss relates to the
operation of a joint venture in which the Trust held an interest. There was no
such item in the previous fiscal year.
Other revenues, primarily investment income increased $29,000 in the
fiscal year ended September 30, 1999 to $855,000 from $826,000 in the prior
fiscal year. This increase is the result of a 22 basis point increase in the
yield earned on these balances from 3.62% to 3.84%. This accounted for an
increase of approximately $51,000. During the year the Trust sold many of its
low yielding investment securities and replaced them with higher yielding money
market investments. This increase was offset by a slight decline in the average
balance of invested assets outstanding from $22,800,000 to $22,200,000. This
decline accounted for a decline in revenues of $22,000.
Interest expense on notes and loans payable increased by $243,000
from $177,000 for the year ended September 30, 1998 to $420,000 for fiscal 1999.
This increase was a direct result of a higher average outstanding balances under
the credit facility during 1999 and fees paid on unused balances.
The Advisor's fee increased to $571,000 for fiscal 1999 from
$519,000 for fiscal 1998 as a result of an increase in average total invested
assets, the basis upon which the advisory fee is calculated.
General and administrative expenses increased by $705,000 from
$2,529,000 for the fiscal year ended September 30, 1998 to $3,223,000 for the
fiscal year ended September 30, 1999. This increase was caused by legal and
accounting expenses incurred in connection with the potential acquisition and/or
start up of a financial institution and an increase in salary and related
expenses, caused by higher staffing levels during the current fiscal year.
Other taxes increased to $386,000 in the year ended September 30,
1999 from zero in the year ended September 30, 1997. This is a result of the
payment of required federal alternative minimum tax.
Operating expenses relating to real estate assets decreased to
$2,148,000 for fiscal 1999 from $2,374,000 for the fiscal year ended September
30, 1998 a decrease of $237,000. This decrease was a result of the sale of real
estate during the 1999 fiscal year.
Gain on sale of foreclosed properties and mortgage loans for fiscal
1999 was $5,719,000 as compared to $8,090,000 during fiscal 1998. During the
current fiscal year the Trust disposed of cooperative apartment units for a gain
of $1,312,000. The Trust also contributed a property to an LLC for a 50%
interest. This transaction produced a gain of $1,934,000. The Trust also sold a
parcel of vacant land for a gain of $727,000. In addition to the sale of real
estate assets, the Trust recognized a gain of $1,746,000 from the payoff of two
loans previously written off. It is the policy of BRT to offer for sale all
property which it acquired in foreclosure or by deed in lieu of foreclosure at
prices which management believes represents fair value in the geographic area in
which the property is located.
Gain on sale of available-for-sale securities was $869,000 for
fiscal 1999. During the fiscal year ended September 30, 1998 gains on sale of
available-for-sale securities was $1,257,000.
<PAGE>
Item 7A - Market Risk Disclosure
----------------------
BRT's primary component of market risk is interest rate volatility. BRT's
interest income and to a lesser extent its interest expense are subject to
changes in interest rates. BRT seeks to minimize these risks by originating
loans that are indexed to the prime rate and borrowing, when necessary, from its
available credit line which is also indexed to the prime rate. At September 30,
2000 approximately 79% of the portfolio was variable rate based primarily on the
prime rate. Any changes in the prime interest rate could have a positive or
negative effect on the net interest income of BRT. When determining interest
rate sensitivity BRT assumes that any change in interest rates is immediate and
that the interest rate sensitive assets and liabilities existing at the
beginning of the period remain constant over the period being measured. BRT has
assessed the market risk for its variable rate mortgage receivables and variable
rate debt and believes that a one percent change in interest rates would have
approximately a $345,000 effect on income before taxes. In addition, BRT
originates loans with short maturities and maintains a strong capital position.
BRT does not own any trading assets. BRT's loan portfolio is primarily located
within the New York metropolitan area, so it is subject to risk associated with
the local economy.
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.
PART III
Items 10, 11, 12 and 13 will be included in BRT's proxy statement to be filed
pursuant to Regulation 14A not later than January 29, 2001.
<PAGE>
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 BRT
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 BRT dated August 20, 1986. Incorporated
by reference to BRT's Registration Statement on
Form S-2 (No. 33-8125).
3(c). Second Amendment to Second Amended and Restated
Declaration of BRT dated March 2, 1987. Incorporated
by reference to the BRT's Registration Statement on
Form S-2 (No.33-11072).
3(d). Third Amendment to Second Amended and Restated
Declaration of BRT 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 BRT's
Registration Statement on Form S-2 (No. 33-8125).
10(a). Advisory Agreement dated February 7, 1983 between
the BRT and REIT Management Corp. Incorporated by
reference to BRT's Registration Statement on Form S-2
(No. 33-8125).
10(b). Credit Agreement with TransAmerica Business Credit
Corporation dated as of May 18, 1999. Incorporated by
reference to Exhibit 7(c) to Form 8-K filed on May 27,
1999.
10. Subsidiaries - Each subsidiary is 100% owned by BRT.
Exhibit 10 is filed with this Form 10-K.
27. Financial Data Schedule - Filed with electronic filing.
(b) Reports on Form 8-K:
None.
(c) Exhibits - See Item 14(a) 3 above.
(d) See Item 14(a) 2 above.
<PAGE>
<TABLE>
<CAPTION>
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 20, 2000 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> <C> <C>
(S) Fredric H. Gould Chairman of the Board December 20, 2000
--------------------
Fredric H. Gould (Principal Executive
Officer)
(S) Jeffrey A. Gould President and Trustee December 20, 2000
---------------------
Jeffrey A. Gould
(S) Patrick J. Callan Trustee December 20, 2000
---------------------
Patrick J. Callan
(S) Arthur Hurand Trustee December 19, 2000
-----------------
Arthur Hurand
(S) Gary Hurand Trustee December 19, 2000
---------------
Gary Hurand
(S) David Herold Trustee December 20, 2000
----------------
David Herold
(S) Herbert C. Lust Trustee December 20, 2000
-------------------
Herbert C. Lust II
(S) Marshall Rose Trustee December 20, 2000
-----------------
Marshall Rose
(S) George E. Zweier Vice President December 20, 2000
--------------------
George E. Zweier (Principal Financial
and Accounting Officer)
</TABLE>
<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
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,
2000 and 1999 F-2
Consolidated Statements of Income for the
three years ended September 30, 2000, 1999 and 1998 F-3
Consolidated Statements of Shareholders' Equity
for the three years ended September 30, 2000,
1999 and 1998 F-4
Consolidated Statements of Cash Flows for the
three years ended September 30, 2000, 1999 and 1998 F-5-6
Notes to Consolidated Financial Statements F-7-20
Consolidated Financial Statement Schedules
for the year ended September 30, 2000:
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 10
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 Ft. Wright Corp. New York
TRB Cutter Mill Corp. New York
White Plains Realty 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
1090 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
TRB Fairway Office Center Corp. Kansas
TRB Abbotts Corp. Pennsylvania
TRB Greenpoint Avenue Realty Corp. New York
TRB Seattle Inc. Washington
TRB Ashbourne Road Corp. Pennsylvania
BRT Funding Corp. New York
TRB 69th Street Corp. New York
TRB Lawrence Corp. New York
TRB Yonkers Corp. New York
TRB Hartford Corp. Connecticut
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders
BRT Realty Trust
We have audited the accompanying consolidated balance sheets of BRT Realty Trust
and Subsidiaries (the "Trust") as of September 30, 2000 and 1999, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended September 30, 2000. 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 auditing standards generally accepted
in the United States. 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 and Subsidiaries at September 30, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 2000, in conformity with
accounting principles generally accepted in the United States. 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.
/s/
ERNST & YOUNG LLP
New York, New York
November 28, 2000
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands except per share amounts)
ASSETS
September 30,
2000 1999
----------- ------------
<S> <C> <C>
Real estate loans - Notes 2, 4 and 6:
Earning interest, including $850 and $-0-
from related parties $ 40,413 $ 44,682
Not earning interest 3,250 -
----------- --------------
43,663 44,682
Less allowance for possible losses 1,381 1,381
----------- -----------
42,282 43,301
---------- ----------
Real estate assets - Notes 3 and 6:
Real estate properties net, including $2,944
and $3,057 held for sale 6,944 3,057
Investment in unconsolidated
real estate ventures at equity 5,381 3,708
----------- -----------
12,325 6,765
Less valuation allowance 349 349
------------ ------------
11,976 6,416
---------- -----------
Cash and cash equivalents 16,221 28,757
Available-for-sale securities at market - Note 5 16,310 -
Due from venture - Note 3 - 4,620
Other assets 1,667 1,515
----------- -----------
TOTAL ASSETS $ 88,456 $ 84,609
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable - Credit Facility - Note 6 $ 88 $ 331
Mortgage payable - Note 6 - 841
Accounts payable and accrued liabilities including
deposits of $1,550 and $1,465 3,221 2,813
----------- -----------
Total liabilities 3,309 3,985
----------- -----------
Commitments and contingencies - Notes 2, 3, 4, 6, 9 and 10 - -
Shareholders' equity - Note 8: Preferred shares, $1 par value:
Authorized 10,000 shares, none issued - -
Shares of beneficial interest, $3 par value:
Authorized number of shares, unlimited, issued
- 8,893 shares 26,665 26,665
Additional paid-in capital, net of distributions
of $5,171 81,499 81,521
Accumulated other comprehensive income - net
unrealized loss on available-for-sale securities (3,133) -
Accumulated deficit (5,047) (12,682)
----------- ----------
99,984 95,504
Cost of 1,718 and 1,723 treasury shares
of beneficial interest (14,837) (14,880)
----------- ----------
Total shareholders' equity 85,147 80,624
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 88,456 $ 84,609
========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in thousands except per share amounts)
Year Ended September 30,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Revenues:
Interest and fees on real estate loans,
including $40, $-0- and $-0- from related parties - Note 2 $ 6,205 $ 7,283 $ 5,267
Operating income from real estate properties 948 3,425 4,104
Previously provided allowances and write offs - 660 -
Equity in earnings (loss) of unconsolidated ventures 626 (50) -
Other, primarily investment income 3,107 855 826
--------- --------- ---------
Total Revenues 10,886 12,173 10,197
-------- ------- -------
Expenses:
Interest - note payable and loans payable - Note 6 77 420 177
Advisor's fees - Note 9 566 571 519
General and administrative - Note 9 3,053 3,223 2,529
Other taxes - Note 7 174 386 -
Operating expenses relating to real estate properties
including interest on mortgages payable
of $15, $599 and $933 938 2,148 2,374
Amortization and depreciation 388 367 357
---------- --------- ---------
Total Expenses 5,196 7,115 5,956
---------- -------- --------
Income before gain on sale of real estate loans and
real estate properties and available-for-sale securities 5,690 5,058 4,241
Net gain on sale of real estate loans and
real estate properties 1,814 5,719 8,090
Net realized gain on available-for-sale securities 131 869 1,257
---------- ---------- ---------
Net Income $ 7,635 $ 11,646 $ 13,588
========= ======== ========
Income per share of Beneficial Interest:
Basic earnings per share $ 1.07 $ 1.63 $ 1.72
========== ========= =========
Diluted earnings per share $ 1.05 $ 1.61 $ 1.71
========== ========= =========
Weighted average number of common shares outstanding:
Basic 7,165,875 7,165,263 7,902,161
========= ========= =========
Diluted 7,253,227 7,220,505 7,941,293
========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years Ended September 30, 2000, 1999, and 1998
(Amounts in thousands)
Accumulated
Shares of Additional Other Accum-
Beneficial Paid-In Comprehensive ulated Treasury
Interest Capital Income Deficit Shares Total
-------- ------- ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1997 $26,657 $81,517 $ 726 $(37,916) $(4,447) $66,537
Exercise of Stock Options 8 4 - - - 12
Purchase of Treasury Shares - - - - (10,433) (10,433)
Net income - - - 13,588 - 13,588
Other comprehensive income -
unrealized gain on available-for-
sale securities (net of reclassifi-
cation adjustment for gains in-
cluded in net income of $1,257) - - 43 - - 43
--------
Comprehensive income - - - - - 13,631
------------------------------------------------------------------------------
Balances, September 30, 1998 26,665 81,521 769 (24,328) (14,880) 69,747
Net income - - - 11,646 - 11,646
Other comprehensive income -
realized gain on sale of
available-for-sale securities
(net of reclassification adjust-
ment for gains included in net
income of $869) - - (769) - - (769)
--------
Comprehensive income - - - - - 10,877
-------------------------------------------------------------------------------
Balances, September 30, 1999 26,665 81,521 - (12,682) (14,880) 80,624
Exercise of Stock Options - (22) - - 43 21
Net income - - - 7,635 - 7,635
Other comprehensive income -
unrealized loss on sale of avail-
able-for-sale securities (net of
reclassification adjustment for
gains included in net income
of $131) - - (3,133) - - (3,133)
-------
Comprehensive income - - - - - 4,502
---------------------------------------------------------------------------------
Balances, September 30, 2000 $26,665 $81,499 $(3,133) $(5,047) $(14,837) $85,147
=================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year Ended September 30,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,635 $ 11,646 $ 13,588
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization and depreciation 388 367 357
Previously provided allowances - (660) -
Net gain on sale of real estate loans and properties (1,814) (5,719) (8,090)
Net gain on sale of available-for-sale securities (131) (869) (1,257)
Equity in (earnings) loss of unconsolidated ventures (626) 50 -
(Increase) decrease in interest and
dividends receivable (576) 123 (218)
Decrease in prepaid expenses 17 102 17
Increase (decrease) in accounts payable and
accrued liabilities 258 433 (644)
Increase in deferred revenues 137 18 108
(Decrease) increase in escrow deposits (187) 353 96
Increase in deferred costs (33) (572) (107)
Other 188 624 (29)
----------- ----------- --------------
Net cash provided by operating activities 5,256 5,896 3,821
---------- ------------ --------
Cash flows from investing activities:
Collections from real estate loans 32,884 25,561 24,233
Additions to real estate loans (31,865) (25,182) (31,716)
Sale of senior participating interest in loans - 7,860 -
Decrease in due from venture 4,620 - -
Purchase of leasehold interest, net of
minority interest (3,854) - -
Net costs capitalized to real estate owned (181) (329) (631)
Proceeds from sale of real estate owned 1,972 3,907 11,385
Increase (decrease) in deposits payable 53 (311) 308
Purchase of available-for-sale securities (20,626) - (347)
Sale of available-for-sale securities 1,315 3,463 3,667
Proceeds from sale of partnership interest - - 1,679
Investment in real estate ventures (1,083) - (613)
Partnership distribution 35 8 -
------------ ------------- -------------
Net cash (used in) provided by investing activities (16,730) 14,977 7,965
----------- ----------- --------
Cash flows from financing activities:
Proceeds from note payable - - 5,500
Repayment of note payable (243) (5,169) -
Payoff/paydown of loan and mortgages payable (841) (896) (3,068)
Exercise of stock options 22 - 12
Repurchase of shares of beneficial interest,
a portion of which were cancelled - - (10,433)
Other - - -
------------ ------------ --------------
Net cash used in financing activities (1,062) (6,065) (7,989)
---------- ----------- ----------
Net (decrease) increase in cash and cash equivalents (12,536) 14,808 3,797
Cash and cash equivalents at beginning of year 28,757 13,949 10,152
---------- ----------- ---------
Cash and cash equivalents at end of year $ 16,221 $ 28,757 $ 13,949
============ =========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Continued)
Year Ended September 30,
-------------------------------------
2000 1999 1998
-------------- ------------ -------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $ 85 $ 1,069 $ 1,141
=========== ========= =========
Cash paid during the year for income taxes $ 314 $ 211 $ -
========== ========== ============
Supplemental schedule of noncash investing and financing activities:
Recognition of valuation allowance upon sale
of real estate owned - - 3,915
Recognition of allowance for previously
provided losses - 660 -
Transfer of foreclosed property to
real estate joint venture - 11,886 -
Transfer of mortgage to real estate joint venture - 6,757 -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999 and 1998
(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
and its wholly-owned subsidiaries. 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 amount of interest or rent that are collectable
are the status of the loan or property, the financial condition of the borrower
or tenant and anticipated future events. The Trust records cash receipts on
impaired loans using the interest income method by directly adjusting the
recorded investment leaving the valuation constant throughout the life of the
impaired loan. For impaired non-accrual loans, interest is recognized on a cash
basis. 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. Commitment fees are generally
non-refundable. When a commitment expires or the Trust no longer has any other
obligation to perform, the fee is recognized into income. If a loan subsequently
becomes non-earning, the unamortized portion of the fee is offset against the
loan balance.
Rental income includes the base rent that each tenant is required to pay in
accordance with the terms of their respective leases reported on a straight line
basis over the initial term of the lease.
The basis on which the cost was determined in computing the realized gain or
loss on available-for-sale securities is historical cost.
Loans held for sale are carried at lower of cost or estimated fair value as
determined on an aggregate basis. Deferred fees on loans held for sale are
recognized as a component of gain or loss upon the sale. Gains or losses on the
sale are determined by the difference between the sales proceeds and the
carrying value of the loan.
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 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.
Real Estate Assets
Real estate properties is comprised of real estate property in which the Trust
has invested directly and properties acquired by foreclosure which are held for
sale.
When real estate is acquired by foreclosure or by a deed in lieu of foreclosure,
it is recorded at estimated fair value, net of foreclosure costs, at the time of
foreclosure. In subsequent periods, individual foreclosed properties held for
sale are valued at the lower of the recorded cost or estimated fair value less
costs to sell, 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 statements of income.
The Trust accounts for the sale of real estate when title passes to the buyer,
sufficient equity payments have been received and when there is reasonable
assurance that the remaining receivable will be collected.
Investments in joint ventures that the Trust does not own a greater than 50%
interest or in which it does not have the ability to exercise operational or
financial control, are accounted for using the equity method. Accordingly, the
Trust reports its pro rata share of net profits and losses from its investments
in unconsolidated entities in the accompanying consolidated financial
statements.
Valuation Allowance on Real Estate Assets
The Trust reviews each real estate asset owned, including investments in real
estate ventures, 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 cash equivalents: The carrying amounts reported in the balance sheet
for these instruments approximate their fair values.
Available-for-sale securities: 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
treasury rate, or are currently fixed at effective interest rates which
approximate market. At September 30, 2000 and 1999 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, 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 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
Basic earnings per share was determined by dividing net income applicable to
common shareholders for each year by the weighted average number of Shares of
Beneficial Interest outstanding during each year. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue Shares of Beneficial Interest were exercised or converted
into Shares of Beneficial Interest or resulted in the issuance of Shares of
Beneficial Interest that then shared in the earnings of the Company. Diluted
earnings per share was determined by dividing net income applicable to common
shareholders for each year by the total of the weighted average number of Shares
of Beneficial Interest outstanding plus the dilutive effect of the Company's
outstanding options using the treasury stock method.
Cash Equivalents
Cash equivalents consist of highly liquid investments, primarily direct United
States treasury obligations and 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 accounting
principles generally accepted in the United States. 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.
Comprehensive Income
As of April 1, 1998, the Trust adopted Statement No. 130, Reporting
Comprehensive Income. Statement No. 130 establishes standards for the reporting
and display of comprehensive income and its components. Statement 130 requires
unrealized gains or losses on the Company's available-for-sale securities, which
prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of Statement 130.
Segment Reporting
Effective October 1, 1998, the Trust adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related Information. Statement 131 superceded FASB
Statement No. 14 Financial Reporting for Segments of a Business Enterprise.
Statement No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. Statement No. 131 also
establishes standards for related disclosures about products and services,
geographical areas, and major customers. The adoption of Statement No. 131 did
not affect results of operations or financial position. As the Trust operates
predominantly in one industry segment, has determined it has one reportable
segment and operates primarily in one geographic location, management believes
it is in compliance with the standards established by Statement No. 131.
Derivative Instruments and Hedging Activities
The FASB issued Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133. The
Statement deferred for one year the effective date of FASB Statement No. 133,
Accounting for Derivatives Instruments and Hedging Activities. The rule applies
to fiscal years beginning after June 15, 2000. Because of the Company's minimal
use of derivatives, management does not anticipate that the adoption of the new
statement will have a significant effect on earnings or the financial position
of the Company.
Reclassification
Certain amounts reported in previous financial statements have been reclassified
in the accompanying financial statements to conform to the current year's
presentation.
NOTE 2 - REAL ESTATE LOANS
<TABLE>
<CAPTION>
At September 30, 2000, information as to real estate loans, is
summarized as follows:
Not
Earning Earning
Total Interest Interest
----- -------- --------
<S> <C> <C> <C>
First mortgage loans:
Long-term:
Residential $ 2,968 $ 2,968 $ -
Shopping centers/retail 4,603 4,603 -
Short-term (five years or less):
Shopping centers/retail 2,329 1,914 415
Industrial buildings 3,300 3,300 -
Office buildings 3,955 3,955 -
Residential (multiple family units) 18,067 15,232 2,835
Hotel 3,890 3,890 -
Miscellaneous 182 182 -
Second mortgage loans,
wraparound mortgages
and junior participations 4,369 4,369 -
---------- ---------- ----------
$ 43,663 $ 40,413 $ 3,250
========= ========= =========
A summary of loans at September 30, 1999 is as follows:
First mortgage loans
Long term $ 8,240
Short term 34,407
Second mortgage loans
and wrap around mortgages 2,035
----------
$ 44,682
</TABLE>
Of the real estate loans not earning interest at September 30, 2000 $3,250 were
deemed impaired, as it is probable that the Trust will not be able to collect
all amounts due according to the contractual terms. There were no non earning
assets at September 30, 1999. Allowances for possible losses were provided for
all such non earning loans, with the exception of a loan in the amount of $415
at September 30, 2000, which loan is expected to be paid in full including
interest. Of the real estate loans earning interest at September 30, 2000 and
1999, $1,418 and $4,296, respectively, were deemed impaired and all are subject
to allowances for possible losses. For the years ended September 30, 2000, 1999
and 1998, respectively, an average $4,482, $4,893 and $7,786 of real estate
loans were deemed impaired, on which $255, $520 and $613 of interest income was
recognized.
During 1999 the Trust sold senior participating interests in several real estate
loans, which were held for sale, to a financial institution. These senior
participating interests were sold at cost which approximated estimated fair
value. Under the terms of the Agreement the financial institution has priority
rights to any optional prepayments and in the event of a default, after payment
of accrued but unpaid servicing fees to the Trust, to payment of accrued, but
unpaid interest and principal due to the financial institution.
Loans originated by the Trust generally provide for interest rates, which are
indexed to the prime or Treasury rates. The weighted average interest rate on
earning loans was 13.56% and 11.71% at September 30, 2000 and 1999,
respectively. Included in real estate loans are two second mortgages to ventures
in which the Trust (through wholly owned subsidiaries) holds a 50% interest. At
September 30, 2000 the balance of the mortgage loans was $850. Interest received
on these loans totaled $40 for the year ended September 30, 2000.
Annual maturities of real estate loans receivable before allowances for possible
losses during the next five years and thereafter reflect revised maturities and
are summarized as follows:
Years Ending September 30 Amount
------------------------- ------
2001........................................... $21,846
2002........................................... 9,598
2003........................................... 3,862
2004........................................... 210
2005........................................... 1,074
2006 and thereafter............................ 7,073
---------
Total.......................................... $43,663
========
The Trust's portfolio consists primarily of senior mortgage loans, secured by
residential and commercial property, 71% 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
$21,846 of real estate loans receivable which mature in Fiscal 2001, $6,347 were
extended during the fiscal year ended September 30, 2000.
If all loans classified as non-earning were earning interest at their
contractual rates for the year ended September 30, 2000, interest income would
have increased by $226.
The Trust's interests in wraparound mortgages of $8,850 and $2,350 are subject
to underlying mortgages aggregating $7,500 and $313 at September 30, 2000 and
1999 respectively. Interest income earned on these loans was $433 and $329 for
the years ended September 30, 2000 and 1999, respectively, of which $281 and $28
was paid to the holder of the prior mortgage loan.
At September 30, 2000 the two largest real estate loans had principal balances
outstanding of approximately $7,710 and $3,500, respectively. Of the total
interest and fees earned on real estate loans during the fiscal year ended
September 30, 2000, 9.7% and .8% related to these loans, respectively. On
November 1, 2000, the loan for $7,710 was paid in full. In addition to the
principal, an additional interest payment in the amount of $710 was paid at
maturity as required by the mortgage agreement.
NOTE 3 - REAL ESTATE ASSETS
<TABLE>
<CAPTION>
A summary of real estate properties, including properties held for sale, for the
year ended September 30, 2000 is as follows:
Acquisitions/
Costs Sales
September 30, 1999 Capitalized/ Collections/ Gain on September 30, 2000
# Properties Amount Amortization Other Sale # Properties Amount
------------ ------ ------------ ----- ---- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Held For Sale
-------------
Residential units-shares of
cooperative corporations 3 $ 40 $ 158 ($1,873) $1,715 3 $ 40
Shopping centers/retail 1 3,622 24 - - 1 3,646
Unimproved land 1 - - - - 1 -
------------------------------------------------------------------------------------------
5 3,662 182 (1,873) 1,715 5 3,686
Amortization 605 137 - - - 742
------------------------------------------------------------------------------------------
5 3,057 45 (1,873) 1,715 - 2,944
Held For Investment
------------------
Shopping centers/retail - - 4,000 - - 1 4,000
------------------------------------------------------------------------------------------
- - 4,000 - - 1 4,000
Total real estate properties 5 $3,057 $4,045 $(1,873) $1,715 6 $6,944
==========================================================================================
</TABLE>
During the year ended September 30, 2000 the Trust continued to dispose of its
shares of cooperative apartment units. Sales of these units had a net book value
totaling $158. Gains of $1,715 were recognized on these sales.
On October 15, 1999, effective September 1, 1999 the Trust (through a
subsidiary) entered into a limited liability company venture agreement to own,
operate and develop its remaining office property. The subsidiary sold the
property at fair value of $16,000 (with a book value of $11,886 and subject to a
net outstanding mortgage of $6,757) to the venture and retained a 50% membership
interest. A $4,620 distribution was received from the venture in October 1999
with a gain of $1,934 recognized on the transaction since the Trust is not
obligated to reinvest funds received on the sale into the venture.
During the current fiscal year the Trust purchased with a minority partner a
leasehold interest in a portion of a retail shopping center located in Yonkers,
New York. The leasehold interest is for approximately 28,500 square feet and
including all option periods expires in 2045. The minority interest, which
equals ten percent is shown in other liabilities on the balance sheet. Such
amount is not material.
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, 2000 are as follows:
Years Ending September 30, Amount
-------------------------- ------
2001 ................................................... $ 1,105
2002 ................................................... 1,032
2003 ................................................... 843
2004 ................................................... 797
2005 ................................................... 754
Thereafter ............................................. 13,498
NOTE 4 - ALLOWANCE FOR POSSIBLE LOSSES AND VALUATION ALLOWANCE
ON REAL ESTATE OWNED
The Trust was not required to record provisions for possible loan losses nor
valuation adjustments on owned real estate during the three years ended
September 30, 2000, 1999 and 1998.
<TABLE>
<CAPTION>
An analysis of the allowance for possible losses is as follows:
Year Ended September 30,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 1,381 $ 2,041 $ 5,956
Previously provided allowances - (660) -
Write-off of allowances - - (3,915)
--------- --------- ---------
Balance at end of year $ 1,381 $ 1,381 $ 2,041
========= ========= ========
The allowance for possible losses applies to assets aggregating
$4,253 at September 30, 2000, $4,296 at September 30, 1999 and
$5,489 at September 30, 1998.
The allowance for possible losses consists of the following
components:
Year Ended September 30,
------------------------
2000 1999 1998
---- ---- ----
Excess of carrying value plus estimated
cost to complete, including marketing
costs over estimated fair value $ 957 $ 736 $ 1,404
Valuation adjustment 185 417 434
Estimated holding period costs 239 228 203
-------- -------- --------
$ 1,381 $ 1,381 $ 2,041
======== ======== ========
</TABLE>
NOTE 5 - AVAILABLE-FOR-SALE SECURITIES
The cost of securities held for sale at September 30, 2000 was $19,442. The fair
value of these securities was $16,310 at September 30, 2000. Gross unrealized
gains and losses at September 30, 2000 were $278 and $3,410, respectively.
Included in available for sale securites are 1,355,600 shares of Entertainment
Properties Trust (NYSE:EPR), which have a cost basis of $17,806 and a fair value
at September 30, 2000 of $14,403. The shares held by BRT represent approximately
9.24% of the outstanding shares of Entertainment Properties Trust. The fair
value of the Trust's investment in Entertainment Properties Trust at November
28, 2000 was $15,676,000.
<PAGE>
NOTE 6 - DEBT OBLIGATION
<TABLE>
<CAPTION>
Debt obligations consist of the following:
September 30,
----------------------------------
2000 1999
<S> <C> <C>
------------- -------------
Note payable - credit facility $ 88 $ 331
============= =============
Mortgage payable $ - $ 841
============= =============
</TABLE>
On May 18, 1999 BRT entered into a $45,000 revolving credit facility with
TransAmerica Business Credit Corporation ("TransAmerica"). It replaced a $25,000
facility with Credit Suisse First Boston Mortgage Capital LLC. The agreement
with TransAmerica is a revolving facility, which may be used for specific
purposes, the primary of which is lending. Borrowings under this facility are
secured by specific receivables of BRT and its subsidiary BRT Funding Corp. The
agreement provides that the amount borrowed will not exceed 80% of the value of
the collateral. BRT paid a non refundable fee of $338 at closing which is being
amortized over the term of the facility. Interest is charged on the outstanding
balance at prime plus 1/2% or under certain circumstances at LIBOR plus 3 1/4%.
The rate being charged was 10.00% at September 30, 2000. The facility matures on
May 18, 2002. Unused line fees are calculated at 1/8% on the difference between
$45,000 (the maximum principal debt) and the average amount outstanding. BRT is
required to maintain a minimum tangible net worth (as defined) of $70,000 and
meet certain other covenants, all of which have been met.
As of September 30, 2000 BRT had provided collateral to TransAmerica which would
permit BRT to borrow up to $3,400 under the facility.
At September 30, 2000 and 1999 the outstanding balance on the facility was $88
and $331, respectively.
During the current fiscal year the Trust paid in full, its only outstanding
non-recourse mortgage payable, secured by a real estate property with an
aggregate carrying value of $2,904 net of amortization. The mortgage which had a
balance of $841 at September 30, 1999 was paid in full in November 1999.
NOTE 7 - 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.
During the year ended September 30, 2000 the Trust recorded $174 of expense
relating to the payment of alternative minimum tax. The Trust is required to pay
alternative minimum tax relating to the usage of net operating loss carry
forwards.
The taxable income is expected to be $213 lower than the financial statement
income during calendar 2000.
At December 31, 1999, the Trust had available tax operating loss carryforwards
of $9,486 of which, $7,254 will expire in 2008, $1,634 will expire in 2009, $527
will expire in 2010 and $71 will expire in 2011.
NOTE 8 - SHAREHOLDERS' EQUITY
Distributions
There were no distributions on the Trust's shares of beneficial interest
declared during the years ended September 30, 2000, 1999 and 1998.
Stock Options
On December 8, 1995, the Board of Trustees granted, under the 1988 Stock Option
Plan (Incentive/Nonstatutory 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. During the current year 5,000 of
the options were exercised. At September 30, 2000 options to purchase 43,000
shares are exercisable and have not yet 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, 2000 options to purchase 77,500 shares are exercisable, none of
which have been exercised.
In March and April 1998 the Board of Trustees granted, under the 1996 Stock
Option Plan options to purchase 50,000 shares of beneficial interest at prices
ranging from $7.3125 to $7.9375 per share to a number of directors, officers and
employees of the Trust. The options are cumulatively exercisable at a rate of
25% per annum, commencing after two years, and expire ten years after the grant
date. At September 30, 2000 options to purchase 10,000 shares are exercisable,
none of which have been exercised.
In December 1998 the Board of Directors granted, under the 1996 Stock Option
Plan options to purchase 180,000 shares of beneficial interest at $5.9375 per
share to a number of officers, employees, consultants and trustees of the Trust.
The options are cumulatively exercisable at a rate of 25% per annum, commencing
after one year (50,000) and two years (130,000), and expire five years (50,000)
and ten years (130,000) after the date of the grant. At September 30, 2000
12,500 of these options were exercisable, none of which were 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.
Pro forma information regarding net income and earnings per share is required by
FAS 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 the Black-Scholes option
pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
December 1998 December 1998 March/April 1998 December 1996
50,000 Shares 130,000 Shares 50,000 Shares 82,500 Shares
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Risk Free Interest Rate 5.94% 6.08% 5.94% 5.94%
Dividend Yield 0% 0% 0% 0%
Volatility Factor .209 .209 .209 .209
Expected Life (Years) 3 8 8 2
</TABLE>
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.
Pro forma net income and earnings per share calculated using the Black-Scholes
option valuation model is as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Pro forma net income $7,484 $11,225 $13,470
Pro forma earnings per share:
Basic 1.04 1.57 1.70
Diluted 1.03 1.55 1.70
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Changes in the number of shares under all option arrangements are
summarized as follows:
Year Ended September 30,
---------------------------------
2000 1999 1998
--------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of period 337,500 165,500 135,500
Granted - 180,000 50,000
Option price per share granted - 5.9375 7.3125-7.9375
Cancelled - 8,000 17,500
Exercisable at end of period 143,000 106,125 74,750
Exercised 5,000 - 2,500
Expired - - -
Outstanding at end of period 332,500 337,500 165,500
Option prices per share outstanding $4.375-$7.9375 $4.375-$7.9375 $4.375-$7.9375
</TABLE>
As of September 30, 2000 the outstanding options had a weighted average
remaining contractual life of approximately 4.9 years and a weighted
average exercise price of $5.95.
Earnings Per Share
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted
earnings per share:
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Numerator for basic and diluted
earnings per share:
Net income $7,635 $11,646 $13,588
Denominator:
Denominator for basic earnings
per share -weighted average shares 7,165,875 7,165,263 7,902,161
Effect of dilutive securites:
Employee stock options 87,352 55,242 39,132
--------- --------- ---------
Denominator for diluted earnings
per share - adjusted weighted average
shares and assumed conversions 7,253,227 7,220,505 7,941,293
Basic earnings per share $ 1.07 $ 1.63 $ 1.72
Diluted earnings per share $ 1.05 $ 1.61 $ 1.71
</TABLE>
<PAGE>
Treasury Shares
The Trust's Board of Trustees authorized the purchase from time to time of up to
1,614,000 shares of beneficial interest of the Trust. During 1998 1,205,000
shares were purchased at an approximate cost of $10,433. During the fiscal year
ended September 30, 2000 no shares were purchased by the Trust. During the
fiscal year ended September 30, 2000, 5,000 treasury shares were issued in
connection with the exercise of stock options under the Trust's existing stock
option plan. As of September 30, 2000 the Trust owns 1,718,000 Treasury shares
of beneficial interest at an aggregate cost of $14,837.
NOTE 9 - 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, 2004, 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 $566, $571 and $519 for the
years ended September 30, 2000, 1999, and 1998, 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 $394, $151 and $229 for the years ended
September 30, 2000, 1999 and 1998 respectively.
REIT arranges for the management of certain properties for the Trust under
renewable year-to-year agreements. Management fees, legal fees and leasing,
selling and financing commissions incurred and reimbursed or owed to REIT or an
other affiliated company for the years ended September 30, 2000, 1999 and 1998
aggregated $140, $746 and $595, respectively.
The Chairman of the Board of Trustees of the Trust holds a similar position in
One Liberty Properties, Inc. a related party, is an executive officer of the
managing general partner and is a general partner of Gould Investors L.P. a
related party. During the years ended September 30, 2000, 1999 and 1998,
allocated general and administrative expenses charged to the Trust by Gould
Investors L.P. aggregated $367, $422 and $622, respectively.
NOTE 10 - 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 $200, $190 and $105 during the
years ended September 30, 2000, 1999 and 1998, respectively.
<PAGE>
NOTE 11 - 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
--------- ---------- ---------- ---------- --------
2000
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,325 $ 2,779 $ 2,857 $ 2,925 $10,886
Income before gain on sale of real
estate loans and real estate
properties and available for
sale securities 1,095 1,521 1,489 1,585 5,690
Net income 1,827 1,975 2,112 1,721 7,635
Per share $ .25 $ .28 $ .29 $ .25 $ 1.07 (a)
1999
------------------------------------------------------------------------
Revenues $ 3,193 $ 3,002 $ 2,924 $ 3,054 $12,173
Income before gain on sale of real
estate loans and real estate
properties and available for
sale securities 1,507 1,185 1,218 1,148 5,058
Net income 2,926 2,183 1,773 4,764 11,646
Per share $ .41 $ .30 $ .25 $ .66 $ 1.63 (a)
Per share earnings represent basic earnings per beneficial share.
(a)Calculated on weighted average shares outstanding for the fiscal year.
Balances may not crossfoot due to rounding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST
SCHEDULE III - REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2000
(Amounts in Thousands)
Gross Amount At Which Carried At
Initial Cost To Company September 30, 2000
----------------------- Costs Capitalized --------------------
Buildings Subsequent to Acquisition Buildings
Encum- And ------------------------- And
Description brances Land Improvements Improvements Carrying Costs Land Improvements Total
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
Islip, New York - - $ 40 - - - $ 40 $ 40
Shopping Center/Retail
Rock Springs, WY - $600 2,483 $534 $28 $600 3,045 3,645
Yonkers, New York - - 4,000 - - - 4,000 4,000
---------------------------------------------------------------------------------------------------------
TOTAL - $600 $6,523 $534 $28 $600 $7,085 $7,685
=========================================================================================================
(a) (b)
</TABLE>
<TABLE>
<CAPTION>
BRT REALTY TRUST
SCHEDULE III - REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2000
(Amounts in Thousands)
Depreciation
Accum. Life For
Amorti- Date Of Date Latest Income
Description zation Construction Acquired Statement
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Residential
Islip, New York - - - -
Shopping Center/Retail
Rock Springs, WY $741 - Jan-92 21-35 Years
Yonkers, New York - - Aug-00 30 Years
------------------------------------------------------
TOTAL $741
======================================================
(c) (d)
</TABLE>
<PAGE>
BRT REALTY TRUST
SCHEDULE III - REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2000
(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 statements of
income.
(b) Total real estate properties $ 7,685
Less: Accumulated amortization 741
--------
Net real estate properties $ 6,944
========
(c) Amortization of the Trust's leasehold interests is over the shorter of
estimated useful life or the term of the respective land lease.
(d) Information not readily obtainable.
(e) A reconciliation of real estate properties is as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
2000 1999 1998
----- ----- ----
<S> <C> <C> <C>
Balance at beginning of year $3,057 $16,622 $23,160
Additions:
Acquisitions 4,000 - -
Capitalization of expenses 182 329 755
------- ------- -------
7,239 16,951 23,915
------- ------- ------
Deductions:
Sales/conveyances 158 13,753 7,169
Depreciation/amortization 137 141 124
------- ------- -------
295 13,894 7,293
------- ------- -------
Balance at end of year $6,944 $ 3,057 $16,622
======= ======= =======
(f) The aggregate cost of investments in real estate assets for federal
income tax purposes approximates book value.
</TABLE>
<TABLE>
<CAPTION>
BRT REALTY TRUST
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2000
(Amounts in Thousands)
FINAL
# OF INTEREST MATURITY
DESCRIPTION LOANS RATE DATE PERIODIC PAYMENT TERMS
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage loans:
Long term:
Retail/Apartments, Brooklyn, NY 1 Prime + 2.45% Aug-08 Interest and principal monthly
Garden Apartments, New Paltz, NY 1 Prime +3.75 Sept-14 Interest and principal monthly
Miscellaneous
$0-$299 4
$300-499 1
$500-998 3
$1,000-1,270 1
Short term:
Cooperative Apartments - NY, NY 1 Prime + 5.25% Interest monthly, principal at maturity
Apartments, Meridan, CT 1 Prime+ 5.0% Interest monthly, principal at maturity
Industrial Building - Bernardsville, NJ 1 Prime + 4.0% Interest monthly, principal at maturity
Motel- Brooklyn, NY 1 Prime + 6.0% Interest and principal monthly
Cooperative Apartments, Bronx, NY 1 Prime + 5.0% Interest monthly, principal at maturity
Industrial/Retail - Great Neck, NY 1 Prime + 5.0% Interest monthly, principal at maturity
Motel - Queens, NY 1 Prime + 5.0% Interest and principal monthly
Miscellaneous
$0-$299 5
$300-$499 2
$500-$999 9
$1,000-$1,270 1
Junior mortgage loans, Wrap-
around mortgages and junior
participations:
Apartments, NY, NY 1 Prime + 3.50% Interest monthly, principal at maturity
Condominiums, Fort Lee, NJ 1 Prime + 2.25% Interest monthly, principal at maturity
Miscellaneous
$0-$299 5
$500-$999 1
---
43
===
</TABLE>
<TABLE>
<CAPTION>
BRT REALTY TRUST
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2000
(Amounts in Thousands)
PRINCIPAL AMOUNT
CARRYING OF LOANS SUBJECT
FACE AMOUNT AMOUNT TO DELINQUENT
DESCRIPTION PRIOR LEINS OF MORTGAGES OF MORTGAGES PRINCIPAL OR INTEREST
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage loans:
Long term:
Retail/Apartments, Brooklyn, NY - $2,110 $2,110 -
Garden Apartments, New Paltz, NY - 1,313 1,313 -
$0-$299 - 436 424 -
$300-499 - 494 494 -
$500-998 - 2,164 2,164 -
$1,000-1,270 - 1,052 1,052 -
Short term:
Cooperative Apartments - NY, NY - 7,710 7,710 -
Apartments, Meridan, CT - 3,500 3,500 -
Industrial Building - Bernardsville, NJ - 2,580 2,580 -
Motel- Brooklyn, NY - 2,357 2,357 -
Cooperative Apartments, Bronx, NY - 2,835 2,200 $2,835
Industrial/Retail - Great Neck, NY - 2,000 2,000 -
Motel - Queens, NY - 1,533 1,533 -
Miscellaneous
$0-$299 - 390 145 -
$300-$499 - 899 899 415
$500-$999 - 6,921 6,432 -
$1,000-$1,270 - 1,000 1,000 -
Junior mortgage loans, Wrap-
around mortgages and junior
participations:
Apartments, NY, NY $3,904 1,550 1,550 -
Condominiums, Fort Lee, NJ 7,500 1,350 1,350 -
Miscellaneous
$0-$299 6,952 869 869 -
$500-$999 785 600 600 -
----------------------------------------------------------
$19,141 $43,663 $42,282 $ 3,250
===========================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRT REALTY TRUST
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2000
(Amounts in Thousands)
Notes to the schedule:
(a) The following summary reconciles mortgages receivable at their
carrying values:
Year Ended September 30,
------------------------
2000 1999 1998
--------- --------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 43,301 $ 49,134 $ 37,909
Additions:
Advances under real estate loans 31,865 25,182 31,716
Previously provided allowances - 660 -
-------- -------- --------
75,166 74,976 69,625
-------- --------- --------
Deductions:
Collections of principal 32,884 23,815 20,491
Sale of senior participating interests in loans - 7,860 -
-------- -------- --------
32,884 31,675 20,491
-------- -------- --------
Balance at end of year $ 42,282 $ 43,301 $ 49,134
======== ======== ========
(b) The aggregate cost of investments in mortgage loans is the same for
financial reporting purposes and Federal income tax purposes.
</TABLE>
