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 March 31, 1998 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 1,547,314 shares
Century Realty Trust and Subsidiaries
Consolidated Balance Sheets
March December
31, 1998 31, 1997
___________ __________
Assets
Real estate investments:
Land $3,776,383 $3,776,383
Buildings 51,291,502 51,276,043
Equipment 1,196,485 1,154,128
Allowances for depreciation (9,076,595) (8,641,330)
___________ ___________
47,187,775 47,565,224
Net investment in direct financing leases 386,579 401,677
___________ ___________
47,574,354 47,966,901
Cash and cash equivalents 880,657 782,631
Restricted Cash 1,337,910 1,028,324
Accounts and accrued income receivable 623,542 415,182
Unamortized management contracts 632,858 650,475
Unamortized mortgage costs 454,338 467,705
Undeveloped land 99,675 99,675
Other assets 146,682 117,195
___________ ___________
$51,750,016 $51,528,088
___________ ___________
___________ ___________
Liabilities and shareholders' equity
Liabilities:
Short-term debt $1,650,000 $1,650,000
Mortgage notes payable 34,702,535 34,828,474
Accounts payable and accrued liabilities 469,363 465,733
Interest 266,658 241,679
State income and property taxes 1,853,448 1,455,212
Tenants' security deposits and unearned rent 507,843 483,362
___________ ___________
39,449,847 39,124,460
Minority interest in operating partnerships 3,543,401 3,535,693
Shareholders' equity:
Shares of Beneficial Interest, no par
value - authorized 5,000,000 shares,
issued 1,553,528 shares, including
6,214 shares in treasury 6,758,619 6,758,619
Undistributed income other than from
gain on the sale of real estate 724,589 835,756
Undistributed net realized gain from the
sale of real estate 1,316,078 1,316,078
Cost of treasury shares (42,518) (42,518)
___________ ___________
8,756,768 8,867,935
___________ ___________
$51,750,016 $51,528,088
___________ ___________
___________ ___________
See accompanying notes.
Century Realty Trust and Subsidiaries
Consolidated Statements of Income
Three Months
Ended March 31
1998 1997
__________ __________
Income:
Real estate operations:
Rental Income $3,070,775 $2,045,997
Income from direct financing leases 12,492 13,831
Other income 75,545 42,217
__________ __________
3,158,812 2,102,045
Less:
Real estate operating expenses 1,156,399 754,103
Provision for depreciation 455,973 284,490
Real estate taxes 358,935 238,500
__________ __________
1,971,307 1,277,093
__________ __________
1,187,505 824,952
Interest 9,280 11,812
__________ __________
1,196,785 836,764
Expenses:
Interest 825,985 461,358
State income taxes 37,374 41,437
General and administrative 142,895 101,435
__________ __________
1,006,254 604,230
Income before minority interest
in operating partnerships 190,531 232,534
Minority interest in operating
partnerships 7,708 -
__________ __________
Net income $182,823 $232,534
__________ __________
__________ __________
Per share data:
Basic earnings per share $0.12 $0.16
Diluted earnings per share $0.12 $0.15
See accompanying notes.
Century Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
Three Months
Ended March 31
1998 1997
__________ __________
Operating Activities
Net income $182,823 $232,534
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 486,957 292,160
Minority interest 7,708 -
Changes in operating assets
and liabilities:
Restricted cash (309,586) (134,567)
Accounts and accrued income receivable (208,360) (176,668)
Other assets (50,195) (14,678)
Accounts payable and accrued liabilities 426,845 299,826
Tenants' security deposits and
unearned rent 24,481 57,233
__________ __________
Net cash provided by operations 560,673 555,840
Investing Activities:
Investment in short term investments - (691,493)
Proceeds from short term investments - 494,868
Purchase of property and improvements (57,816) (33,028)
Lease principal payments received 15,098 14,407
__________ __________
Net cash used in investing activities (42,718) (215,246)
Financing Activities:
Principal payments on mortgage notes payable (125,939) (88,315)
Sale of treasury shares - 186,025
Dividends paid to shareholders (293,990) (305,327)
__________ __________
Net cash used in financing activities (419,929) (207,617)
__________ __________
Net increase in cash and cash equivalents 98,026 132,977
Balance at beginning of period 782,631 315,337
__________ __________
Balance at end of period $880,657 $448,314
__________ __________
__________ __________
See accompanying notes.
NOTES TO FINANCIAL STATEMENTS
CENTURY REALTY TRUST
Unaudited
NOTE 1 - REAL ESTATE INVESTMENT TRANSACTIONS
In the second quarter of 1997, the Trust purchased a 34,000 square
foot multiple-tenant office building in Indianapolis, and a 192-unit garden
apartment property in Evansville, Indiana. In the fourth quarter of 1997,
the Trust, through a wholly-owned subsidiary, CR Management, Inc., purchased
the one percent General Partner interest and management control of five
Indiana garden apartment properties containing a total of 586 apartment
units. Combined, those acquisitions represented a 57% increase in total
apartment units, and a 62% increase in leasable square feet of commercial
property over the portfolio of investment properties the Trust held at the
end of the first quarter of 1997. Following is a description of those
transactions:
On May 29, 1997, the Trust purchased the office building in Indianapolis,
Indiana 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 bank credit facility, and issued 24,175
previously unissued shares of beneficial interest valued at $275,000 to the
seller. The balance of the purchase price, net of prorated income and
expenses, was paid in cash. In December, 1997, the Trust obtained a $1.14
million long-term mortgage loan on the property, and used the proceeds to
repay short-term bank borrowings.
On June 30, 1997, the Trust, through a wholly-owned subsidiary, Charter
Oaks Associates, LLC, purchased from an unrelated seller, 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. The balance of the purchase price,
net of prorated income and expenses, was paid in cash.
In November, 1997, the Trust purchased, through a wholly-owned
subsidiary, CR Management, Inc., the one percent General Partner interest
and management control of five Indiana apartment properties containing a
total of 586 apartment units. In addition to its initial cash investment of
approximately $900,000, the Trust agreed that, within two years, it would
use its best efforts to offer the limited partners, who have a 99% equity
interest, the right to exchange their partnership interests for approximately
290,000 shares of the Trust.
NOTE 2 - MORTGAGE NOTES PAYABLE
Ten of the fifteen properties owned by the Trust, including the two
1997 acquisitions, are encumbered by mortgage loans that are payable in
monthly installments totaling approximately $219,000, 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 five apartment properties owned by the operating partnerships
controlled by the Trust have long-term mortgage loans that are payable
in monthly installments totaling approximately $237,000. The loans have
interest rates ranging from 8 1/4% to 9 1/2%, and mature from May 15, 2006
to May 1, 2030.
A mortgage loan on one of the two phases of the Creek Bay at Meridian
Woods apartments, a 208-unit property in Indianapolis matured April 15,
1998 with a balance due at maturity of $2.5 million. A mortgage loan on
the other phase will mature July 15, 1998 with a balance due at maturity of
$2.9 million. In addition to the $1.65 million of existing short-term debt,
the Trust obtained a short-term bank loan to repay the April maturity,
thereby temporarily increasing short-term debt to approximately $4.2
million. The Trust has obtained a commitment for a new ten-year first
mortgage loan on the Creek Bay at Meridian Woods apartments in the amount of
$6.75 million, of which $2.9 million will be used to repay the July mortgage
loan maturity. The remainder of the proceeds will be used to reduce total
short-term debt to approximately $350,000. Monthly principal and interest
payments on the new mortgage loan are approximately equal to the combined
payments on the two mortgage loans it replaces.
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
OVERVIEW
Contained in this discussion are forward-looking statements which
management believe to be reasonable and informative. Such statements
are based on assumptions which may not prove to be correct for reasons
management cannot predict. Consequently, the inclusion of forward-looking
statements should not be considered as representations by the Trust or its
management that expected results will be achieved or that stated objectives
will be attained.
At March 31, 1998, and throughout the quarter then ended, the Trust
owned or controlled fifteen apartment communities containing 2,136 apartment
units, three multi-tenant commercial properties containing 89,000 rentable
square feet, and two restaurant properties leased to operators under net
leases. Six of the apartment properties containing 778 units and one
commercial property containing 34,000 rentable square feet were acquired
during the second and fourth quarters of 1997. A detailed description of
the real estate acquisitions is contained in Note 1 "Real Estate Investment
Transactions" in the financial statements. The properties acquired in 1997
increased the number of apartment units and rentable square feet of
commercial property in the Trust's investment real estate portfolio by 57%
and 62%, respectively. At March 31, 1998 the Trust's net investment in real
estate consisted of apartment properties (94%), commercial properties (5%)
and net-leased restaurant properties (1%). Except for one restaurant
property in Orlando, Florida, the Trusts' real estate investments are
located in Indiana.
The apartment communities, which comprise 94% of the Trust's investment
property, also account for most of the rental income and expenses reported.
On a weighted average basis, 2,136 apartment units contributed to the Trust's
operations in first quarter of 1998, up 57% from the 1,358 units in operation
during first quarter of 1997. Management expects that, exclusive of the
impact attributable to future real estate transactions, operating income and
expenses will increase proportionately in second quarter of 1998.
RESULTS OF OPERATIONS
For the first quarter of 1998, the Trust reported a $1,024,778, or
50.3%, increase in rental income over the comparable 1997 period due,
entirely, to investment properties acquired in the second and fourth
quarters of 1997 (the newly-acquired properties). The newly-acquired
properties accounted for $1,030,418 of rental income for the quarter,
Rental income from properties owned throughout the first quarters of 1998
and 1997 decreased by $5,640, or .3%, from the prior year quarter.
The nine apartment properties (1,358 units) that the Trust owned
throughout the first quarters of 1998 and 1997 reported average three-month
economic occupancy rates of 92.6% and 94% for the two periods, respectively.
Average rental rates increased 1.2% for those properties over the prior year
period. The combined effect of lower occupancy rates and higher rental
rates resulted in a .3% decrease in gross revenue from the core group of
apartments. Operating expenses, excluding interest and depreciation, for
the same properties amounted to 44.5% of gross possible income for the first
quarter of 1998, down from 45.6% for the prior year period, and amounted
to a decrease of 2.4% in total operating expenses. A relatively mild winter
resulted in lower utility costs and winter-related repair expenses during
the 1998 quarter.
The overall economic occupancy rate for the newly-acquired apartment
properties averaged 93.6% for the first quarter of 1998. Operating expenses
for the same properties, excluding interest and depreciation, amounted to
48.9% of gross possible income.
Rental properties other than apartments that were owned throughout the
first quarters of 1998 and 1997, which accounted for 2.7% percent of total
rental income in the first quarter of 1998, reported a 5.4% ($3,100) increase
in net operating income compared with the prior year quarter. Rental income,
due to higher rental rates and stable occupancy, was up $1,900, or 2.4%,
while operating expenses decreased by 5.5%. During the 1998 and 1997
quarters, the commercial properties were 94% occupied.
The office property purchased in the second quarter of 1997, was 93%
occupied during the first quarter of 1998. It accounted for $95,194 of
gross rental income and $63,509 of net operating income in the quarter.
Depreciation expense in the first quarter of 1998, includes $165,300
applicable to the newly-acquired properties. The balance of the $171,483
increase in depreciation over the first quarter of 1997, is applicable to
capitalized expenditures for the replacements and improvements to properties
owned throughout both quarters.
Real estate taxes in the first quarter of 1998 includes $119,800
applicable to the newly-acquired properties, and substantially accounts
for all of the increase over the prior year quarter.
Administrative expenses, primarily auditing and accounting services,
related the the five operating partnerships over which the Trust acquired
control in the fourth quarter of 1997, account for $35,900 of general and
administrative expenses in the first quarter of 1998. Other than the
partnership-related expenses, general and administrative expenses increased
5.5% from the first quarter of 1997. Two-thirds of that increase related to
shareholder communications. Administrative salaries and related payroll
taxes and benefits, increased $1,400, or 2.3% over the prior year quarter.
In the first quarter of 1998, general and administrative expenses consumed
4.5% of income from real estate operations, down from 4.8% in the first
quarter of 1997.
Interest expense related to loans outstanding throughout the first
quarters of 1998 and 1997 declined by $7,663 due the scheduled reduction
of loan balances. Mortgage loan interest expense applicable to the newly
acquired properties amounted to $309,400 in the first quarter of 1998. An
additional $62,890 of interest expense was incurred in the 1998 quarter for
short-term loans related to the 1997 property acquisitions. The Trust had
no short-term loans outstanding during the first quarter of 1997.
FINANCIAL CONDITION AND LIQUIDITY
At March 31,1998, the Trust held approximately $880,000 in cash and
cash equivalents. 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 the need to repay
approximately $350,000 of short-term debt, 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
1998. No transactions or events have occurred to indicate that funds
provided by operations during the balance of 1998 will differ
disproportionately from the first quarter of the year.
Management is considering various options to repay that portion of its
short-term debt which will remain after the mortgage loan refinancing
referred to in Note 2 to the financial statements. Among the options
under consideration are the raising of equity capital in the private
placement of restricted shares of beneficial interest, the long-term
financing or refinancing of existing unencumbered or under-encumbered real
estate, and the sale property.
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. A distribution of $.19 per share was paid in
February, and on April 14, 1998, a distribution of $.20 per share was
declared for payment May, 18, 1998 to shareholders of record May 1, 1998.
Future 1998 quarterly distributions, with amounts to be determined at the
time of declaration, are scheduled to be paid in August and November.
INFLATION
Management believes that the direct effects of inflation on the Trust's
quarterly operations have been insignificant during 1997 and 1998.
YEAR 2000 ISSUE
All computer hardware and software in use has been developed or
purchased since 1995. Eight-digit date fields are provided in all software
in use. The Trust has no systems that interface with another entity.
Management believes that the year 2000 issue is unlikely to have a material
effect on the Trust.
PART II
Item 6(b). No events occurred during the three months ended March 31,
1998, 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
March 31, 1998, and December 31, 1997, and the results of its operations
and its cash flow for the three months ended March 31, 1998, and March 31,
1997, 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
1997 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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