<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission File Number: 1-8073
CV REIT, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-0950354
(State of Incorporation) (I.R.S. Employer Identification No.)
100 Century Boulevard, West Palm Beach, Florida 33417
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407-640-3155
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common stock, par value New York Stock Exchange
$.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
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
This report contains a total of 16 pages.
<PAGE> 2
CV REIT, INC. AND SUBSIDIARIES
PART I. Financial Information
Item 1. Financial Statements
The consolidated financial statements included herein
have been prepared by the registrant, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been consolidated or
omitted pursuant to such rules and regulations; however, the
registrant believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the
registrant's annual report on Form 10-K for the fiscal year ended
December 31, 1994.
The consolidated financial statements for the interim
periods included herein, which are unaudited, include, in the
opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial
position and results of operations of the registrant for the
periods presented. The results of operations for interim periods
should not be considered indicative of results to be expected for
the full year.
<PAGE> 3
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
==============================
(dollars in thousands)
Jun.30, Dec.31,
ASSETS 1995 1994
------ --------- ---------
Investments:
Real estate mortgage notes $101,239 $92,691
Real estate acquired by foreclosure 7,896 8,469
Less allowance for losses (3,107) (3,531)
--------- ---------
106,028 97,629
Real estate and investments in real
estate partnerships, net of
accumulated depreciation 5,666 5,689
Investment in Hilcoast Development Corp.
10% Cumulative Preferred Stock - 5,000
--------- ---------
Total investments 111,694 108,318
Cash and cash equivalents
(includes $876 and $868 restricted) 4,251 9,998
Short-term investments 2,920 2,920
Other 2,163 1,546
--------- ---------
$121,028 $122,782
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities and other credits:
Collateralized Mortgage Obliga-
tions (net of unamortized
discount of $1.0 million) $38,011 $38,908
Accounts payable, accruals and
other liabilities 235 861
Dividends payable 2,415 2,418
Deferred income taxes 8,179 8,179
--------- ---------
Total liabilities and other credits 48,840 50,366
--------- ---------
Stockholders' equity:
Common stock, $.01 par-shares authorized
10,000,000; outstanding 7,966,621 80 80
Additional paid-in capital 18,490 18,490
Retained earnings 53,618 53,846
--------- ---------
Total stockholders' equity 72,188 72,416
--------- ---------
$121,028 $122,782
========= =========
See accompanying notes to consolidated financial statements
<PAGE> 4
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
=====================================
(in thousands, except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
---------------------------------------
1995 1994 1995 1994
---------------------------------------
Revenues:
Interest, substantially from
mortgage notes, and dividends $3,067 $3,111 $6,106 $6,706
Rent and income from real
estate partnerships 251 256 533 509
------ ------ ------ ------
3,318 3,367 6,639 7,215
------ ------ ------ ------
Expenses:
Interest 853 945 1,729 2,362
Operating, general and
administrative 395 386 770 850
Depreciation 33 41 66 81
------ ------ ------ ------
1,281 1,372 2,565 3,293
------ ------ ------ ------
2,037 1,995 4,074 3,922
Loss on sale of GNMA certificates - (2,392) - (2,392)
Reversal of losses - - - 200
------ ------ ------ ------
Net income (loss) $2,037 ($397) $4,074 $1,730
====== ====== ====== ======
Net income (loss) per common share $0.26 ($0.05) $0.51 $0.22
====== ====== ====== ======
Dividends declared per common share $0.27 $0.27 $0.54 $0.54
====== ====== ====== ======
Average common shares
outstanding 7,966,621 7,966,621 7,966,621 7,966,621
See accompanying notes to consolidated financial statements
<PAGE> 5
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARN
===========================================
(in thousands)
Balance at December 31, 1994 $53,846
Net income for the six months
ended June 30, 1995 4,074
Dividends declared (4,302)
--------
Balance at June 30, 1995 $53,618
========
See accompanying notes to consolidated financial
<PAGE> 6
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================
(in thousands) Six
Months Ended
June 30,
-----------------
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES: -------- --------
Net income $4,074 $1,730
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation 66 81
Reversal of losses - (200)
Equity in depreciation of real estate
partnership 89 90
Write-off of deferred financing costs - 133
Loss on sale of GNMA certificates - 2,392
-------- --------
4,229 4,226
Changes in operating assets and liabilities:
Increase in other assets (648) (456)
Decrease in accounts payable, accruals
and other liabilities (626) (290)
-------- --------
Net cash provided by operating activities 2,955 3,480
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate mortgage notes (13,760) (13,125)
Collections on real estate mortgage notes 10,158 18,139
Sale of GNMA certificates - 32,412
Return of principal on GNMA certificates - 977
Other 102 (21)
-------- --------
Net cash provided by (used in) investing
activities (3,500) 38,382
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 500 -
Repayments of borrowings (1,397) (37,439)
Cash dividends paid (4,305) (4,149)
Increase in restricted cash (8) (29)
-------- --------
Net cash used in financing activities (5,210) (41,617)
Net increase (decrease) in unrestricted -------- --------
cash and cash equivalents (5,755) 245
Unrestricted cash and cash equivalents at
beginning of the period 9,130 4,228
-------- --------
Unrestricted cash and cash equivalents at
end of the period $3,375 $4,473
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $1,737 $2,514
======== ========
Supplemental schedule of non-cash investing and
financing activities:
Increase in real estate mortgage notes in connection
with redemption of the Company's investment in
Hilcoast Development Corp. Preferred Stock $5,000 $ -
======== ========
See accompanying notes to consolidated financial statements
<PAGE> 7
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(1) Investments
(a) Investments in real estate mortgage notes, substantially
all of which are collateralized by real estate located in southeast
Florida, consist of (in thousands):
Jun. 30, Dec. 31,
1995 1994
-------- --------
Hilcoast Development Corp.
("Hilcoast"):
Term Loan $ 26,822 $ 28,345
Lines of Credit 10,340 7,870
Other 11,668 2,952
-------- --------
48,830 39,167
First mortgage installment notes,
with self-amortizing equal
monthly principal and interest
payments due through 2012, with
interest averaging 13%, collateral-
ized by recreation facilities at
three Century Village communities
in West Palm Beach, Boca Raton and
Deerfield Beach, Florida
("Recreation Notes") 43,740 44,096
First mortgage notes, maturing
through 1998, with interest
ranging primarily from
8.9% to 11%, collateralized
principally by real property
in Palm Beach and Broward
Counties, Florida:
Residential 2,387 3,143
Commercial 6,282 6,285
-------- --------
101,239 92,691
Less allowance for losses (38) (62)
-------- --------
Totals $101,201 $ 92,629
======== ========
<PAGE> 8
(b) Hilcoast
Term Loan and Lines of Credit
The Term Loan and the Lines of Credit are principally
collateralized by certain residential and commercial real estate at
the Century Village at Pembroke Pines, Florida adult condominium
project ("Century Village"), including the recreation facilities at
Century Village (the "Pembroke Recreation Facilities").
The Term Loan bears interest at prime (9% at June 30, 1995)
plus 3%, but in any event not less than 9% nor more than 11%, and
requires specific release prices principally based on sales of
condominium apartments. Provided that the Term Loan has been
reduced to $25 million, by July 31, 1998 it will be converted to
an 11%, fixed rate, 25 year self-amortizing loan providing for
equal monthly payments of principal and interest (the "Permanent
Loan"). The release prices will then be applied to a permanent
reduction of amounts available under the Lines of Credit (see
below). The Permanent Loan may not be prepaid by Hilcoast without
a prepayment penalty and will be collateralized by a first mortgage
on the Pembroke Recreation Facilities.
The Lines of Credit consist of revolving construction loan
commitments aggregating $13 million, of which $7.5 million matures
on July 31, 1998 and bears interest, payable monthly, at prime plus
3%, but in any event not less than 9% nor more than 11%. The
remaining $5.5 million matures through December 31, 1996 and bears
interest, payable monthly, at prime plus 3% through 12.5%.
Hilcoast is required to pay commitment fees ranging from .9% to
1.8% per annum on the unused portion of the Lines of Credit.
Other
Other notes due from Hilcoast mature variously through July
31, 1998 and bear interest, ranging from prime plus 1/2% through
12.5%. These notes include $8.8 million which arose during 1995 as
follows:
In February 1995, the Company advanced $2 million to
Hilcoast at prime plus 1/2% to enable Hilcoast to prepay
the balance of a note to an unrelated party which had
been guaranteed by the Company, and which was repaid by
Hilcoast on July 31, 1995. In March 1995, the Company
acquired from a bank a $2.7 million note due from
Hilcoast, which bears interest at prime plus 1.5%, is
collateralized by the Pembroke Recreation Facilities,
matures on October 31, 1996, and requires minimum
quarterly principal payments of $300,000. At June 30,
1995, the outstanding principal balance of that note was
$1.8 million. Effective March 31, 1995, Hilcoast
redeemed the $5 million Preferred Stock owned by the
Company. As consideration, Hilcoast issued a $5 million
note, payable July 31, 1998, with interest at 10%,
collateralized by the Pembroke Recreation Facilities.
<PAGE> 9
(c) Real estate acquired by foreclosure consists of (in
thousands):
Jun.31, Dec.31,
1995 1994
------- -------
Commercial:
Broward County, Florida:
Nine acre commercial
site in Dania $5,000 $5,000
29 acre commercial site
in Miramar 2,594 2,563
Other - 600
------ ------
Total commercial 7,594 8,163
Residential 302 306
------ ------
7,896 8,469
Less allowance for losses (3,069) (3,469)
------ ------
Totals $4,827 $5,000
====== ======
(d) Real estate and investments in real estate partnerships
are located in southeast Florida and consist of (in thousands):
Jun.30, Dec.31,
1995 1994
------- -------
Days Inn motel $3,654 $3,654
Administration Building 821 764
Other 94 82
------ ------
4,569 4,500
Accumulated depreciation (2,130) (2,074)
------- -------
2,439 2,426
45%-50% investments in self-
storage warehouse partnerships 3,227 3,263
------ ------
Totals $5,666 $5,689
====== ======
<PAGE> 10
(2) Collateralized Mortgage Obligations (CMO's)
The CMO's bear interest at an effective rate of 8.84%, are
collateralized by the Recreation Notes (Note 1(a)) and require
quarterly self-amortizing principal and interest payments through
March 15, 2007.
(3) Commitments and Contingencies
(a) TGI Development, Inc. ("TGI")
In February 1994, a Final Judgment was granted in favor of the
Company, which dismissed TGI's claim of common law fraud against
the Company and struck its punitive damage claim. TGI sought
compensatory damages of approximately $2 million pursuant to the
common law fraud count. In accordance with an agreement between
the parties, in August 1994 the Court entered a judgment in the
amount of $1.1 million in favor of the Company in connection with
a counterclaim filed by the Company against TGI. The Company has
agreed not to attempt execution on that judgment until completion
of TGI's appeal of the Final Judgment on its claim for compensatory
damages. Although the Company believes it has substantial
defenses, the ultimate outcome of this litigation cannot presently
be determined. Accordingly, no provision for any liability that
may result upon final adjudication has been made in the
accompanying financial statements. In addition, since the
collectibility of the $1.1 million judgment is doubtful, it has not
been reflected as an asset in the Company's financial statements.
In management's opinion, the final outcome of this litigation will
not have a material adverse effect on the Company's financial
condition.
(b) Century Plaza
On December 5, 1994, a Complaint, as amended, was filed in the
Circuit Court of Broward County, Florida, against the Company
seeking a judicial declaration as to the Plaintiff's obligation to
provide parking areas to members of a religious institution located
adjacent to a shopping center ("Century Plaza") in Deerfield Beach,
Florida, acquired by the Plaintiff from the Company for $8 million
in 1989. The basis for the Complaint is that the Company failed
to advise the Plaintiff that in 1978, a former officer of the
Company had allegedly consented to a limited number of parking
spaces to be allocated to the religious institution.
<PAGE> 11
Should the Court determine that the institution has parking
rights, the Plaintiff seeks recision of the original sales
agreement and the purchase money mortgage note held by the Company
in connection with the sale of Century Plaza, which has an
outstanding principal balance of $6.3 million (the "Century Plaza
Note"). The Plaintiff also seeks restoration of amounts paid by
the Plaintiff to the Company pursuant to the sales agreement, plus
interest thereon, and reconveyance of Century Plaza to the Company.
The Century Plaza Note was not paid on its December 31, 1994
maturity date and the Company has instituted foreclosure
proceedings. The Plaintiff has continued to remit monthly interest
payments to the Company. The Company believes it has substantial
defenses to the Complaint; however, the proceedings have just
recently commenced and the final outcome of this litigation cannot
be determined. In management's opinion, the ultimate decision in
this matter will not have a material adverse effect on the
Company's future operations.
(4) Consulting and Advisory Agreement with Hilcoast
Hilcoast provides certain investment advisory, consulting and
administrative services to the Company under a consulting and
advisory agreement, excluding matters relating to Hilcoast's loans
from the Company. The agreement, which expired on July 31, 1995,
is expected to be extended to January 31, 1996. The agreement
provides for the payment of $10,000 per month to Hilcoast, plus
reimbursement for all out of pocket expenses, and may be terminated
by Hilcoast upon 180 days notice and by the Company upon 30 days
notice.
<PAGE> 12
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Funds From Operations
The Company's Funds From Operations generally consists of net
income, excluding reversal of losses and loss on sale of GNMA
certificates, plus depreciation of real property (including the
Company's share of depreciation in connection with its equity in
earnings of unconsolidated partnerships).
For the quarter ended June 30, 1995, Funds From Operations was
$2,114,000 compared to $2,081,000 for the same quarter of 1994.
For the six months ended June 30,1995, Funds From Operations
was $4,229,000 compared to $4,226,000 for the corresponding period
of 1994.
Funds From Operations reflects a slight increase in net
interest income during the 1995 periods. Although there was a
$386,000 reduction in net interest income during the current six
month period resulting from the sale of the Company's leveraged
GNMA certificate portfolio in April 1994, this reduction was
substantially offset by an increase in interest income earned on
the Company's variable rate mortgage notes receivable, primarily
due to increases in the prime rate.
During each of the quarters ended June 30, 1995 and 1994, the
Company declared cash dividends of $.27 per share which
approximates the Company's Funds From Operations during those
periods.
Net Income
During the quarter ended June 30, 1995, net income was
$2,037,000 as compared to a net loss of $397,000 for the
corresponding quarter in 1994.
During the six months ended June 30, 1995, net income was
$4,074,000 compared to $1,730,000 for the same period of 1994.
The 1994 periods include a $2.4 million loss on the sale of
the Company's GNMA certificate portfolio in April 1994. Net income
for the six months ended June 30, 1994 also includes income of
$200,000 from the reversal of previously recorded losses, partially
offset by a write-off of $133,000 of unamortized deferred financing
costs in connection with a bank loan prepaid during the first
quarter of 1994.
<PAGE> 13
Liquidity and Capital Resources
At June 30, 1995, total assets were $121 million, including
$101.2 million in real estate mortgage notes. Approximately $43.7
million of the real estate mortgage notes provide for self-amortizing,
equal monthly installment payments through 2012 and are
collateralized by recreation facilities under long-term leases with
residents living in the approximately 22,000 apartments at Century
Village adult condominium communities at West Palm Beach, Deerfield
Beach and Boca Raton, Florida ("Recreation Notes"). The operations
of these facilities historically have been profitable and, in the
Company's opinion, are not likely to be affected by adverse
economic conditions.
The remaining $57.5 million of real estate mortgage notes are
collateralized by residential and commercial real estate, generally
in southeast Florida, including $48.8 million due from Hilcoast
Development Corp. ("Hilcoast"), principally collateralized by
certain real estate at the Century Village at Pembroke Pines adult
condominium community in Broward County, Florida ("Century
Village"), including the recreation facilities located at Century
Village. Of this amount, approximately $23.8 million is scheduled
to be repaid through July 1998 and the remaining $25 million is
scheduled to be converted by July 1998 to a 25 year, 11%, self-amortizing
loan providing for equal monthly installment payments of
principal and interest, collateralized by a first mortgage on the
recreation facilities at Century Village. At June 30, 1995, 6,460
units had been sold and delivered at the planned 7,780 unit Century
Village and the backlog of units under contract for future delivery
was 227 units with a sales value of $17 million.
Collections on the Company's real estate mortgage notes may be
affected by the future success of the projects which collateralize
these notes, which may, in turn, be affected by conditions in the
housing and commercial real estate markets.
Operating funds are currently generated from interest income
on mortgage notes and rentals from income producing properties,
including distributions from self-storage warehouse partnerships.
Dividend payments to stockholders, in accordance with the
provisions of the Internal Revenue Code pertaining to real estate
investment trusts, limit the Company from utilizing significant
amounts of income-generated funds for investment purposes.
At June 30, 1995, the outstanding balance of the Company's
Collateralized Mortgage Obligations (the "CMO's") amounted to $38
million (net of unamortized discount of $1 million based on an
effective interest rate of 8.84%). The CMO's are collateralized by
the Recreation Notes and require self-amortizing principal and
interest payments through March 2007. During the term of the
CMO's, the Company's scheduled annual debt service requirement
approximates $5.2 million compared to annual principal and interest
payments scheduled to be received under the Recreation Notes of
$6.5 million.
<PAGE> 14
In the past several years, the Company's only new loan
commitments have been in connection with its then existing
borrowers. By the beginning of 1994, the Company had repaid all of
its outstanding borrowings, other than the CMO's, and had
significantly reduced its mortgage loan commitments. During the
remainder of 1994, funds received from the repayment of existing
mortgage notes were generally reinvested in high quality short-term
corporate and government securities. As a result, by year-end
1994, the Company had accumulated cash and cash equivalents and
short-term investments which aggregated approximately $13 million.
In an effort to realize increased yields, with minimal risk,
during 1995 the Company made certain short-term investments in
connection with notes due by Hilcoast to unrelated third parties,
totaling $4.7 million (see Note 1(b) to the Consolidated Financial
Statements).
At June 30, 1995, commitments on outstanding real estate loans
consisted of $2.7 million under the Hilcoast Lines of Credit. The
Company expects to be able to meet these commitments with
internally generated funds, including existing cash balances.
During the quarter ended June 30, 1995, there were no new loan
commitments. There are currently no material commitments for
capital expenditures.
Inflation
As of June 30, 1995, the Company had no variable interest rate
borrowings; however, the Company's interest-sensitive mortgage
notes receivable amounted to approximately $41 million. Of this
amount, the interest rate on approximately $33 million is limited
to the lower of 11% or prime + 3%. As of June 30, 1995, the
interest rate on those notes had reached the 11% ceiling;
accordingly, in the event of inflation, even if such inflation is
accompanied by rising interest rates, the effect on the Company's
results of operations is not expected to be material.
<PAGE> 15
PART II. Other Information
Item 6 - Exhibits and Reports on Form 8-K:
Exhibits:
27 Financial Data Schedule
Reports on Form 8-K
The Company was not required to file Form 8-K
during the quarter for which this report is filed.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CV REIT, INC.
________________________________
(Registrant)
August 8, 1995 /s/ Alvin Wilensky
_________________________________
Alvin Wilensky, President
August 8, 1995 /s/ Elaine Kahant
_________________________________
Elaine Kahant, Vice President
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,251<F1>
<SECURITIES> 2,920
<RECEIVABLES> 101,239
<ALLOWANCES> 3,107
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,692
<DEPRECIATION> 2,130
<TOTAL-ASSETS> 121,028
<CURRENT-LIABILITIES> 0
<BONDS> 38,011
<COMMON> 80
0
0
<OTHER-SE> 72,108
<TOTAL-LIABILITY-AND-EQUITY> 121,028
<SALES> 0
<TOTAL-REVENUES> 6,639
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,729
<INCOME-PRETAX> 4,074
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,074
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<FN>
<F1>Includes $876 restricted.
</FN>
</TABLE>
