SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20259
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317)632-5467
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports). and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
___ ___
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant was $16,725,976, based upon the
average bid and asked prices on February 19, 1999.
Shares of Beneficial Interest, no par value--1,547,314 shares
outstanding as of February 19, 1999.
PART 1
ITEM 1. BUSINESS
The principal business of Century Realty Trust, an Indiana
business trust, is the ownership of income-producing real
properties, which consist of fifteen apartment complexes, two
restaurant properties, three commercial properties, and various
parcels of undeveloped land which are situated adjacent to
rental properties owned by the Trust. In 1997, the Trust
expanded its investment options to include the exclusive control
of real estate through the use of operating partnerships. Five
of the Trust's fifteen apartment properties are owned by
operating partnerships. Other than long-term leases on the
restaurant properties, the Trust's rental income is derived from
short-term leases of units in its various buildings. The
residential properties are managed under agreements with
independent property management firms. The Trust and its
operating partnerships reimburse the management firms for
compensation of approximately 65 persons employed at the
apartment properties.
The Trust has elected to be treated as a real estate investment
trust under the Internal Revenue Code and to distribute
substantially all of its real estate investment trust taxable
income. A real estate investment trust is an investment vehicle
which permits individuals, by purchasing shares, to invest in
real estate equities and/or mortgage loans, and share in the
profits therefrom without having profits subjected to federal
income taxes at the trust level.
ITEM 2. PROPERTIES
The following investment properties were owned by the registrant
at December 31, 1998:
Year No. of 1998 Net
Apartments Location Acquired Units Occupancy Investment
__________ ________ ________ ______ _________ __________
Park Plaza Indianapolis, IN 1973 176 89% $ 635,335
Fontenelle Kokomo, IN 1973 176 96 1,087,435
Park Forest Marion, IN 1973 64 94 392,064
Chester Heights Richmond, IN 1973 110 93 377,063
Driftwood Park Indianapolis, IN 1989 48 91 1,001,104
Regency Royale Mishawaka, IN 1993 132 92 3,398,810
Creek Bay Indianapolis, IN 1993 208 94 6,768,036
Eagle Creek Indianapolis, IN 1994 188 96 5,686,221
Fox Run Indianapolis, IN 1995 256 84 6,510,751
Charter Oaks Evansville, IN 1997 192 97 5,025,468
Barcelona* Kokomo, IN 1997 64 87 1,459,255
Beech Grove* Jeffersonville, IN 1997 182 94 4,056,689
Hampton Court* Indianapolis, IN 1997 92 94 1,704,326
Sheffield Square* New Albany, IN 1997 152 95 4,220,829
West Wind Terrace* Indianapolis, IN 1997 96 91 1,731,819
_____ ___ ___________
Total Apartments 2,136 92 44,055,206
* Property is owned by a partnership controlled by the Trust.
Year Square Currently Net
Commercial Location Acquired Feet Leased Investment
__________ _________ ________ ______ _________ __________
Office/Warehouse
401 Industrial Dr. Carmel, IN 1977 38,000 90% $ 303,533
Office Buildings
1810 E. 62nd St. Indianapolis, IN 1986 17,000 100 395,665
3510-20 E. 96th St.Indianapolis, IN 1997 34,000 100 1,521,039
______ ___________
Total Commercial 89,000 2,220,237
Year Square Lease Net
Restaurants Location Acquired Feet Expires Investment
___________ _________ ________ ______ ________ __________
Fortune House Indianapolis, IN 1979 5,000 2004 427,909
Miami Subs Orlando, FL 1979 3,500 2004 170,473
_____ _______
Total Restaurants 8,500 598,382
___________
ALL INVESTMENT PROPERTIES $46,873,825
___________
___________
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the
trust, and no such proceedings are known to be contemplated,
except that in November, 1998, the Internal Revenue Service
assessed a $151,400 penalty against the Trust for its alleged
failure to correctly and/or timely file information returns
regarding dividends that it paid in 1996. The Trust's
management believes that the returns in question were submitted
timely, were correct when submitted, and that the assessed
penalty is unjustified. The Trust is currently pursuing its
administrative appeal rights with the Internal Revenue Service
and intends to vigorously oppose the penalty assessment. As a
result of the uncertainty concerning the ultimate outcome of
this matter, no liability has been recorded at December 31,
1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of the year ended December 31, 1998
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Trust's shares of beneficial interest are traded over-the
counter. Cash distributions are paid approximately 45 days
after the end of each quarter. The high and low published bid
prices and distributions for the last two years were:
Distributions
1998 High Low Declared
____ ______ ______ _____________
1st Quarter $12.13 $11.38 $0.19
2nd Quarter 12.13 11.63 0.20
3rd Quarter 12.63 11.94 0.20
4th Quarter 12.63 12.25 0.20
1997
____
1st Quarter $11.13 $10.63 $0.21
2nd Quarter 11.38 11.13 0.22
3rd Quarter 11.63 11.38 0.22
4th Quarter 11.63 11.63 0.22
ITEM 6. SELECTED FINANCIAL DATA
In thousands, except per share data and number of apartments
Years ended December 31, 1998 1997 1996 1995 1994
________________________ ____ ____ ____ ____ ____
Operating Data:
Rental and other
operating income $12,885 $ 9,364 $ 8,385 $ 7,761 $ 6,044
Gains on sale of property - - - - -
Income before minority
interest in operating
partnerships 990 832 1,022 832 703
Net income 884 859 1,022 832 703
Cash distributions declared 1,222 1,307 1,192 1,106 1,003
Weighted average number
of shares outstanding 1,547 1,515 1,454 1,389 1,346
Per share:
Basic earnings $ 0.57 $ 0.57 $ 0.70 $ 0.60 $ 0.52
Diluted earnings 0.57 0.56 0.69 0.59 0.51
Distributions declared 0.79 0.87 0.82 0.78 0.75
Balance Sheet Data:
Total real estate
investments(a) $57,041 $56,608 $36,261 $36,096 $29,078
Allowances for
depreciation (10,167) (8,641) (7,476) (6,511) (5,663)
Total assets 50,489 51,528 30,538 30,762 24,181
Mortgage and other
notes payable 35,767 36,478 20,438 20,449 14,607
Total liabilities 38,439 39,124 22,205 22,277 16,022
Minority interest in
operating partnerships 3,521 3,536 - - -
Shareholders' equity 8,529 8,868 8,333 8,485 8,159
Number of shares
outstanding 1,547 1,547 1,454 1,452 1,382
Other Data:
Cash flow data:
Cash provided by
operating activities $ 2,730 $ 2,098 $ 1,977 $ 1,831 $ 1,440
Cash (used in)
investing activities (637) (3,299) (609) (6,467) (1,055)
Cash provided by (used
in) financing
activities (2,130) 1,668 (1,242) 4,711 (586)
Funds from operations(b):
Income before minority
interest in operating
partnerships $ 990 $ 832 $ 1,022 $ 832 $ 703
Deduct gains on sale
of property - - - - -
Add back investment real
estate depreciation 1,741 1,265 1,111 1,050 862
_______ _______ _______ _______ _______
Funds from operations $ 2,731 $ 2,097 $ 2,133 $ 1,882 $ 1,565
_______ _______ _______ _______ _______
_______ _______ _______ _______ _______
Apartment units owned(a):
Owned at December 31 2,136 2,136 1,358 1,358 1,102
Weighted average number
of apartments owned
during the year 2,136 1,503 1,358 1,294 1,055
(a) Real estate owned includes apartments owned by operating partnerships
created and controlled by the Trust.
(b) Funds from operations (FFO) is defined as income before gains on sale
of property and minority interest of unitholders in operating
partnerships created and controlled by the Trust plus investment
property depreciation. FFO should be considered along with, not as
an alternative to, net income and cash flows as a measure of the
Trust's operating performance and liquidity. FFO does not represent
cash flow from operating activities and is not necessarily indicative
of cash available to fund capital expenditures, debt repayment, or
other cash needs.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Contained in this discussion and elsewhere in this annual report
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 December 31, 1998 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. No properties were acquired or sold during
1998. Six of the apartment properties containing 778 units and
one commercial property containing 34,000 rentable square feet
were acquired during 1997. A detailed description of the real
estate acquisitions is contained in Note 3 "Real Estate
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 December 31, 1998 the Trust's net investment in real estate
consisted of apartment properties (94%), commercial properties
(5%) and net-leased restaurant properties (1%).
The apartment communities, which comprise 94% of the Trust's
investment property, also account for most of the rental income
and expenses reported. The 2,136 apartment units in the
portfolio throughout 1998 represents a 42% increase over the
weighted average number of units reflected in the 1997
operations. On a weighted average basis, 1,503 apartment units
contributed to the Trust's operations in 1997, up 11% from the
1,358 units in operation during 1996.
RESULTS OF OPERATIONS -- 1998
The Trust experienced increases of approximately 38% in income
and 39% in expenses related to its real estate operations in
1998. The investment properties acquired in 1997 accounted for
97% of the increase in income and 58% of the increase in
expenses. For properties owned during all of 1998 and 1997,
rental income increased 1%, representing the net effect of 2.3%
higher rental rates offset by a decrease in occupancy to 91.8%
from 92.1%. Real estate operating expenses for the same
properties increased 3.8%, an amount comparable to management's
projected increase of 4%. For the same apartment properties,
operating expenses, including real estate taxes (excluding interest
and depreciation) amounted to 47.3% and 46.6% of gross possible
income for 1998 and 1997, respectively. At December 31, 1998
the occupancy rate for all of the Trust's apartment properties,
combined, was 94%. At the end of 1997, the overall apartment
occupancy was 92%. The apartment properties owned for all of 1997
and 1998, with few exceptions, experienced lower turnover rates
during the year, and ended 1998 with higher occupancy rates.
Overall apartment occupancy at the end of 1998, was up from the
average during the year primarily due to an increase at the Fox Run
apartments, a 256-unit community purchased in 1995. At year-end
Fox Run was 91% occupied compared with its average occupancy of
84% for all of 1998.
The Charter Oaks apartments in Evansville, Indiana, which the
Trust purchased in mid-1997 was the most improved producer in
1998 among the Trust's investment properties. While still
operating below initial expectations, its 1998 funds from
operations amounted to more than seven percent, a significant
improvement over its 1997 yield of less than one percent of
invested capital. The 192-unit apartment property, which
experienced an 88.3% occupancy rate during the last half of 1997
averaged 97% in 1998. Operating expenses amounted to 56.2% of
gross possible income, a small improvement from 57.1% in 1997.
Management believes that a normal expense ratio for Charter
Oaks would be 49.5%. Management is confident that the operating
expense ratio can be improved in 1999 without a negative impact
on occupancy. In contrast to the Charter Oaks property, the
34,000 square foot office property the Trust purchased in 1997,
exceeded expectations, both as to occupancy rate and expense
ratio in 1997. Its results in 1998 were less impressive due to
an increase in operating expenses from 32.8% in 1997 to 38.7% in
1998. The increase resulted primarily from expenses related to
tenant turnover. On its equity investment in the office
property, the Trust realized a cash return of 7% in 1998
compared with an annualized cash return of 10% in 1997.
Nonresidential properties owned during all of 1998 and 1997,
which accounted for 4.6% of total income from operations in
1998, and 3.2% in 1997, experienced a 7.1% ($23,600) increase
in total rental income. The increase resulted primarily from
higher occupancy rates in 1998, and represented a recovery from
a decrease of nearly the same amount reported for the prior year.
During 1998, 21% of the $70,100 of interest income earned by the
Trust was derived from the a note receivable, 32% was earned at
money market rates on sweep account demand deposit funds and the
balance was earned at savings account rates on restricted cash
balances. Restricted cash balances consist of tax and insurance
escrow deposits and replacement fund balances held by mortgage
lenders, and tenant security deposit savings accounts. In 1998,
the Trust earned a 4.3% average rate of return on an average
total amount of cash and short-term investments of $519,000,
exclusive of the restricted cash accounts over which the Trust
does not have investment discretion. In 1997, 40% of the
interest income earned by the Trust was derived from short-term
investments in certificates of deposit and U.S. government
agency discount notes. The average rate of return earned in
1997 was 5.2%. The balance of interest income in 1997 was
derived, primarily, from the day to day investment of excess
cash deposits at money market rates of return that averaged 4.4%.
Interest expense applicable to mortgage loans and short-term
borrowings related to the two investment properties purchased
during 1997 increased by $237,500 in 1998, while interest
expense related to seasoned mortgage loans decreased by $48,000.
The balance of the $999,000 increase in interest expense is
attributable to long-term mortgage loans on properties owned by
the controlled partnerships acquired in November, 1997. During
1998, the Trust obtained a new $6.7 million, ten-year, 6.97%
fixed-rate first mortgage loan on its Creek Bay apartment
property to repay $5.4 million of mortgage loans on that
property with interest rates of 8 7/8% and 9 3/4%. The $1.3
million net proceeds from the new mortgage loan was used to
reduce short-term borrowings. For 1998, mortgage interest
expense related to Trust-owned properties averaged 8.43% on
average outstanding balances of $25.3 million. For 1997, the
overall effective interest rate was 8.88% on average outstanding
mortgage loan balances of $22.6 million. For partnership-owned
properties, the average effective interest rate was 9.04% on
average outstanding loan balances of $10.0 million.
At December 31, 1998, with the exception of one $1.1 million
variable rate loan, the mortgage notes payable provide for fixed
interest rates. Using discounted cash flow analyses based on
the Trust's current incremental borrowing rates, the aggregate
fair value of those notes at December 31, 1998, was
approximately 3% higher than the carrying amount. (See Note 8 to
the financial statements).
General and administrative expenses amounted to 4.0% of income
from real estate operations in 1998, compared with 4.5% in 1997.
Employee compensation cost, which includes payroll taxes and
benefits, amounted to $248,000 in 1998, up 2.3% from $242,400 in
1997.
RESULTS OF OPERATIONS -- 1997
The Trust experienced increases of approximately 11% in income
and 16% in expenses related to its real estate operations in
1997. The investment properties acquired in 1997 accounted for
98% of the increase in income and 80% of the increase in
expenses. For properties owned during all of 1997 and 1996,
rental income increased 2%, representing the net effect of 3.3%
higher rental rates offset by a decrease in occupancy to 92.8%
from 95.4%. Real estate operating expenses for the same
properties increased 3.2%, an amount comparable to the increase
in rental rates. For the same apartment properties, operating
expenses, including real estate taxes (excluding interest and
depreciation) amounted to 45.8% and 46.3% of gross possible
income for 1997 and 1996, respectively. At December 31, 1997
the occupancy rate for all of the Trust's apartment properties,
combined, was 92%. At the end of 1996, the overall apartment
occupancy was 95%. The apartment properties owned for all of
1997, with few exceptions, experienced higher turnover rates
during the year, and ended 1997 with lower occupancy rates.
Management believes that the availability and affordability of
single family homes was primarily responsible for the decline in
its overall apartment occupancy.
The Charter Oaks apartments in Evansville, Indiana, which the
Trust purchased in mid-1997 fell significantly short of
expectations in its first six months in the portfolio. On its
equity investment in Charter Oaks, the Trust realized an
annualized cash return of less than one percent in 1997. The
192-unit apartment property experienced an 88.3% occupancy rate
during the last half of 1997 and ended the year 85% occupied.
Operating expenses, which included certain nonrecurring start-up
costs, amounted to 57.1% of gross possible income. Certain
higher-rent units were upgraded and an intensified marketing
program was implemented. In contrast to the Charter Oaks
property, the 34,000 square foot office property the Trust
purchased in 1997 exceeded expectations, both as to occupancy
rate and expense ratio. On its equity investment in the office
property, the Trust realized an annualized cash return of 10% in
1997.
Nonresidential properties owned during all of 1997 and 1996,
which accounted for 3.2% of total income from operations in
1997, and 3.8% in 1996, experienced a 6.8% ($21,500) decrease in
total rental income. The decrease in rental income from
commercial properties resulted primarily from lower occupancy
rates in 1997. In 1996, those properties were 100% leased for
nearly the entire year.
During 1997, 40% of the $79,000 of interest income earned by the
Trust was derived from the short term investment of funds in
discount notes issued by agencies of the U.S government, 22% was
earned at money market rates on sweep account demand deposits
funds and the balance was earned at savings account rates on
restricted cash balances. In 1997, the Trust earned a 4.5%
average rate on an average total amount of cash and short-term
investments of $1,077,000, exclusive of the restricted cash
accounts over which the Trust does not have investment
discretion. In 1996, 75% of the interest income earned by the
Trust was derived from short-term investments in certificates of
deposit and U.S. government agency discount notes. The average
rate of return earned in 1996 was 4.9%. The balance of interest
income in 1996 was derived, primarily, from day to day
investment of excess cash deposits at money market rates of
return. The Trust does not believe it is subject to market risk.
Interest expense applicable to loans related to investment
activities increased by $271,000 in 1997, while interest expense
related to seasoned mortgage loans decreased by $31,000. The
increase in interest expense related to investment activities
included $91,000 applicable to short-term borrowings against the
Trust's credit facility for the property acquisitions in 1997.
Interest expense applicable to the long-term mortgage loan
assumed with the purchase of the Charter Oaks apartments
amounted to $166,000 in 1997. The balance of the increase in
interest expense resulted from long-term mortgage loans on two
properties that were refinanced in 1996. For 1997, mortgage
interest expense averaged 8.88% on average outstanding balances
of $22.6 million. For 1996, the overall effective interest rate
was 9.12% on average outstanding mortgage loan balances of $20.4
million.
During 1997, all of the mortgage notes payable provided for
fixed interest rates. Using discounted cash flow analyses based
on the Trust's incremental borrowing rates, the aggregate fair
value of those notes at December 31, 1997, was approximately 5%
higher than the carrying amount. (See Note 8 to the financial
statements).
General and administrative expenses amounted to 4.5% of income
from real estate operations in 1997, compared with 4.7% in 1996.
Employee compensation cost, which includes payroll taxes and
benefits, amounted to $242,400 in 1997, up 1.3% from $239,300 in
1996.
LIQUIDITY AND SOURCES OF CAPITAL
On January 7, 1999, the Trust declared a $.20 per share cash
distribution payable February 15, 1999 to holders of its
1,547,314 outstanding shares of beneficial interest. The cash
requirement for that distribution amounts to $309,000. Four of
the five partnerships declared surplus cash distributions
aggregating $43,000 payable February 25, 1999 to partners of
record December 31, 1998. In addition to the cash required for
distributions, the Trust may be liable for a penalty related to
its dividend information returns for 1996 which it submitted on
a computer diskette to the Internal Revenue Service, as
required, in February, 1997. Due to a programming error which
misplaced the decimal point in a summary record, the Internal
Revenue Service rejected the filing and, in November, 1998,
assessed a penalty of $151,400, claiming that the Trust did not
timely file correct information returns. This contingency is
described in Note 10 to the financial statements. Other than
the requirement for declared, but unpaid distributions, and the
contingency described, management is not aware of any
significant transactions or events which would require material
expenditures in 1999. The Trust has no other obligations, nor
has it made any commitments, which would require expenditures in
excess of funds expected to be provided by operations during
1999. At December 31, 1998, the Trust had $745,000 in cash
which management believes is sufficient to meet anticipated
working capital requirements.
Management expects to continue to operate the Trust as a real
estate investment trust, and to distribute to shareholders all
of its otherwise taxable income. At December 31, 1998, the
Trust had no undistributed earnings and profits. Distributions
to shareholders during 1998, which totaled $1,222,000 included
all taxable income and earnings and profits for 1998 plus
$145,000 designated as return of capital. During 1997, the
Trust distributed $1,307,000, of which $315,000 was designated
as a return of capital. During 1998, the aggregate surplus cash
distributed to the minority interest by the controlled
partnerships totaled $145,000.
Due to differences in depreciation rates and carrying values of
some properties, reported income for 1998 was 15% lower; for
1997, 10% lower; and, for 1996, 9% lower, than income for income
tax purposes.
IMPACT OF INFLATION
Inflation has not had a significant impact on the Trust during
1998, 1997 and 1996.
YEAR 2000 ISSUE
A description of the Trust's state of readiness, evaluation of
risks, and contingency plans is contained in Note 11 to the
financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, which are included on pages 7 through
16 of the annual shareholders report for the year ended December
31, 1998, are included as exhibits under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No change of accountants or reported disagreements have occurred
which are to be disclosed hereunder.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Trustees:
Period During
Which He Has Shares of the
Served As A Trust Beneficially
Principal Occupation Trustee Owned as of
Name and Address Age For Past Five Years (term expires) March 22, 1999
________________ ___ ____________________ ______________ __________________
John I Bradshaw, Jr. 67 President (1998) 1982 to date 96,294 (6.22%)
Indianapolis, IN Exec. Vice President (2000)
Century Realty Trust
Other Directorships:
None
John W. Adams 50 Vice President 1996 to date 1,700 (.11%)
Indianapolis, IN Browning Investments, Inc.(2000)
Real Estate Development
Other Directorships:
Brightpoint, Inc.
John A. Wallace 75 Real estate investor 1973 to date 16,500 (1.07%)
Indianapolis, IN Self employed (1999)
Other directorships:
None
Francis M. Hapak 73 Real estate investor 1987 to date 76,605 (4.95%)
Indianapolis, IN Self employed (1999)
Other directorships:
None
King R. Traub 74 Retired March, 1999 1973 to date 19,662 (1.27%)
Indianapolis, IN Sr. Vice Pres. (1998) (2001)
David A. Noyes & Company
Securities Brokerage
Prior to 1998, President
Traub and Company, Inc.
Securities Brokerage
Other directorships:
None
John I. Bradshaw, Jr. is sole owner of 43,935 shares and shares
voting and investment power with respect to 52,359 shares owned
by trusts for his children and his sister.
John A. Wallace is the sole owner of 15,000 shares and shares
voting and investment power with respect to 1,500 shares owned
by Brenda L. Wallace, his wife.
Francis M. Hapak is the sole owner of 38,392 shares and shares
voting and investment power with respect to 38,213 shares owned
by Charlotte H. Hapak, his wife.
King R. Traub is sole owner of 13,579 shares and shares voting
and investment power with respect to 6,083 shares owned by Jane
C. Traub, his wife.
(b) Identification of officers:
Name Age Office(s) Held
________________________ ___ ________________________________________
Francis M. Hapak 73 Chairman of the Board (since 1998)
John I. Bradshaw, Jr. 67 President (since 1998)
Executive Vice President (1973 to 1998)
Secretary (1979 to 1998),Treasurer
(since 1996) and Trustee
John W. Adams 50 Secretary (since 1998) andTrustee
John I. Bradshaw, Jr. is the only salaried officer of the Trust
and serves as its Chief Executive Officer. The Trust has no
executive officers other than those individuals listed.
ITEM 11. EXECUTIVE COMPENSATION
(b) Summary Compensation Table:
Annual Compensation
________________________________
Long-Term
Name and Other Compensation
Principal Compen- Awards
Position Year Salary($) Bonus($) sation($) Options(#)
_____________________ ____ _________ ________ _________ ______________
John I. Bradshaw, Jr. 1998 99,000 - 2,307* -
President (1998) 1997 99,000 - 1,942* -
Exec.. Vice Pres. 1996 99,000 - 1,513* -
Chief Exec. Officer
* Compensation equivalent of club dues paid on behalf of individual.
(c) Option grants in the last fiscal year: None
(d) Option exercises in the last fiscal year and fiscal
year end option value:
Value of
Unexercised
Unexercised In the Money
Shares Options at Fiscal Options at Fiscal
Acquired on Value Year End (#) Year End**
Name Exercise (#) Realized (All Exercisable) (All Exercisable)
____________________ ____________ ________ _________________ _________________
John W. Adams None None 4,300 $15,050
**Value is based on $13.00 per share, the average of the
published over-the-counter bid ($12.25) and asked ($13.75)
prices at December 31, 1998.
The option for 4,300 shares held by John W. Adams will expire
April 30, 1999. The option is exercisable at any time until the
expiration date. Upon exercise, shares in treasury, to the
extent available, will be issued.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners:
Name and Address Amount and Nature
of Beneficial of Beneficial Percent
Title of Class Owner Ownership of Class
___________________ ______________________ _________________ ________
Shares of John I. Bradshaw, Jr. 96,294 6.2%
Beneficial Interest 320 N. Meridian Street
Indianapolis, IN 46204
Shares of Murray R. Wise 80,812 5.2%
Beneficial Interest 2407 S. Neil Street
P.O. Box 3009
Champaign, IL 61812
John I. Bradshaw, Jr. is sole owner of 43,935 shares and shares
voting and investment power with respect to 52,359 shares owned
by trusts for his children and his sister.
The source of information regarding beneficial ownership by
Murray R. Wise is a Schedule 13G, dated October 28, 1998. The
Schedule 13G reflects that Mr. Wise has sole voting power and
sole investment power for all of the shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no relationships or transactions, as defined under
this item, nor are any contemplated, to be disclosed hereunder.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) and (2) The response to this portion of Item 14
is submitted as a separate section of this report.
(3) Listing of Exhibits:
Exhibit 13-Annual report to shareholders
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during
the last quarter of the period covered by this report.
(c) Exhibits
Response to this portion of Item 14 is submitted as
an attachment to this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTURY REALTY TRUST
Date: 3/25/99 By: S/ JOHN I. BRADSHAW, JR.
President and Trustee
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
dates indicated.
Date: 3/25/99 S/ DAVID F. WHITE
Controller
Date: 3/25/99 S/ JOHN W. ADAMS
Trustee
Date:
_______ ______________________
King R. Traub, Trustee
Date: 3/29/99 S/ FRANCIS M. HAPAK
Trustee, Chairman
Date: 3/29/99 S/JOHN A. WALLACE
Trustee
ITEM 14(A)(1) AND (2). LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following financial statements of Century Realty Trust and
Subsidiaries are included herein and in the annual report of the
Registrant to its shareholders for the year ended December 31,
1998:
Consolidated balance sheets - December 31, 1998 and 1997
Consolidated statements of income - Years ended December 31,
1998, 1997 and 1996
Consolidated statements of cash flows - Years ended December 31,
1998, 1997 and 1996
Consolidated statements of shareholders' equity - Years ended December
31, 1998, 1997 and 1996
Notes to consolidated financial statements
The following financial statement schedule of Century Realty
Trust and Subsidiaries is included in Item 14(d):
Schedule III - Real estate and accumulated depreciation
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
CONSENT OF INDEPENDENT AUDITORS
Board of Trustees
Century Realty Trust
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Century Realty Trust of our report dated
February 17, 1999, included in the 1998 Annual Report to
Shareholders of Century Realty Trust.
Our audits also included the financial statement schedule of
Century Realty Trust listed in Item 14(a). This schedule is the
responsibility of the Trust's management. Our responsibility is
to express an opinion based on our audits. In our opinion, the
financial statement schedule, referred to above, when considered
in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
S/ ERNST & YOUNG LLP
Indianapolis, Indiana
February 17, 1999
Century Realty Trust and Subsidiaries
Consolidated Balance Sheets
December 31
1998 1997
___________ ___________
Assets
Real estate investments:
Land $3,776,383 $3,776,383
Buildings 51,642,208 51,276,043
Equipment 1,273,636 1,154,128
Allowances for depreciation (10,166,811) (8,641,330)
___________ ___________
46,525,416 47,565,224
Net investment in direct financing leases 348,409 401,677
___________ ___________
46,873,825 47,966,901
Cash and cash equivalents 744,901 782,631
Restricted Cash 1,052,003 1,028,324
Stort-term investments
Accounts and accrued interest receivable 474,079 415,182
Unamortized management contracts 579,895 650,475
Unamortized mortgage costs 539,979 467,705
Undeveloped land 99,675 99,675
Other assets 125,048 117,195
___________ ___________
$50,489,405 $51,528,088
___________ ___________
___________ ___________
Liabilities and shareholders' equity
Liabilities:
Short-term debt $100,000 $1,650,000
Mortgage notes payable 35,667,408 34,828,474
Accounts payable and accrued liabilities 425,068 465,733
Accrued Interest 264,779 241,679
Accrued State income and property taxes 1,454,464 1,455,212
Tenants' security deposits and unearned rent 527,642 483,362
___________ ___________
38,439,361 39,124,460
Minority interest in operating partnerships 3,520,925 3,535,693
Shareholders' equity:
Shares of Beneficial Interest, no par
value - authorized 5,000,000 shares,
issued 1,553,528, including
6,214 shares in treasury 6,758,619 6,758,619
Undistributed income other than from
gain on the sale of real estate 496,940 835,756
Undistributed net realized gain from the
sale of real estate 1,316,078 1,316,078
Cost of treasury shares (42,518) (42,518)
___________ ___________
8,529,119 8,867,935
___________ ___________
$50,489,405 $51,528,088
___________ ___________
___________ ___________
See accompanying notes.
Century Realty Trust and Subsidiaries
Consolidated Statements of Income
Year ended December 31
1998 1997 1996
__________ __________ __________
Income:
Real estate operations:
Rental Income $12,470,119 $9,076,399 $8,120,197
Income from direct
financing leases 50,897 53,466 60,849
Other income 253,709 155,179 162,266
__________ __________ __________
12,774,725 9,285,044 8,343,312
Less:
Real estate operating expenses 4,966,967 3,528,637 3,012,292
Depreciation 1,753,216 1,270,519 1,113,618
Real estate taxes 1,267,304 960,150 842,349
__________ __________ __________
7,987,487 5,759,306 4,968,259
__________ __________ __________
4,787,238 3,525,738 3,375,053
Interest income 70,118 79,253 41,420
__________ __________ __________
4,857,356 3,604,991 3,416,473
Expenses:
Interest 3,201,369 2,202,376 1,860,759
State income taxes 150,100 151,395 144,240
General and administrative expenses 515,558 419,152 389,004
__________ __________ __________
3,867,027 2,772,923 2,394,003
__________ __________ __________
Income before minority interest
in operating partnerships 990,329 832,068 1,022,470
Minority interest in operating
partnerships (106,767) 26,879 -
__________ __________ __________
Net income $883,562 $858,947 $1,022,470
__________ __________ __________
__________ __________ __________
Earnings per share:
Basic earnings per share $0.57 $0.57 $0.70
Diluted earnings per share $0.57 $0.56 $0.69
See accompanying notes.
<TABLE>
Century Realty Trust and Subsidiaries
Consolidated Statements of Shareholders' Equity
Undistributed Unrealized
Income Other Net
Outstanding Than From Realized
Shares of Shares of Gain on Gain from Cost of
Benefical Benefical Sale of Sale of Treasury
Interest Interest Real Estate Real Estate Shares Total
_________ __________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 1,451,939 $6,245,289 $1,453,788 $1,316,078 ($529,704) $8,485,451
Net income for 1996 - - 1,022,470 - - 1,022,470
Dividends ($.82 per share) - - (1,192,230) - - (1,192,230)
Stock options exercised 2,000 3,815 - - 13,685 17,500
_________ __________ __________ __________ __________ __________
Balance at December 31, 1996 1,453,939 6,249,104 1,284,028 1,316,078 (516,019) 8,333,191
Net income for 1997 - - 858,947 - - 858,947
Dividends ($.87 per share) - - (1,307,219) - - (1,307,219)
Shares issued for real estate
acquisition 24,175 274,991 - - - 274,991
Treasury shares sold 48,000 193,560 - - 328,440 522,000
Stock options exercised 21,200 40,964 - - 145,061 186,025
_________ __________ __________ __________ __________ __________
Balance at December 31, 1997 1,547,314 6,758,619 835,756 1,316,078 (42,518) 8,867,935
Net income for 1998 - - 883,562 - - 883,562
Dividends ($.79 per share) - - (1,222,378) - - (1,222,378)
_________ __________ __________ __________ __________ __________
Balance at December 31, 1998 1,547,314 $6,758,619 $496,940 $1,316,078 ($42,518) $8,529,119
_________ __________ __________ __________ __________ __________
_________ __________ __________ __________ __________ __________
</TABLE>
See accompanying notes.
Century Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
Year ended December 31
1998 1997 1996
__________ __________ __________
Operating Activities
Net income $883,562 $858,947 $1,022,470
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 1,805,010 1,304,744 1,142,300
Minority interest 106,767 (26,879) -
Changes in operating assets
and liabilities:
Restricted cash (23,680) (78,045) (30,719)
Accounts and accrued income
receivable (99,945) (77,165) (25,430)
Other assets 7,880 11,697 (60,547)
Accounts payable and accrued
liabilities 5,963 147,471 (40,842)
Tenants' security deposits and
unearned rent 44,280 (42,845) (30,323)
__________ __________ __________
Net cash provided by operations 2,729,837 2,097,925 1,976,909
Investing Activities:
Investment in short term investments - (2,474,313) (2,567,768)
Proceeds from maturities of short term
investments - 3,065,306 2,270,721
Acquisition of real estate, net of
debt assumed - (2,858,857) -
Purchase of property and improvements (690,672) (422,483) (352,450)
Purchase of management contracts - (650,475) -
Lease principal payments received 53,268 41,913 40,387
__________ __________ __________
Net cash used in investing activities (637,404) (3,298,909) (609,110)
Financing Activities:
Net short-term bank
borrowings (repayments) (1,550,000) 1,650,000 (700,762)
Net proceeds from mortgage
notes payable 6,689,609 1,126,684 2,982,530
Principal payments on mortgage
notes payable (5,910,838) (518,152) (2,360,377)
Sale of treasury shares - 708,025 17,500
Distribution to minority interest (145,321) - -
Dividends paid to shareholders (1,213,613) (1,298,279) (1,181,282)
__________ __________ __________
Net cash provided by (used in)
financing activities (2,130,163) 1,668,278 (1,242,391)
__________ __________ __________
Net increase (decrease) in cash
and cash equivalents (37,730) 467,294 125,408
Cash and cash equivalents
at beginning of year 782,631 315,337 189,929
__________ __________ __________
Cash and cash equivalents
at end of year $744,901 $782,631 $315,337
__________ __________ __________
__________ __________ __________
Supplemental Data:
Selected noncash activities related to
investing and financing activities
were as follows:
Liabilities assumed in connection
with acquisition of real estate - $13,761,000 -
See accompanying notes.
Century Realty Trust
Notes to Consolidated Financial Statements
December 31, 1998
1. Significant Accounting Policies
Organization and Management Agreements:
Century Realty Trust (the Trust) commenced operations under a
Plan of Reorganization as of January 1, 1973, as the successor
in interest to American National Trust and Republic National
Trust. Charter Oaks Associates, LLC and CR Management, Inc.
were formed as wholly-owned subsidiaries in 1997. CR
Management, Inc. is the manager and sole general partner of five
partnerships, each of which owns one apartment property as its
principal asset. As the sole general partner and pursuant to
each partnership agreement, the Trust has full, exclusive and
complete responsibility and discretion in the management and
control of each of these five partnerships. Control is
demonstrated by the ability of the general partner to manage
day-to-day operations, refinance debt and sell the assets of the
partnerships without the consent of the limited partners and the
inability of the limited partner to replace the general partner.
Interests held by limited partners in the five real estate
partnerships are controlled by the Trust and are reflected as
minority interests in operating partnerships. Charter Oaks
Associates, LLC holds title to the Charter Oaks apartments in
Evansville, Indiana, which the Trust purchased in 1997.
The residential rental properties owned and controlled by the
Trust are managed under agreements with independent property
management firms. The agreements provide for management fees
based generally on gross rental collections.
Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the Trust, and its wholly-owned and controlled
subsidiaries, including the five operating partnerships
controlled by CR Management, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents:
Cash and cash equivalents include cash and short-term
investments with original maturities of less than 30 days.
Restricted Cash:
Restricted cash includes security deposit savings accounts,
capital and completion replacement reserves, and real estate tax
and insurance escrow accounts held by lenders.
Short-Term Investments:
Short-term investments include certificates of deposit and U.S.
government agency obligations with maturities less than one year.
Unamortized Management Contracts:
Unamortized management contracts represents the allocation of
the purchase price related to the Porter Portfolio acquisition
identifiable with obtaining management of those properties (See
Note 3). Amortization is computed by the straight-line method
for a 10 year period which is the number of years the limited
partners, in the five controlled partnerships, have to exchange
their operating partnership units (O.P. units) into shares of
beneficial interest of the Trust.
Unamortized Mortgage Costs:
Unamortized mortgage costs represents costs incurred to acquire
long-term financing. Amortization is computed by the
straight-line method based on the terms of the loans which
approximates the effective interest method.
Real Estate Investments:
Real estate investments are stated on the basis of cost, except
for real estate investments transferred from the predecessor
trusts which are stated at appraised values as of January 1,
1973. Depreciation is computed by the straight-line method
based on estimated economic lives ranging from 29 to 40 years
for buildings and 3 to 15 years for equipment.
Treasury Shares:
Treasury shares are carried at cost and shares reissued are
removed based on average cost. The difference between proceeds
received on reissuance and the average cost is credited or
charged to Shares of Beneficial Interest.
Income Taxes:
The Trust intends to continue to qualify as a real estate
investment trust as defined in the Internal Revenue Code and
will distribute its taxable income. Realized gains on the sale
of investments are distributed to shareholders if and when
recognized for income tax purposes. Assuming compliance with
other requirements of the Code, income so distributed will not
be taxable to the Trust. Accordingly, no provision for federal
income taxes is made in the financial statements.
For income tax purposes, distributions paid to shareholders
consist of ordinary income, capital gains, return of capital or
a combination thereof. Earnings and profits, which determine
the taxability of dividends to shareholders, differ from
reported net income due to differences for tax purposes in the
estimated useful lives used to compute depreciation and the
carrying values of the depreciable properties.
No provision has been made for income taxes or related credits
of the operating partnerships, as the results of operations are
includable in the tax returns of the partners.
Net Income per Share:
Net income per share is computed in accordance with Statement of
Financial Accounting Standards No. 128.
Use of Estimates:
The preparation of financial statements 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.
2. Real Estate Investments
Real estate investments consist principally of apartments and
commercial properties in Indiana. In connection with these
properties, the Trust is principally a lessor using short-term
operating leases except for two restaurant properties which it
leases to the operators using long-term agreements expiring in
1999 and 2004. In addition to specified minimum payments, the
restaurant leases provide for contingent rentals based upon
percentage of gross receipts derived by the lessees. The Trust
has no obligation to grant purchase options to the lessees.
The Trust's net investment in direct financing leases consists
of:
1998 1997
___________ __________
Minimum lease payments receivable $393,992 $498,157
Estimated unguaranteed residual values 101,484 101,484
Unearned income (147,067) (197,964)
___________ __________
Net investment $348,409 $401,677
___________ __________
___________ __________
At December 31, 1998 future minimum lease payments receivable
from direct financing leases are $69,024 for 1999, $66,095 for
2000 through 2003, and $60,587 for 2004. Also, at December 31,
1998, future minimum lease payments receivable from
noncancelable operating leases are $20,120 for 1999, $18,905 for
2000 through 2003, and $17,329 for 2004.
3. Real Estate Investment Transactions
During 1997, the Trust purchased or acquired control of one
commercial property and six apartment properties. The cash
portions of the acquisitions were funded primarily with proceeds
from the issuance of shares of $275,000, short-term borrowings
under the Trust's Bank Credit Facility of $1,650,000, assumption
of existing mortgage debt and with working capital.
The Trust purchased, in separate transactions, 100% ownership of
a 34,000 square-foot multi-tenant office property in
Indianapolis, Indiana in May, 1997 for $1,500,000, and the
192-unit Charter Oaks apartment property in Evansville, Indiana
in June, 1997 for $5,100,000. The aggregate consideration paid
by the Trust consisted of long-term mortgage loans of
$4,500,000, 24,175 shares of beneficial interest valued at
$275,000 which were issued to a Trustee of the Trust and
approximately $1,500,000 in cash and with working capital. The
Trustee was a limited partner of the commercial property.
In November, 1997, the Trust, through its wholly-owned
subsidiary, CR Management, Inc., acquired from a single
unrelated seller, the general partner interest in five limited
partnerships (the "Porter Portfolio") each of which owned as its
principal asset, a single apartment property. CR Management,
Inc. paid, in cash, $687,500 for its one percent general partner
interest and management rights to the properties and $245,000
for acquisition and organization. The acquisition resulted in
creating five new partnerships which issued, in the aggregate,
approximately 286,908 O.P. units to the selling partnerships for
their contribution of net assets to the newly-formed
partnerships.
The acquisition agreement provides that the Trust will use its
best efforts to grant to each beneficial owner of O.P. units,
commencing two years after closing, the right to exchange those
units on a one for one basis, for shares of beneficial interest
of the Trust. Such exchange rights would exist for at least
eight years, at which time the Trust could, at its option,
require the exchange of any remaining outstanding O.P. units.
At the date of acquisition, the market value of the Trust's
shares of beneficial interest was $11.625 per share. The
share-equivalent value of the 286,908 O.P. units ($3.3 million)
plus the cash investment of $923,500 represents the approximate
purchase price for the exclusive management rights and the real
estate and other assets less assumed mortgage debt and other
liabilities of the operating partnerships.
Due to the level of control that the Trust has over the
activities and operations of each of these partnerships included
in the Porter Portfolio, the financial position and results of
operations of those partnerships are included in the
consolidated financial statements of the Trust from the date of
their acquisition. The equity interest which the Trust does not
own is described in the consolidated financial statements as the
minority interest in operating partnerships. The Porter
Portfolio properties consisted of the following:
Date Number Year
Acquired Property Location of Units Built
_______ __________________ ______________________ ________ ______
11/97 Barcelona Kokomo, Indiana 64 1971
11/97 Beech Grove Jeffersonville, Indiana 182 1973
11/97 Hampton Court Indianapolis, Indiana 92 1980
11/97 Sheffield Square New Albany, Indiana 152 1974
11/97 West Wind Terrace Indianapolis, Indiana 96 1967
4. Short-term Debt
In April 1997, the Trust obtained an unsecured line of credit
for $2,500,000 from a bank. As of December 31, 1998 and 1997,
the Trust had borrowed $100,000 and $1,650,000, respectively,
which it expects to repay from funds provided by operations.
The line of credit rate of interest was 7.4% and 7.9% at
December 31, 1998 and 1997, respectively.
At December 31, 1998 and 1997, approximately $539,000 and
$642,000, respectively, in bank deposit accounts represent
collateral for the short-term debt.
5. Mortgage Notes Payable
Mortgage notes applicable to properties owned by the Trust are
payable in monthly installments, including interest at rates
ranging from 7% to 9 3/4% per annum, and mature from December 1,
2000 to August 1, 2008. At December 31, 1998 and 1997, mortgage
notes payable by the Trust amounted to $25,805,261 and
$24,868,704 respectively. The aggregate amount of long-term
debt maturities for each of the five years after December 31,
1998 are: 1999, $495,583; 2000, $3,946,526; 2001, $428,526;
2002, $1,504,969; 2003, $1,692,690 and thereafter, $17,736,967.
Mortgage notes applicable to properties included in the Porter
Portfolio controlled by the Trust are payable in monthly
installments, including interest at rates ranging from 8 1/8% to
8 7/8% per annum, and mature from June 1, 2006 to May 1, 2030.
At December 31, 1998 and 1997, mortgage notes payable by
partnerships controlled by the Trust amounted to $9,862,147 and
$9,959,770 respectively. The aggregate amount of long-term debt
maturities for each of the five years after December 31, 1998
are: 1999, $103,195; 2000, $112,555; 2001, $122,544; 2002,
$110,213; 2003, $113,160; and thereafter $9,300,480.
Cash paid for interest was $3,077,610, $2,093,275, and
$1,860,237 for years ended December 31, 1998, 1997, and 1996,
respectively.
At December 31, 1998, approximately $30,600,000 of the owned
real estate investments, and $13,000,000 of controlled real
estate investments, after allowances for depreciation, represent
collateral for the mortgage notes payable.
6. Shareholder Rights Plan
In 1989, the Board of Trustees adopted a Shareholder Rights Plan
and distributed as a dividend one purchase right (a "Right") for
each outstanding share of beneficial interest. At December 31,
1998 there were 1,547,314 Rights outstanding.
Each Right entitles the holder to purchase from the Trust one
share of beneficial interest at a price of $15 per share,
subject to certain antidilution adjustments. The Rights are not
exercisable or transferable apart from the shares until certain
events occur relating to the acquisition of shares of the Trust
as defined in the Plan. The Rights may be redeemed by the Board
of Trustees at a redemption price of $.01 per Right until
certain events relating to the acquisition of shares of the
Trust as defined by the Plan occur.
The Rights will expire October 10, 1999, unless the date is
extended or the Rights are exercised by the holder or redeemed
by the Trust before that date. Until exercised, the holder of
the Rights, as such, will have no rights as a shareholder of the
Trust, including, without limitation, the right to vote as a
shareholder or receive dividends.
7. Stock Options
In 1994, the Board of Trustees granted each of the then five
members of the Board an option to purchase up to 5,000 shares of
beneficial interest of the Trust. The options were exercisable
on or before March 21, 1997, at a price of $8.75 per share, the
fair market value at the date of grant. In 1996, the Board
granted an option to purchase 5,000 shares to a newly-elected
trustee. That option is exercisable on or before April 30, 1999
at a price of $9.50 per share, the fair market value at the date
of grant. In 1996, options for 2,000 shares were exercised at
$8.75 per share. In 1997, options for 21,200 shares were
exercised, 20,500 at $8.75 per share and 700 at $9.50 per share.
Options for 1,500 shares expired unexercised on March 21, 1997.
Options for 4,300 shares were unexercised at December 31, 1998.
8. Fair Values of Financial Instruments
The following methods and assumptions were used by the Trust in
estimating its fair value disclosures for financial instruments:
Cash, Cash Equivalent and Restricted Cash: The carrying amount
reported in the balance sheet for cash and cash equivalents
approximates fair value.
Short-Term Investments: The carrying amount reported in the
balance sheet for short-term investments approximates fair value.
Short-term Debt and Mortgage Notes Payable: The fair values of
the Trust's mortgage notes payable are estimated using
discounted cash flow analyses, based on the Trust's current
incremental borrowing rates for similar types of borrowing
arrangements.
The carrying amounts and fair values of the Trust's financial
instruments are as follows:
December 31, 1998
Carrying Amount Fair Value
________________ ______________
Cash and cash equivalents $ 744,901 $ 745,000
Restricted cash 1,052,003 1,052,000
Short-term debt 100,000 100,000
Mortgage notes payable 35,667,408 36,718,000
December 31, 1997
Carrying Amount Fair Value
________________ _____________
Cash and cash equivalents $ 782,631 $ 783,000
Restricted cash 1,028,324 1,028,000
Short-term debt 1,650,000 1,650,000
Mortgage notes payable 34,828,474 36,686,000
9. Earnings Per Share
A reconciliation of the numerator and denominator of the
earnings per share computation is as follows:
1998 1997 1996
__________ __________ __________
Numerator:
Numerator for basic and diluted
earnings per share $ 883,562 $ 858,947 $1,022,470
__________ __________ __________
__________ __________ __________
Denominator:
Denominator for basic earnings per
share-weighted average shares 1,547,314 1,515,436 1,453,660
Effect of dilutive securities:
Stock options 3,335 6,320 23,018
__________ ___________ __________
Denominator for diluted earnings
per share-adjusted weighted
average shares and assumed
conversions 1,550,649 1,521,756 1,476,678
__________ __________ __________
__________ __________ __________
Basic earnings per share $ .57 $ .57 $ .70
__________ __________ __________
__________ __________ __________
Diluted earnings per share $ .57 $ .56 $ .69
__________ __________ __________
__________ __________ __________
Shareholder rights have not been included in the earnings per
share calculation because they would be anti-dilutive at
December 31, 1998, 1997 and 1996.
10. Contingent Liability
On November 30, 1998, the Internal Revenue Service assessed a
$151,400 penalty against the Trust for its alleged failure to
correctly and/or timely file information returns regarding
dividends that it paid in 1996. The Trust's management believes
that the returns in question were submitted timely, were correct
when submitted and that the assessed penalty is unjustified.
The Trust is currently pursuing its administrative appeal rights
with the Internal Revenue Service and intends to vigorously
oppose the penalty assessment. As a result of the uncertainty
concerning the ultimate outcome of this matter, no liability has
been recorded at December 31, 1998.
11. Year 2000 Readiness (Unaudited)
The Trust completed an assessment of its Year 2000 exposure in
1998 and concluded that it has no significant exposure in
non-information systems. None of the Trust's investment
properties has centralized or automated utility, communications
or security systems. None of its properties has elevator or
escalator equipment. Security lighting is regulated by photo
electric cells and heating systems are regulated by
heat-sensitive thermostats. Computerized information systems
used in accounting and word processing are all based on personal
computers, either as stand-alone units or in hard-wired
networks. The Trust has no computer systems that interface with
another entity. None of the Trust's computer information
systems is considered critical to the conduct of its business.
The principal independent property management firm that manages
most of the Trust's investment properties completed its software
assessment in 1998 and concluded that all software in use is
Year 2000 compliant. That firm is moving to new offices, and
will reconfigure its computer network in the second quarter of
1999. It is planning to upgrade some hardware at that time and
have all of its equipment certified to be Year 2000 compliant by
a qualified independent consultant.
Substantially all hardware used in the Trust's operations has
been purchased new within the last five years. All accounting
and information processing software in use is well-known,
commercially available, and purchased within the last five
years. The Trust uses custom-written software for its investors
records, distribution payments, and tax reporting. All custom
software in use was developed within the last three years and
certified by the developer to be Year 2000 compliant.
Due to the use of relatively modern equipment, relatively simple
and readily available software, and the absence of critical
systems, the cost and organizational involvement required to
assess the Trust's state of readiness for the Year 2000 has been
immaterial. No remediation requirements have been identified to
date and none are expected.
Apartment properties comprise the majority of the Trust's
invested assets and account for most of its revenue. The
Trust's profitability in the short run and its survival in the
long run, depends upon the ability and willingness of the
residents of its apartments to pay rent when due. The most
likely worst case scenario related to the Year 2000 for the
Trust is that the residents of its apartments may be unwilling
or unable to pay rent. Disruption in electric, heat and/or
water service could prompt some residents to temporarily
withhold part or all rent due the Trust. Lost wages or payroll
delays due to Year 2000 problems encountered by residents'
employers or others upon whom those employers depend could
jeopardize the ability of some residents to pay rent.
In the event that unforeseen Year 2000 problems arise in the
accounting systems used by the Trust and/or its independent
management firms, essential functions will be done manually.
Non-essential functions will be curtailed until corrective
measures are implemented. Contingency plans with respect to the
"most likely worst case scenario" have not been finalized. The
objective of such contingency planning is to enable the Trust,
in spite of a substantial temporary decrease in revenue, to meet
its debt service and payroll obligations in January, 2000 and
beyond, if necessary.
Report of Ernst & Young, Independent Auditors
Board of Trustees
Century Realty Trust
We have audited the accompanying consolidated balance sheets of
Century Realty Trust and Subsidiaries (the "Trust") as of
December 31, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Century Realty Trust and Subsidiaries as
of December 31, 1998 and 1997, and the consolidated results of
their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
February 17, 1999
Indianapolis, Indiana
<TABLE>
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
CENTURY REALTY TRUST
December 31, 1998
Col. B Col. C Col. D
Cost Capitalized
Initial Cost to Company Subsequent to Acquisition
_________________________ _______________________
Buildings
and Carrying
Description Encumbrances Land Improvements Improvements Costs
_______________________________________ ________________ ___________ _____________ _____________ _________
<S> <C> <C> <C> <C> <C>
Garden apartments (no. of units):
Chester Heights (110), Richmond, IN First mortg $56,700 $852,500 $360,681 ---
Park Forest (64), Marion, IN First mortg 57,800 517,200 610,795 ---
Fontenelle (176), Kokomo, IN None 128,000 1,622,000 1,444,949 ---
Park Plaza I (88), Indianapolis, IN None 37,655 693,295 336,990 ---
Park Plaza II (96), Indianapolis, IN None 47,345 871,705 --- ---
Driftwood Park (48), Indianapolis, IN First mortg 117,000 1,168,308 138,968 ---
Regency Royale (132), Mishawaka, IN First mortg 125,000 3,638,499 124,856 ---
Creek Bay (208), Indianapolis, IN First mortg 340,940 7,101,480 88,067 ---
Eagle Creek Park (188), Indianapolis, IN First mortg 378,000 5,679,172 335,641 ---
Fox Run (256), Indianapolis, IN First mortg 398,000 6,446,469 202,905 ---
Charter Oaks (192), Evansville, IN First mortg 241,500 4,851,716 52,034 ---
Barcelona (64), Kokomo, IN First mortg 59,200 1,350,384 64,189 ---
Beech Grove (182), Jeffersonville, IN First mortg 469,000 3,612,360 2,089 ---
Hampton Court (92), Indianapolis, IN First mortg 225,600 1,481,900 12,441 ---
Sheffield Square (152), New Albany, IN First mortg 227,000 4,020,424 37,690 ---
West Wind Terrace (96), Indianapolis, IN First mortg 136,700 1,610,241 4,772 ---
Commercial (square feet):
Office/Warehouse (38,000), Carmel, IN First mortg 54,000 446,075 138,314 ---
Office (17,000), Indianapolis, IN None 71,500 457,818 48,253 ---
Office (34,000), Indianapolis, IN First mortg 348,725 1,184,344 39,429 ---
Net leased restaurants (square feet):
Miami Subs (3,500), Longwood, FL None 113,479 --- --- ---
Fortune House (5,000), Indianapolis, IN None 136,494 --- --- ---
__________ ___________ __________ _________
3,769,638 47,605,890 4,043,063 ---
Equipment--various locations None --- 492,266 781,370 ---
__________ ___________ __________ _________
TOTAL REAL ESTATE INVESTMENTS $3,769,638 $48,098,156 $4,824,433 ---
__________ ___________ __________ _________
__________ ___________ __________ _________
Undeveloped land - various locations None $99,675 --- --- ---
__________ ___________ __________ _________
__________ ___________ __________ _________
Col. E
Gross Amount at Which
Carried at Close of Period
_____________________________________
Buildings
and
Description Land Improvements Total
______________________________________ _________ ___________ _____________
<S> <C> <C> <C>
Garden apartments (no. of units):
Chester Heights (110), Richmond, IN $63,445 $1,206,436 $1,269,881
Park Forest (64), Marion, IN 57,800 1,127,995 1,185,795
Fontenelle (176), Kokomo, IN 128,000 3,066,949 3,194,949
Park Plaza I (88), Indianapolis, IN 37,655 1,030,285 1,067,940
Park Plaza II (96), Indianapolis, IN 47,345 871,705 919,050
Driftwood Park (48), Indianapolis, IN 117,000 1,307,276 1,424,276
Regency Royale (132), Mishawaka, IN 125,000 3,763,355 3,888,355
Creek Bay (208), Indianapolis, IN 340,940 7,189,547 7,530,487
Eagle Creek Park (188), Indianapolis, IN 378,000 6,014,813 6,392,813
Fox Run (256), Indianapolis, IN 398,000 6,649,374 7,047,374
Charter Oaks (192), Evansville, IN 241,500 4,903,750 5,145,250
Barcelona (64), Kokomo, IN 59,200 1,414,573 1,473,773
Beech Grove (182), Jeffersonville, IN 469,000 3,614,449 4,083,449
Hampton Court (92), Indianapolis, IN 225,600 1,494,341 1,719,941
Sheffield Square (152), New Albany, IN 227,000 4,058,114 4,285,114
West Wind Terrace (96), Indianapolis, IN 136,700 1,615,013 1,751,713
Commercial (square feet
Office/Warehouse (38,000), Carmel, IN 54,000 584,389 638,389
Office (17,000), Indianapolis, IN 71,500 506,071 577,571
Office (34,000), Indianapolis, IN 348,725 1,223,773 1,572,498
Net leased restaurants (square feet):
Miami Subs (3,500), Longwood, FL 113,479 --- 113,479
Fortune House (5,000), Indianapolis, IN 136,494 --- 136,494
__________ ___________ ___________
3,776,383 51,642,208 55,418,591
Equipment--various locations --- 1,273,636 1,273,636
__________ ___________ ___________
TOTAL REAL ESTATE INVESTMENS $3,776,383 $52,915,844 $56,692,227 (A)
__________ ___________ ___________
__________ ___________ ___________
Undeveloped land - various locations $99,675 $ $99,675 (B)
__________ ___________ ___________
__________ ___________ ___________
Col. F Col. G Col. H Col.I
Life on Which
Depreciation in
Latest Income
Accumulated Date of Date Statements
Description Depreciation Construction Acquired Is Computed
___________________________________________ _____________ ___________ __________ _____________
<S> <C> <C> <C> <C>
Garden apartments (no. of units):
Chester Heights (110), Richmond, IN $ 912,477 1965 01/73 31 years
Park Forest (64), Marion, IN 797,101 1962 01/73 31 years
Fontenelle (176), Kokomo, IN 2,172,312 1966 01/73 29 years
Park Plaza I (88), Indianapolis, IN 703,934 1965 01/73 33 years
Park Plaza II (96), Indianapolis, IN 679,929 1967 01/73 33 years
Driftwood Park (48), Indianapolis, IN 436,152 1963 09/89 28 years
Regency Royale (132), Mishawaka, IN 529,235 1983 06/93 40 years
Creek Bay (208), Indianapolis, IN 913,093 1992 12/93 40 years
Eagle Creek Park (188), Indianapolis, IN 749,565 1974 03/94 40 years
Fox Run (256), Indianapolis, IN 637,067 1974 03/95 40 years
Charter Oaks (192), Evansville, IN 183,761 1984 06/97 40 years
Barcelona (64), Kokomo, IN 40,176 1971 11/97 33 years
Beech Grove (182), Jeffersonville, IN 102,565 1973 11/97 33 years
Hampton Court (92), Indianapolis, IN 42,358 1980 11/97 33 years
Sheffield Square (152), New Albany, IN 115,301 1974 11/97 33 years
West Wind Terrace (96), Indianapolis, IN 45,810 1967 11/97 33 years
Commercial (square feet):
Office/Warehouse (38,000), Carmel, IN 334,856 1972 10/77 33 years
Office (17,000), Indianapolis, IN 181,906 1966 7/86 33 years
Office (34,000), Indianapolis, IN 51,459 1975 5/97 40 years
Net leased restaurants (square feet):
Miami Subs (3,500), Longwood, FL --- 1978 1/79 N/A
Fortune House (5,000), Indianapolis, IN --- 1979 11/79 N/A
___________
9,629,057
Equipment--various locations 537,754 Various Various 3-15 years
___________
TOTAL REAL ESTATE INVESTMENTS $10,166,811 (A)
___________
___________
Undeveloped land - various locations --- N/A 1/73 N/A
___________
___________
(A) The aggregate carrying value for tax purposes is $41,661,772
(B) The aggregate carrying value for tax purposes is $72,522
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
CENTURY REALTY TRUST
December 31, 1998
Total Land,
Buildings Buildings
and and Accumulated Undeveloped
Land Improvements Improvements Equipment Depreciation Land
__________ ____________ ____________ __________ ___________ ___________
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 $2,068,658 $32,778,431 $34,847,089 $765,401 $6,511,045 $99,675
Additions:
Improvements --- 251,307 251,307 101,144 --- ---
Depreciation --- --- --- --- 1,110,493 ---
Deductions:
Fully amortized costs --- 117,065 117,065 28,291 145,356 ---
__________ ___________ ___________ __________ ___________ ________
Balance December 31, 1996 2,068,658 32,912,673 34,981,331 838,254 7,476,182 99,675
Additions:
Acquisitions 1,707,725 18,111,370 19,819,095 245,845 --- ---
Improvements --- 317,366 317,366 105,117 --- ---
Depreciation --- --- --- --- 1,265,602 ---
Deductions:
Fully amortized costs --- 65,366 65,366 35,088 100,454 ---
__________ ___________ ___________ __________ ___________ ________
Balance December 31, 1997 $3,776,383 $51,276,043 $55,052,426 $1,154,128 $8,641,330 $99,675
Additions:
Improvements --- 440,443 440,443 189,934 --- ---
Depreciation --- --- --- --- 1,670,185 ---
Deductions:
Fully amortized costs --- 74,278 74,278 70,426 144,704 ---
__________ ___________ ___________ __________ ___________ ________
Balance December 31, 1998 $3,776,383 $51,642,208 $55,418,591 $1,273,636 $10,166,811 $99,675
__________ ___________ ___________ __________ ___________ ________
__________ ___________ ___________ __________ ___________ ________
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 745
<SECURITIES> 0
<RECEIVABLES> 474
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,052
<PP&E> 57,041
<DEPRECIATION> 10,167
<TOTAL-ASSETS> 50,489
<CURRENT-LIABILITIES> 790
<BONDS> 35,667
0
0
<COMMON> 6,759
<OTHER-SE> 1,770
<TOTAL-LIABILITY-AND-EQUITY> 50,489
<SALES> 12,470
<TOTAL-REVENUES> 12,845
<CGS> 0
<TOTAL-COSTS> 7,987
<OTHER-EXPENSES> 666
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,201
<INCOME-PRETAX> 884
<INCOME-TAX> 0
<INCOME-CONTINUING> 884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 884
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
</TABLE>
