SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission File Number 0-7716
CENTURY REALTY TRUST
(Exact name of Registrant as specified in its charter)
INDIANA 35-1284316
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
823 Chamber of Commerce Building 46204
Indianapolis, Indiana (ZipCode)
(Address of principal executive offices)
Registrant's telephone number, including area code (317)632-5467
Indicate by check mark whether this registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or 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 the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Shares of Beneficial Interest, no par value 1,535,314 shares
BALANCE SHEETS
Century Realty Trust
June December
30, 1997 31, 1996
___________ ___________
Unaudited
Assets
Real estate investments:
Land $2,658,883 $2,068,658
Buildings 38,958,783 32,912,673
Equipment 927,578 838,254
Allowances for depreciation (8,045,767) (7,476,182)
___________ ___________
34,499,477 28,343,403
Net investment in direct financing leases 423,562 443,590
___________ ___________
34,923,039 28,786,993
Cash and cash equivalents 419,077 315,337
Short-term investments 590,518 590,993
Accounts and accrued income receivable 374,919 335,303
Undeveloped land 99,675 99,675
Other assets 591,716 410,166
___________ ___________
36,998,944 30,538,467
___________ ___________
___________ ___________
Liabilities and shareholders' equity
Liabilities:
Short-term debt $2,000,000 0
Mortgage notes payable 23,929,496 20,437,686
Accounts payable and accrued compensation 718,192 288,474
Accrued interest 152,469 132,578
State income and property taxes 1,094,187 952,031
Tenants' security deposits and unearned rent 382,857 394,507
___________ ___________
28,277,201 22,205,276
Shareholders' equity:
Shares of Beneficial Interest, no par value-authorized
5,000,000 shares, issued 1,553,528 shares (1,529,353 shares
at December 31, 1996) including 18,214 shares in
treasury (75,414 shares at December 31, 1996) 6,710,229 6,249,104
Undistributed income other than from
gain on the sale of real estate 820,064 1,284,028
Undistributed net realized gain from the
sale of real estate 1,316,078 1,316,078
Cost of treasury shares (124,628) (516,019)
___________ ___________
8,721,743 8,333,191
___________ ___________
$36,998,944 $30,538,467
___________ ___________
___________ ___________
See accompanying notes.
STATEMENTS OF INCOME
Century Realty Trust
Unaudited
Three Months Six Months
Ended June 30, Ended June 30,
_____________________ _____________________
1997 1996 1997 1996
__________ __________ __________ __________
Income
Real estate operations:
Rental income $2,069,603 $2,006,016 $4,115,600 $4,024,335
Other income 37,779 39,435 79,996 81,777
Income from direct financing
leases 13,831 15,213 27,662 30,425
__________ __________ __________ __________
2,121,213 2,060,664 4,223,258 4,136,537
Less:
Real estate operating expenses 769,247 754,629 1,523,350 1,505,566
Depreciation 285,096 277,590 569,586 555,180
Real estate taxes 193,599 196,640 432,099 440,090
__________ __________ __________ __________
1,247,942 1,228,859 2,525,035 2,500,836
__________ __________ __________ __________
873,271 831,805 1,698,223 1,635,701
Interest income 16,784 11,962 28,596 18,748
__________ __________ __________ __________
890,055 843,767 1,726,819 1,654,449
Expenses
Interest 469,224 462,437 930,582 929,160
State income taxes 40,459 35,647 81,896 70,508
General and administrative expenses 106,052 94,730 207,487 191,455
__________ __________ __________ __________
615,735 592,814 1,219,965 1,191,123
__________ __________ __________ __________
Net income $274,320 $250,953 $506,854 $463,326
__________ __________ __________ __________
__________ __________ __________ __________
Net income per share of
Beneficial Interest $0.18 $0.17 $0.34 $0.32
__________ __________ __________ __________
__________ __________ __________ __________
Weighted average number
of shares outstanding 1,505,911 1,453,716 1,485,615 1,453,494
See accompanying notes.
STATEMENTS OF CASH FLOW
Century Realty Trust
Unaudited
Six Months
Ended June 30,
_____________________
1997 1996
__________ __________
Operating Activities
Net income $506,854 $463,326
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 587,177 569,841
Changes in operating assets and liabilities:
Increase in accounts and income
receivable (39,616) (98,212)
Increase in prepaid expenses and other assets (199,142) (17,746)
Increase in accounts payable and accrued expenses 162,048 69,113
Increase (decrease) in tenants' security deposits
and unearned rents 73,904 (7,255)
__________ __________
Net cash provided by operations 1,091,225 979,067
Investing Activities
Short-term investment of funds (1,384,734) (1,183,394)
Proceeds from matured short-term investments 1,385,209 986,267
Acquisition of real estate, net of debt assumed (2,653,009) 0
Purchase of property improvements and replacemets (127,375) (171,082)
Principal payments received under leases 20,028 20,194
__________ __________
Net cash used in investing activities (2,759,881) (348,015)
Financing Activities
Proceeds from sale of treasury shares 577,525 17,500
Short-term bank borrowing 2,000,000 (700,762)
Proceeds from long-term mortgage loans 0 730,492
Principal payments on mortgage notes payable (178,474) (129,145)
Dividends paid to shareholders (626,655) (576,883)
__________ __________
Net cash provided by (used in) financing activities 1,772,396 (658,798)
__________ __________
Net increase (decrease) in cash and cash equivalents 103,740 (27,746)
Balance at beginning of period 315,337 189,929
__________ __________
Balance at end of period $419,077 $162,183
__________ __________
__________ __________
See accompanying notes.
NOTES TO FINANCIAL STATEMENTS
CENTURY REALTY TRUST
Unaudited
NOTE 1 - REAL ESTATE INVESTMENT TRANSACTIONS
On May 29, 1997, the Trust purchased from a partnership, in which one
of its Trustees is a partner, a 34,000 square-foot multiple-tenant office
building in Indianapolis, Indiana. The property, unencumbered, was
purchased for $1.5 million, an amount approximately equal to its
independently appraised value. To complete the purchase, the Trust
borrowed $1 million against a $2.5 million unsecured line of credit from
NBD Bank, N.A., and issued 24,175 previously unissued shares of beneficial
interest valued at $275,000 to the selling partnership. The balance of
the purchase price, net of prorated income and expenses, was paid in cash.
The Trust expects to obtain a long-term mortgage loan on the property, the
proceeds from which will be used to repay short-term bank borrowings. The
property was 100% leased on the date purchased.
On June 30, 1997, the Trust, through a wholly-owned subsidiary,
Charter Oaks Associates, LLC, purchased from Charter Oaks Associates Limited
Partnership, an unrelated New Jersey limited partnership, the Charter Oaks
apartments, a 192-unit property in Evansville, Indiana for $5.1 million.
The Trust assumed an existing first mortgage loan with a remaining balance
of $3.67 million and borrowed $1 million against its $2.5 unsecured bank
line of credit to complete the purchase. Borrowings under the line of
credit bear interest, currently 8%, based on LIBOR and mature in one year.
The balance of the purchase price, net of prorated income and expenses, was
paid in cash. On the date purchased, more than 95% of the apartments were
rented.
NOTE 2 - MORTGAGE NOTES PAYABLE
Nine of the Trust's fifteen properties, including the two recent
acquisitions, are encumbered by mortgage loans that are payable in monthly
installments totaling approximately $208,000, including interest at fixed
rates ranging from 8.125% to 9.75% per annum, and which mature from April 15,
1998 to October 1, 2006. The approximate aggregate amount of scheduled
mortgage loan repayments for each of the remaining quarters of 1997 are:
third quarter, $81,000; and, fourth quarter, $82,800.
NOTE 3 - FEDERAL INCOME TAXES
The Trust intends to continue as a real estate investment trust as
defined in the Internal Revenue Code and to distribute its taxable income.
Assuming compliance with other requirements of the Code, income distributed
will not be taxable to the Trust. Accordingly, no provision for federal
income taxes is made in the financial statements. Distributions, however,
to the extent that such payments are from earnings and profits of the Trust,
are taxable to the shareholder recipients as dividend income.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter and six months ended June 30, 1997, the Trust reported
increases over the comparable 1996 periods in both rental income and income
from real estate operations. In spite of increases in the provision for
depreciation, substantially all of which related to property improvements
and replacements purchased in 1996, net income increased by $23,367
($.01 per share) and $43,528 ($.02 per share) for the quarter and six months,
respectively. The increase in net income was due to improved results of
operations from the investment properties owned throughout the first and
second quarters of 1997 and 1996. The Trust, in separate and unrelated
transactions, acquired two investment properties during the second quarter
of 1997 but they did not materially effect to results of operations through
June 30.
On May 29, 1997, the Trust purchased a 34,000 square-foot multiple-tenant
office building in Indianapolis for $1.5 million, and on June 30, 1997, it
purchased the Charter Oaks apartments, a 192-unit property, in Evansville,
Indiana for $5.1 million. The terms of those transactions are described in
Note 1 to the financial statements. The office property was 100% leased and
the apartment property was 95% rented at the dates of acquisition. The Trust
projects that ,combined, these two investments will increase gross income
from real estate operations by approximately 16%, net income by 1% and funds
from operations by 8%.
The nine apartment properties (1,358 units) that the Trust owned
throughout the first two quarters of 1997 and 1996 reported average six-month
economic occupancy rates of 94.1% and 96.5% for the two periods, respectively.
For the second quarters of 1997 and 1996, economic occupancy rates were 93.7%
and 96.0%, respectively. Average rental rates increased 4.8% for those
properties over the prior year periods. The combined effect of lower
occupancy rates and higher rental rates resulted in increases in gross
revenue from this core group of apartments by 2.6% and 3.1% for the quarter
and six month periods, respectively. Operating expenses, excluding interest
and depreciation, for the same properties amounted to 43.9% and 44.8% of gross
possible income for the second quarter and six month periods of 1997, down
from 46.9% and 47.5% for the prior year periods. Those operating expenses,
compared with 1996, decreased by .9% and .7% for the quarter and six months
ended June 30, 1997, respectively.
Rental properties other than apartments, which accounted for 4% percent
of total rental income in each of the first two quarters of 1997, reported
decreases in net operating income of 19.8% ($10,600) and 15.3% ($18,300) for
the second quarter and first six months of 1997 compared with the prior year
periods. Rental income, due to lower occupancy rates, was down $11,400, or
15.3% and $16,200, or 10.1%, for the second quarter and six months. Operating
expenses during the second quarter decreased by 4.7% and, for the six months,
increased by 7% in comparison with the same periods a year ago. During the
1996 quarter and six month periods, the commercial properties were 100%
occupied.
Interest expense related to loans outstanding throughout the first two
quarters of 1997 and 1996 declined by $17,000 and $27,700 for the second
quarter and six month periods, respectively, due the scheduled reduction of
loan balances. Those decreases were more than offset by additional interest
expense related to approximately $240,000 of additional borrowings in
connection with the refinance of two mortgage loans and a short-term bank
loan during 1996. One mortgage loan and the bank loan were refinanced in
May, 1996 and the other mortgage loan was refinanced in September, 1996.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1997, the Trust held approximately $1,000,000 in cash and
short term investments. It invests funds in excess of immediate cash needs
in securities of the U.S. government, agencies of the U.S government, and
FDIC-insured certificates of deposit. Except for a pending agreement to
acquire control, as general partner, of six limited partnerships, the Trust
has no obligations, nor has it made any commitments, which will require
expenditures in excess of funds anticipated to be provided by operations
during the remainder of 1997.
No transactions or events have occurred to indicate that funds provided
by operations, except as to the projected impact, previously described, of
two investment properties purchased in the second quarter of 1997 and the
impact which might result from properties not yet acquired, during the second
half of 1997 will differ disproportionately from the first half of the year.
In July, 1997, the Trust agreed, subject to approval by a majority of
the limited partners in each partnership and by all of the mortgage holders,
to purchase the sole general partner position in six limited partnerships.
The partnerships have an aggregate total asset value of approximately $18.9
million with mortgage loans and other liabilities of approximately $14.4
million. Approvals are expected to be solicited in August. If such approvals
are obtained and all due diligence procedures are satisfactorily completed,
the transaction could be consummated in the fourth quarter of 1997. Under
the agreement, the Trust would invest $550,000 and become, through a
wholly-owned qualified REIT subsidiary corporation, a 1% equity owner of,
and would have full management control over, all six of the partnerships
and their respective apartment properties. Each partnership owns one
apartment property - five in Indiana and one in Ohio. In the aggregate,
the properties contain 722 apartment units, the smallest containing 64
units and the largest containing 182 units.
The agreement further provides that, within two years after closing,
the Trust would use its best efforts to offer each limited partner the right
to exchange his/her limited partnership interest for shares of beneficial
interest of the Trust based on an agreed exchange ratio. Assuming that such
an exchange offer is made and that all limited partners eventually accept
such offer, the Trust could, by issuing approximately 333,000 shares of
beneficial interest (approximately $3.9 million at current market value),
become the equity owner of the six apartment properties.
To facilitate the two acquisitions completed in the second quarter, the
Trust, sold 48,000 shares of beneficial interest previously held as treasury
shares for a total of $522,000. In addition, the Trust obtained a $2.5 million
unsecured standby line of credit from a bank. Through June 30, 1997, the
Trust has borrowed $2 million against the line of credit. The remainder of
line of credit, together with cash and invested funds currently on hand,
represents sufficient capital to complete the aforementioned partnership
transaction should it be approved and executed.
The Trust intends to continue as a real estate investment trust, and
to distribute all of its earnings. Accordingly, no provision has been made
for federal income taxes. The Trust, until it adopted a quarterly
distribution schedule in the third quarter of 1996, followed a practice of
making cash distributions to its shareholders in June and December each year.
Quarterly distributions, each $.21 per share , were paid in September and
December, 1996. To facilitate the provision of timely quarterly financial
reports to shareholders, the timing of quarterly distributions was changed
for subsequent distributions. Commencing in 1997, distributions were
scheduled for payment in February, May, August and November. Distributions
in 1997 of $.21, $.22 and $.22 were declared for payment in February, May
and August, respectively.
INFLATION
Management believes that the direct effects of inflation on the Trust's
operations have been insignificant.
PART II
Item 6(b). No events occurred during the three months ended June 30,
1997, which would have necessitated the filing of a report on Form 8K.
MANAGEMENT REPRESENTATIONS
The information furnished in this report, while not audited, includes
all adjustments, in the opinion of management, necessary for a fair
representation of the financial position of Century Realty Trust at June 30,
1997, and December 31, 1996, and the results of its operations and its cash
flow for the three months and six months ended June 30, 1997, and June 30,
1996, in accordance with generally accepted accounting principles consistently
applied. The interim results reported are not necessarily indicative of
expected results for the full year, and should be considered in conjunction
with the audited financial statements contained in the Trust's 1996 annual
report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY REALTY TRUST
Date_____________ By___________________________
John I. Bradshaw, Jr.
Executive Vice President,
Secretary and Treasurer
Date_____________ By___________________________
David F. White
Controller
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