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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ______________
Commission File Number: 1-8073
CV REIT, INC.
(Exact name of the 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:
Name of each exchange on
Title of each class 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
This report contains a total of 59 pages.
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AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NONAFFILIATES OF THE REGISTRANT
Common Stock, par value $.01 per share ("Common Stock"), was the only
class of voting stock of the Registrant outstanding on December 31, 1994.
Based on the last sale price of the Common Stock on the New York Stock
Exchange as reported by the consolidated transaction reporting system on
January 31, 1994 $9.00, the aggregate market value of the 6,121,776 shares of
the Common Stock held by persons other than officers, directors and persons
known to the Registrant to be the beneficial owner (as that term is defined
under the rules of the Securities and Exchange Commission) of more than five
percent of the Common Stock on that date was approximately $55.1 million. By
the foregoing statements, the Registrant does not intend to imply that any of
these officers, directors or beneficial owners are affiliates of the
Registrant or that the aggregate market value, as computed pursuant to rules
of the Securities and Exchange Commission, is in any way indicative of the
amount which could be obtained for such shares of Common Stock.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 14(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes ___ No ___
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
7,966,621 shares of Common Stock, par value $.01
per share, were outstanding as of December 31, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement of CV Reit, Inc.
for the 1995 Annual Meeting of Stockholders
(incorporated in Part III)
<PAGE> 3
PART I
Item 1. Business
General
CV Reit, Inc. (hereinafter, together with its subsidiaries, the
"Company" or "Registrant") has operated as a real estate investment trust
("REIT") under Sections 856 through 860 of the Internal Revenue Code since
January 1, 1982. The Company has invested in a portfolio of real estate
interests consisting primarily of real estate mortgage notes.
A REIT must be a calendar year unincorporated trust, association or
corporation with certain attributes including the following:
* At no time during the last half of its taxable year may more than 50% in
value of its outstanding stock be owned directly or indirectly by or for
five or fewer individuals. Certain rules regarding constructive
ownership and attribution of stock apply for purposes of this test.
* Gross income tests must be met: a) at least 75% must be from specified
types of real property related income, b) at least 95% must be from such
real property related and other specified investment income, and c) less
than 30% must be from short term capital gains from stocks, etc.,
"prohibited transactions" or gain from the sale or disposition of real
property (other than by involuntary conversion or disposition of
mortgage foreclosure property) held less than four years.
* At the close of each quarter of the tax year, at least 75% of the value
of its total assets must be in real estate assets (including real estate
mortgage loans), government securities, and cash and cash items. Not
more than 25% of the value of its total assets may be invested in
securities other than government securities and real estate assets. It
may not invest more than 5% of the value of the total assets of the
trust in the securities of any nongovernmental issuer (other than
securities qualifying as real estate assets), and, with certain
exceptions, may not own more than 10% of the out-standing voting
securities of any nongovernmental issuer.
<PAGE> 4
A Company which qualifies as a REIT may, if it distributes at least 95%
of its ordinary taxable income for a taxable year, deduct dividends paid to
stockholders with respect to such taxable year from taxable income. The
Company intends to operate in such a manner that it will continue to qualify
as a REIT. In any year in which it so qualifies, the Company itself will not
be taxed under the Code on income distributed to its stockholders
attributable to that year.
The primary objective of the Company is to provide income for
distribution to its stockholders. The Company considers appropriate
investments in real estate or interests in real estate and real estate
mortgages, and securities or interests in persons engaged in real estate
activities. The Company intends to maintain the percentages of its assets in
various types of investments necessary to continue to qualify as a REIT. The
Company may borrow money and issue additional debt securities, preferred
stock, or other equity securities, including securities senior to its Common
Stock, in connection with the acquisition of future investments, or to
otherwise finance its operations. See Management's Discussion and Analysis
of Results of Operations and Financial Condition - Liquidity and Capital
Resources for a discussion regarding the Company's recent real estate
investment strategy.
At December 31, 1994, total assets of the Company were $122.8 million,
including $92.7 million in real estate mortgage notes, $5 million in real
estate acquired by foreclosure (net of allowance for losses), $5.7 million of
income producing real estate (primarily partnership interests in three self-
storage warehouses and a motel), $5 million in an investment in Hilcoast
Development Corp. Preferred Stock and $12.9 million in cash, cash equivalents
and short-term investments.
Real Estate Mortgage Notes
The Company's principal investments in real estate mortgage notes are
described in detail herein and are summarized as follows (in thousands):
December 31,
------------------
1994 1993
-------- --------
Hilcoast Development Corp. ("Hilcoast"):
Term Loan $28,345 $34,504
Lines of Credit 7,870 6,525
Land Acquisition Loan 1,350 1,350
Glen Abbey Note 1,602 1,845
------- -------
39,167 44,224
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December 31,
------------------
1994 1993
-------- --------
Recreation Notes 44,096 44,808
Century Plaza Note (1) 6,285 6,188
Various first mortgage notes,
maturing through 1998, with interest
ranging primarily from 8.9% to 10.5%,
collateralized by residential
property principally in Palm Beach
and Broward Counties, Florida 3,143 10,643
------- --------
92,691 105,863
Less allowance for losses 62 1,600
------- --------
Totals (2) $92,629 $104,263
======= ========
_________
(1) The Century Plaza Note was not repaid on its December 31, 1994 maturity
date. See Legal Proceedings - Century Plaza for a discussion of the
Century Plaza Note and recent liti-gation instituted by the borrower.
(2) As of December 31, 1994, other than the Century Plaza Note, none of the
above real estate mortgage notes were delinquent except for $.2
million.
Hilcoast
Term Loan and Lines of Credit
On July 31, 1992, Hilcoast, an affiliate of the Company on that date
(see Investment in Hilcoast Preferred Stock and Common Stock) acquired
certain assets from affiliates of Cenvill Development Corp. (the "Cenvill
Affiliates") pursuant to approval by the Bankruptcy Court of the Southern
District of Florida in connection with Chapter 11 proceedings filed by the
Cenvill Affiliates. The assets were acquired subject to $48.2 million of
loans to the Company and certain other indebtedness.
<PAGE> 6
On July 31, 1992, immediately prior to the acquisition, the Company
modified the mortgage loans to which the acquired assets were subject. The
$48.2 million balance of such loans was converted to a $41.7 million term
loan (the "Term Loan") and a revolving $6.5 million construction loan
commitment (the "$6.5 million Line of Credit"). Upon satisfaction of the
Purchase Note (as described below), the $6.5 million Line of Credit may be
increased by Hilcoast to $7.5 million. On September 30, 1993, the Company
increased the revolving construction loan commitment to Hilcoast by $3
million (the "$3 million Line of Credit"). On September 15, 1994, the
Company agreed to a further increase up to a maximum of $2.5 million (the
"$2.5 million Line of Credit"), limited to 50% of the amount by which $30
million exceeds the outstanding principal balance of the Term Loan. The
$6.5 million Line of Credit, the $3 million Line of Credit and the $2.5
million Line of Credit are hereinafter collectively referred to as the Lines
of Credit.
The Term Loan and the $6.5 million Line of Credit mature on July 31,
1998, except as described below with respect to the conversion of the Term
Loan, and bear interest, payable monthly, at prime (8.5% at December 31,
1994) plus 3%, but in any event not less than 9% nor more than 11%. The $3
million Line of Credit matures on December 31, 1996 and bears interest,
payable monthly, at prime plus 3% with a floor of 11%. The $2.5 million Line
of Credit matures on July 31, 1996 and bears interest, payable monthly, at
12.5%.
The Term Loan and the Lines of Credit are principally collateralized by
first mortgages on certain residential and commercial real estate at the
Century Village at Pembroke Pines, Florida adult condominium project
("Century Village"), and a second mortgage on the recreation facilities at
Century Village (subordinated to a first mortgage to The Daiwa Bank, Ltd.
(the "Daiwa Note")). In February 1995, the Company agreed to acquire the
Daiwa Note for the outstanding balance on the date the transaction is
closed. The Daiwa Note matures on October 31, 1996, bears interest,
payable monthly, at prime plus 1.5%, requires minimum quarterly principal
payments equal to the greater of available net cash flow (as defined) or
$300,000 and had an outstanding balance of $2.8 million as of January 31,
1995.
Hilcoast is required to pay commitment fees ranging from .9% to 1.8% per
annum on the unused portion of the Lines of Credit. The Term Loan requires
specific release prices principally based on sales of condominium apartments.
<PAGE> 7
Provided that the Daiwa Note has been satisfied and the Term Loan has
been reduced to $25 million, by July 31, 1998, the Term Loan 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. The Permanent Loan may not be prepaid
by Hilcoast without a prepayment penalty and will be collateralized by a
first mortgage on the recreation facilities at Century Village.
In connection with the acquisition by Hilcoast in July 1992, Hilcoast
issued a promissory note (the "Purchase Note") to the seller, guaranteed by
the Company and collateralized principally by $3 million of the Company's $5
million investment in Hilcoast Preferred Stock (see Investment in Hilcoast
Preferred Stock and Common Stock). The Purchase Note bears interest at prime
plus 1/2%, is payable by Hilcoast on July 31, 1995 and had an out-standing
balance of $2 million at December 31, 1994.
Land Acquisition Loan
In August 1993, the Company provided a $1.3 million mortgage loan to
Hilcoast to finance Hilcoast's acquisition of certain unimproved land
adjacent to Century Village (the "Land Acquisition Loan"). The loan is
collateralized by the acquired land, bears interest, payable monthly, at 12%,
matures on July 31, 1998, and provides for specific release prices based on
sales of condominium apartments.
Glen Abbey Note
Effective August 18, 1992, the Company sold to Hilcoast all of the
capital stock of its subsidiary which owns unimproved land in Volusia County,
Florida, in an existing golf course community known as Glen Abbey ("Glen
Abbey") for approximately $2.5 million, which represented the Company's
approximate book value of those homesites on the date of sale. Hilcoast paid
approximately $.4 million in cash, and $2.1 million in the form of a
promissory note (the "Glen Abbey Note"). The Company acquired the property
in 1991 in a foreclosure proceeding in connection with a default under a loan
from the Company. Hilcoast is presently developing the land and plans to
sell approximately 200 improved single family homesites. As of December 31,
1994, 44 homesites had been sold of which 36 had been delivered.
<PAGE> 8
The Glen Abbey Note is collateralized by the undelivered homesites at
Glen Abbey, bears interest, payable monthly, at 9% through August 1995 and
prime plus 3% thereafter, but in no event less than 9% nor more than 11%,
matures on December 31, 1997, and is recourse to the extent of Hilcoast's
guarantee of the first $1.5 million principal of the note. Payments of
principal are based on release prices for the homesites.
The mortgage notes under the Term Loan, Land Acquisition Loan and Glen
Abbey Note are pledged as collateral for a $4 million promissory note to a
bank, consisting of a $2.5 million line of credit through December 31, 1995
which, as of December 31, 1994, had no outstanding balance, and a $1.5
million Letter of Credit issued by the bank for the benefit of Hilcoast.
Recreation Notes
At December 31, 1994, the outstanding balance of the Company's first
mortgage notes collateralized by the recreation facilities at the three
previously completed Century Village communities (the "Recreation Notes") was
$44.1 million, including $11.6 million due from H. Irwin Levy, a principal
stockholder and former Chairman of the Board of the Company and a principal
stockholder, Chairman of the Board and Chief Executive Officer of Hilcoast.
These notes generally arose from the Company's sale of the recreation
facilities at the Century Village adult condominium communities in West Palm
Beach and Deerfield Beach, Florida to unrelated parties in January 1982 and
in Boca Raton, Florida to Mr. Levy in December 1981. The terms of Mr. Levy's
acquisition of the recreation facilities, including the terms and security
for his promissory notes, were substantially the same as the terms of the
sales (negotiated independently) of the other two recreation facilities.
The Recreation Notes principally consist of 30 year non-recourse notes
maturing in 2011 and 2012, with interest rates averaging 13% (13-1/4% in the
case of Mr. Levy). Equal monthly self-amortizing installments of principal
and interest in the aggregate amount of $6.5 million per annum are required,
including $1.7 million from Mr. Levy. The Recreation Notes are
collateralized by purchase money mortgages and by collateral assignments to
the Company of the purchasers' respective interests in the recreation
facilities.
The Recreation Notes are pledged as collateral for Collateralized
Mortgage Obligations ("CMO's") issued by the Company which, as of December
31, 1994, had an outstanding balance of $38.9 million (net of $1.1 million
unamortized discount based on an effective interest rate of 8.84%). See
Management's Discussion and Analysis of Results of Operations and Financial
Condition - Liquidity and Capital Resources for a description of the CMO's.
<PAGE> 9
Since 1990, companies owned by Mr. Levy and certain members of his
family have leased, managed and operated the recreation facilities at the
Century Villages in West Palm Beach, Deerfield Beach and Boca Raton, which
are collateral for the Company's Recreation Notes.
Other
In 1988 and 1990, the Company made a first mortgage loan commitment
aggregating $12 million to the developer of Emerald Pointe, a residential
community consisting of 330 villas and condominium units, in Palm Beach
County, Florida. The commitment expired in March 1993 and effective March 1,
1993, the loan was extended to December 31, 1994 and, provided the borrower
met certain conditions, the Company agreed to waive up to approximately $1.1
million of the outstanding indebtedness plus interest accruing thereon from
March 1, 1993. During 1994, the project was completed and the outstanding
balance due under the loan agreement, as modified, was repaid to the Company.
Real Estate Acquired by Foreclosure
Real estate acquired by foreclosure, which consists of various
properties acquired by foreclosure or deed in lieu thereof and held for
resale, is summarized as follow (in thousands):
December 31,
------------------
1994 1993
Commercial: ------- -------
Broward County, Florida:
Nine acre office building site
in Dania $ 5,000 $ 5,000
29 acre commercial site in Miramar (a) 2,563 2,563
Other 600 600
------- -------
Total commercial 8,163 8,163
Residential 306 525
------- -------
8,469 8,688
Less allowance for losses 3,469 3,519
------- -------
Totals $ 5,000 $ 5,169
======= =======
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- - - - - - -----------
(a) In December 1994, the Company entered into a sales contract to sell this
parcel for $2.7 million, subject to certain conditions principally
related to rezoning. If the required rezoning is obtained, the Company
expects to close this sale by the beginning of 1996. The net sales
proceeds are expected to approximate $900,000 in excess of book value,
net of allowance for losses.
Investment in Hilcoast Preferred Stock and Common Stock
In connection with Hilcoast's acquisition of certain assets from the
Cenvill Affiliates (see Real Estate Mortgage Notes - Hilcoast), Hilcoast
was capitalized through the issuance of $5 million of 10% Cumulative
Preferred Stock (5,000 shares - the "Preferred Stock") to the Company, $1.8
million of non-voting Class A Common Stock (1.8 million shares) to the
Company, and $738,000 of voting Common Stock (600,000 shares) to Mr. Levy.
All of the Common Stock was purchased for cash and the Preferred Stock was
acquired by the grant from the Company to Hilcoast of a $5 million senior
participation interest in certain of the Company's mortgage loans to the
Cenvill Affiliates. On the date of acquisition (July 31, 1992), Hilcoast
received from the Company a credit against the purchase price equal to the
amount of the senior participation interest ($5 million) and that interest
was deemed to have been satisfied.
On October 23, 1992, the Company distributed 1,752,320 shares of the
Hilcoast Class A Common Stock to the Company's stockholders in the form of a
taxable dividend (the "Distribution"), based upon one share of Hilcoast
Common Stock for each four shares of the Company's Common Stock owned. Upon
such Distribution, the Class A Common Stock was automatically converted into
voting Common Stock. The remaining 47,680 shares of Class A Common Stock
were repurchased from the Company by Hilcoast at the original purchase price.
As a result of the Distribution, Hilcoast became independent of the Company.
The Preferred Stock requires the payment of annual dividends of $500,000
on a quarterly basis and may be redeemed at any time at the option of
Hilcoast at stated value plus unpaid dividends.
<PAGE> 11
Real Estate and Investments in Real Estate Partnerships
The Company's real estate equities are summarized as follows (in
thousands):
December 31,
-----------------
1994 1993
------- -------
Days Inn motel $ 3,654 $ 3,654
Administration Building 764 756
Other 82 520
------- -------
4,500 4,930
Accumulated depreciation (2,074) (1,940)
------- -------
2,426 2,990
45%-50% investments in self-storage
warehouse partnerships 3,263 3,341
------- -------
Totals $ 5,689 $ 6,331
======= =======
Motel
The Company owns a 154-room Days Inn motel, located near the entrance to
Century Village at West Palm Beach, Florida. The motel is leased to a
corporation controlled by Alan Shulman, the Chairman of the Board of the
Company.
The lease, as amended, provided for annual rental through the
expiration of the lease term on August 31, 1999, equal to a minimum of
$300,000, plus 30% of gross room revenues in excess of $1.2 million. In
February 1995, the Company and the lessee agreed to adjust the annual rental
to a minimum of $330,000, plus 30% of gross room revenues in excess of $1.3
million. The lease also provides for the Company to be paid 50% of the
amounts received by the lessee from the concessionaire who operates the food
and beverage facilities at the motel, excluding certain reimbursements for
taxes, insurance and maintenance.
<PAGE> 12
Administration Building
On March 7, 1991, the Company acquired, for $750,000, from a subsidiary
of Cenvill Development Corp., a two-story office building containing
approximately 28,000 square feet (the "Administration Building"), located
within the Century Village at West Palm Beach community. The Company
currently occupies a portion of the Administration Building as its corporate
headquarters. During 1994 and 1993, the Company leased approxi-mately 4,800
square feet in the Administration Building on a month to month basis to a
company owned by Mr. Levy and a member of his family at a monthly rental of
approximately $4,000, plus an allocation of utility expenses, and 3,800
square feet to Hilcoast on a month to month basis, at a monthly rental of
approximately $3,400.
In January 1995, the Company entered into a letter of intent to lease
approximately 15,000 square feet to an unrelated party for provision of
physician and medically related services for five years, with five additional
five-year options, at an initial annual rent of $10 per square foot on a
triple net basis plus annual increases of 3%-4%. The letter of intent
requires rent to commence on 8,000 square feet by May 1, 1995 and on the
remaining 7,000 square feet by May 1, 1996.
Self-Storage Warehouses
The Company, through three wholly-owned subsidiaries, has 45%-50%
general and limited partnership interests in three partnerships whose
principal assets consist of self-storage warehouses, two in Dade County and
one in Palm Beach County, Florida with an aggregate of approximately 2,900
units, managed by independent parties. The Company's partners in these
partnerships are Felix Granados, Sr. and certain members of his family. The
subsidiaries have no financial obligation with respect to such partnerships
except, under state law, as general partners. The subsidiaries receive
monthly distributions from each of the partnerships based on cash flows.
GNMA Certificates
Prior to April 5, 1994, the Company invested in "fully modified pass-
through" mortgage-backed certificates issued by mortgage banking companies or
other financial concerns approved by the Government National Mortgage
Association ("GNMA"). GNMA provides a guarantee of timely payment of the
principal of, and interest on, GNMA certificates and that the full faith and
credit of the United States is pledged to the payment of all amounts which
may be required to be paid under such guarantee.
<PAGE> 13
On April 5, 1994, the Company sold its entire remaining GNMA Certificate
portfolio with an aggregate book value of $34.8 million and recognized a $2.4
million loss on the sale.
During 1993 and 1992, the Company sold GNMA certificates with an
aggregate book value of $18.5 million and $20.4 million, respectively, and
recognized gains of $1.1 million and $1.4 million, respectively.
Industry Factors
The results of operations of the Company depend upon the availability of
suitable opportunities for investment and reinvestment of its funds and on
the yields available from time to time on mortgage and other real estate
investments, which in turn depend to a large extent on the type of investment
involved, prevailing interest rates, the nature and geographical location of
the property, competition and other factors, none of which can be
predicted with certainty. The Company competes for acceptable investments
with financial institutions, including banks, insurance companies, savings
and loan associations, pension funds, and other real estate investment trusts
which have investment objectives similar to those of the Company and some of
which may have greater financial resources than the Company. The Company is
not aware of statistics which would allow it to determine its position with
respect to all of its competitors in the real estate investment industry.
Historically, the Company has invested in real estate and mortgages in
real estate projects located primarily in the State of Florida. Although
certain fundamental aspects of the Florida market, including economic
development opportunities and an attractive climate and quality of life, have
contributed to Florida's significant population and economic growth, the
Florida economy, in general, and the Florida real estate market,
specifically, are cyclical.
The Company's mortgage notes receivable are collateralized by land and
improvements in various residential and commercial projects. The competitive
environment for those projects and the Company's real estate acquired by
foreclosure may affect the future income of the Company, and the Company may
not be immune from the risks connected with these projects.
Potential competition to the Company's motel and self-storage warehouse
partnerships comes from similar facilities in the immediate surrounding area.
Therefore, the operations of these properties could be adversely affected by
the building of additional motels and self-storage warehouses in those areas.
<PAGE> 14
Relationship Between the Company and Hilcoast
In connection with the acquisition by Hilcoast (see Real Estate Mortgage
Notes-Hilcoast) on July 31, 1992, H. Irwin Levy resigned as Chairman of the
Board of the Company, Joseph D. Weingard resigned as a director, Michael S.
Rubin resigned as Vice President-Real Estate Management and Jack Jaiven
resigned as Vice
President and Treasurer of the Company. Those individuals were elected to
the following positions with Hilcoast: H. Irwin Levy-Chairman of the Board
and Chief Executive Officer; Joseph D. Weingard, Director; Michael S. Rubin,
President, Chief Operating Officer and Director; and Jack Jaiven, Executive
Vice President, Chief Financial Officer and Director.
Effective July 31, 1992, the Company and Hilcoast entered into a
consulting and advisory agreement under which Hilcoast provides certain
investment advisory, consulting and administrative services to the Company,
excluding matters related to Hilcoast's loans from the Company. The
agreement, which originally expired on July 31, 1994, has been extended to
July 31, 1995, and provides for the payment of $10,000 per month to Hilcoast,
plus reimbursement for all out of pocket expenses. The agreement may be
terminated by Hilcoast upon 180 days notice and by the Company upon 30 days
notice.
During 1994 and 1993, Hilcoast leased certain office space at the
Company's Administration Building at the Century Village at West Palm Beach,
Florida community. See Real Estate and Investments in Real Estate
Partnerships-Administration Building.
Employees
On December 31, 1994, the Company employed 4 persons.
Item 2. Properties
See response to Item 1. Business - Real Estate and Investments in Real
Estate Partnerships.
<PAGE> 15
Item 3. Legal Proceedings
TGI Development, Inc. ("TGI")
On October 9, 1989, TGI filed a complaint against the Company, H. Irwin
Levy and certain unrelated parties alleging misrepresentations by the
defendants in connection with the Plaintiff's purchase and development of
land from a previous borrower of the Company. The complaint, as subsequently
amended, consisted of counts of common law fraud and breach of contract and
sought compensatory damages of approximately $2 million in addition to
punitive damages. On October 3, 1990, the Company filed a counterclaim
against TGI in connection with an $800,000 promissory note from TGI to the
Company. On February 9, 1994, the Court granted a Final Judgment in favor of
the Company as to the count of common law fraud which strikes the punitive
damage claim. In accordance with an agreement between the parties, on August
23, 1994, the Court dismissed the breach of contract count with prejudice and
entered a judgment in the amount of $1.1 million in favor of the Company on
the aforementioned counterclaim. The Company has agreed not to execute that
judgment until completion of the Plaintiff's appeal of the Final Judgment on
the punitive damage claim. 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 management's opinion, the final outcome of this litigation will not have
a material adverse effect on the Company's financial condition.
Century Plaza
In December 1989, the Company sold its 85,000 square feet Century Plaza
Shopping Center ("Century Plaza") in Deerfield Beach, Florida to Century
Plaza Investments, Inc. (the "Buyer") for $8 million, consisting of $1.6
million cash and a $6.4 million first mortgage note due on December 31, 1994
(the "Century Plaza Note"). As part of the sale agreement, the Company
guaranteed to the Buyer a minimum level of annual net operating income from
Century Plaza for a period of three years. For each of the three years ended
December 31, 1992, the Company was required to make payments under that
guarantee.
<PAGE> 16
On December 5, 1994, the Buyer filed a Complaint in Broward County
Circuit Court against the Company seeking a judicial declaration as to the
Buyer's obligation to provide parking areas within Century Plaza to members
of an adjacent religious institu-tion. The factual basis for the Buyer's
Complaint is that the Company failed to advise the Buyer that in 1978, a
former officer of the Company had apparently consented to a limited number of
parking spaces to be allocated to the religious institution in connection
with a request for site plan approval by that institution. Should the Court
determine that the institution has parking rights, the Buyer seeks recision
of the Century Plaza Note, restoration of amounts paid by the Buyer 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 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.
Other
The Company is subject to various claims and complaints relative to its
business activities. In the opinion of management, the ultimate disposition
of these matters will not have a material adverse effect on the Company's
financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE> 17
PART II
Item 5. Market for Registrant's Common Stock
and Related Security Holders Matters
The Common Stock of the Company is listed for trading on the New York
Stock Exchange under the symbol CVI. The following table sets forth the high
and low sales prices per share and the dividends per share declared by the
Company on the Common Stock, for each quarter during the past two years.
Market
Price Range
------------------- Dividends
High Low Declared
---- --- ------------
1994
First Quarter 11-1/2 9 $ .27
Second Quarter 10-7/8 9-1/4 .27
Third Quarter 9-5/8 8-3/4 .27
Fourth Quarter 9-5/8 8-3/8 .27
-----
$1.08
=====
1993
First Quarter 11-1/2 7-3/8 $ .25
Second Quarter 10-1/4 9-1/2 .25
Third Quarter 11 9-5/8 .25
Fourth Quarter 9-5/8 9-1/8 .25
-----
$1.00
=====
As of December 31, 1994, the Company had 7,966,621 shares of Common
Stock outstanding and 2,236 holders of record of such stock.
As described in Item 1, the Company expects to continue to qualify as a
REIT. A corporation which qualifies as a REIT may deduct from taxable income
dividends paid to stockholders. The Company's policy is to distribute
approximately 100% of its taxable ordinary income.
<PAGE> 18
Item 6. Selected Financial Data
(in millions, except per share data)
Year Ended December 31,
---------------------------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- -----
Total revenues $13.9 $15.4 $15.1 $20.3 $23.0
===== ===== ===== ===== =====
Income (loss) before income
taxes and cumulative effect
of accounting change $6.3 $11.3 $13.0 $5.4 ($28.3)
===== ===== ===== ===== ======
Income (loss) before cumulative
effect of accounting change $6.3 $9.5 $9.9 $3.4 ($15.5)
Cumulative effect of change in
accounting for income taxes - - - - (1.9)
----- ----- ----- ----- -----
Net income (loss) $6.3 $9.5 $9.9 $3.4 ($17.4)
===== ===== ===== ===== =====
Per common share:
Income (loss) before cumulative
effect of accounting change $0.79 $1.29 $1.38 $0.47 ($2.14)
Cumulative effect of
accounting change - - - - (0.27)
----- ----- ----- ----- -----
Net income (loss) $0.79 $1.29 $1.38 $0.47 ($2.41)
===== ===== ===== ===== =====
Dividends declared per share:
Cash $1.08 $1.00 $0.45 $0.75 $0.58
Hilcoast Development Corp.
Common Stock - - 0.19(1) - -
----- ----- ----- ----- -----
$1.08 $1.00 $0.64 $0.75 $0.58
===== ===== ===== ===== =====
At Year End:
Total assets $122.8 $163.2 $160.0 $177.7 $185.7
====== ====== ====== ====== ======
Borrowings $38.9 $77.2 $83.5 $109.2 $118.3
===== ===== ===== ====== ======
Stockholders' equity:
Total $72.4 $74.7 $66.0 $60.5 $62.5
===== ===== ===== ===== =====
Per common share $9.09 $9.38 $9.14 $8.37 $8.66
===== ===== ===== ===== =====
- - - - - - --------
(1) Based on 75 cents per share market price of Hilcoast Development
Corp.(Hilcoast") Common Stock on October 19, 1992. The distribution wasbased
upon one share of Hilcoast Common Stock for each four shares of the Company's
Common Stock owned.
<PAGE> 19
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
1994 Compared to 1993
Funds From Operations
The Company's Funds From Operations generally consists of net income,
excluding the reversal of losses, gains or losses on sales of GNMA
certificates and real estate, plus depreciation of real property (including
the Company's share of depreciation in connection with its equity in earnings
of unconsolidated partnerships).
For the year ended December 31, 1994, Funds From Operations amounted to
$8.4 million compared to $7.3 million during 1993. The $1.1 million (15%)
increase in Funds From Operations was princi-pally attributable to a $.6
million reduction in operating, general and administrative expenses and a $.4
million increase in net interest income.
The decrease in operating, general and administrative expenses was
primarily due to the elimination of costs incurred in connec-tion with
operating residential real estate acquired by fore-closure, sold during 1993,
and reduced legal fees. The improved net interest income includes an
approximate $1.1 million reduction in interest expense due to the retirement
in November 1993 of the $14.7 million outstanding balance of the Company's
senior subordinated notes. The funds used to retire the notes included
approximately $6.7 million generated from the issuance of 748,000 additional
shares of Common Stock in connection with the October 1993 Rights Offering
and a $7.5 million bank loan (which loan was repaid by March 1994). The
higher net interest income also reflects an approximate $.4 million increase
in interest income on the Company's variable rate mortgage notes receivable
due to the rise in the prime rate during 1994, offset by a $1 million
reduction in net interest income from the sale of the Company's leveraged
GNMA certificate portfolio as discussed below.
<PAGE> 20
Net Income
During 1994, the Company incurred a $2.4 million loss on the sale of its
GNMA certificate portfolio and recognized as income a $.6 million reversal of
previously recorded losses. In 1993, the Company recognized a $1.1 million
gain on the sale of GNMA certificates and a $2.9 million reversal of
previously recorded losses. In addition, the Company's 1993 results included
a deferred income tax expense of $1.8 million. As a result, net income in
1994 was $6.3 million or $.79 per share compared to $9.5 million or $1.29 per
share in 1993.
1993 Compared to 1992
Funds From Operations
For the year ended December 31, 1993, Funds From Operations amounted to
$7.3 million compared to $3.5 million during 1992.
The $3.9 million (112%) increase in Funds From Operations was
principally attributable to a $2.8 million increase in net interest income
and a $1.5 million decrease in operating, general and administrative
expenses, primarily from reduced legal fees and personnel costs. The
increased net interest income reflects $1.9 million in additional interest
income recognized in 1993 on loans to Hilcoast Development Corp. ("Hilcoast"
- - - - - - - see Real Estate Mortgage Notes - Hilcoast) During the second quarter of
1992, the Company discontinued recognition of interest income on
approximately $48 million in loans to Cenvill Development Corp. On July 31,
1992, Hilcoast, an affiliate of the Company at that time, acquired the
underlying collateral from Cenvill Development Corp. subject to those loans.
In October 1992, the Company distributed to its shareholders its 75% interest
in Hilcoast's common stock at which time, the Company resumed recognition of
interest income earned on those loans. The increased net interest income
also reflects a decline in interest expense resulting from reductions in
borrowings, primarily generated from the approximately $18 million cash
received from the sale of the Westward Shopping Center ("Westward") in May
1992 and from proceeds received from sales of real estate acquired by
foreclosure.
<PAGE> 21
Net Income
During 1993, the Company recognized gains of $.3 million from sales of
real estate acquired by foreclosure compared to a gain of $8 million in 1992
from the sale of Westward. The Company also recognized gains on sales of
GNMA certificates of $1.1 million in 1993 and $1.4 million in 1992 and
reversals of previously recorded losses of $2.9 million in 1993 and $.2
million in 1992. In addition, during 1993 and 1992, deferred income tax
expense amounted to $1.8 million and $3.0 million, respectively. As a
result, 1993 net income was $9.5 million or $1.29 per share compared to $9.9
million or $1.38 per share in 1992.
Operating results in 1993 reflects a $.9 million decrease in rent income
partially offset by a $.5 million decrease in operating expenses and
depreciation both resulting from the sale of Westward. However, the net
effect of the sale on net income was minimal due to the interest savings
resulting from the aforementioned reduction in borrowings from the cash
proceeds received on the sale.
Liquidity and Capital Resources
At December 31, 1994, total assets were $122.8 million, including $92.7
million in real estate mortgages notes. Approximately $44.1 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 $48.6 million of real estate mortgage notes are
collateralized by residential and commercial real estate, generally in
southeast Florida, including $39.2 million due from Hilcoast, principally
collateralized by first mortgages on certain real estate at the Century
Village at Pembroke Pines adult condominium community in Broward County,
Florida ("Century Village"), and a second mortgage on the recreation
facilities located at Century Village. Of this amount, approximately $14.2
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. See Real Estate Mortgage Notes - Hilcoast. At December
31, 1994, 6,253 units had been sold and delivered at the planned
approximately 7,780 unit Century Village and the backlog of units under
contract for future delivery was 207 units with a sales value of $16 million.
<PAGE> 22
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, rentals from income producing properties, including distributions from
self-storage warehouse partnerships, and dividend income on the Company's
investment in Hilcoast Preferred Stock. Dividend payments to stockholders,
in accordance with the provisions of the Internal Revenue Code, limit the
Company from utilizing significant amounts of income-generated funds for
investment purposes.
Since its qualification as a REIT and until 1990, the Company's
operating strategy was to reinvest monies received from the repayment of
existing mortgage notes and borrowings in new and existing mortgage notes and
other real estate related investments, including loans to developers for the
purpose of acquiring, developing or constructing real estate. In the past
several years, the Company's only new loan commitments have been in
connection with its existing borrowers. As a result, through the beginning
of 1994, monies received from the repayment of existing mortgage notes, the
sale of real estate, or new borrowings were generally utilized to reduce the
Company's outstanding borrowings, or to fund such mortgage loan commitments.
By the beginning of 1994, the Company had repaid all of its outstanding
borrowings, other than its long-term obligations ($39 million as of December
31, 1994 - see below), and had significantly reduced its mortgage loan
commitments. Since March 1994, monies received from the repayment of
existing mortgage notes have generally been reinvested in high quality short-
term corporate or government securities. The Company expects to pursue this
strategy while it continues its evaluation of alternative real estate
investments. At December 31, 1994, the Company's cash, cash equivalents and
short-term investments amounted to $12.9 million.
During 1994 and 1993, the Company declared cash dividends of $1.08 per
share and $1.00 per share, aggregating $8.6 million and $7.4 million,
respectively. During the same periods, the Company's Funds From Operations
amounted to $8.4 million and $7.3 million, respectively.
<PAGE> 23
At December 31, 1994, the outstanding balance of the Company's
Collateralized Mortgage Obligations (the "CMO's") amounted to $38.9 million
(net of unamortized discount of $1.1 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.
At December 31, 1994, commitments on outstanding real estate loans
consisted of $5.1 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 1994, the Company's new loan
commitments amounted to $3 million, including $2.5 million related to
Hilcoast. In February 1995, the Company agreed to acquire from a bank a $2.8
million mortgage note due from Hilcoast (see Real Estate Mortgage Notes -
Hilcoast). There are currently no material commitments for capital
expenditures.
INFLATION
As of December 31, 1994, the Company had no variable interest rate
borrowings; however, the Company's interest-sensitive mortgage notes
receivable amounted to $39.1 million. Of this amount, the interest rate on
$36.4 million is limited to the lower of 11% or prime + 3%. As of December
31, 1994, the interest rate on those notes had reached the 11% ceiling;
accordingly, in the event of inflation, even if such inflation is accompanies
by rising interest rates, the effect on the Company's results of operations
is not expected to be material.
<PAGE> 24
Item 8. Financial Statements and Supplementary Data
Table of Contents to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accountants 25
Consolidated Financial Statements:
Balance Sheets - December 31, 1994 and 1993 26
Statements of Income - Years Ended
December 31, 1994, 1993 and 1992 27
Statements of Stockholders' Equity - Years
Ended December 31, 1994, 1993 and 1992 28
Statements of Cash Flows - Years Ended
December 31, 1994, 1993 and 1992 29
Notes to Consolidated Financial Statements 30-50
Consolidated Financial Statements Schedules:
Schedule IV - Mortgage Loans on
Real Estate 51
Schedules, other than those listed above, are omitted because of the
conditions under which they are required, or because the information required
therein is set forth in the consolidated financial statements or the notes
thereto.
<PAGE> 25
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
of CV Reit, Inc.
West Palm Beach, Florida
We have audited the accompanying consolidated balance sheets of CV Reit, Inc.
and subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. We have
also audited the schedule listed in the accompanying index. These financial
statements and the schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule 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 and
schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CV Reit,
Inc. and subsidiaries at December 31,1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
As more fully discussed in Note 4(a) to the consolidated financial
statements, the Company is a defendant in and has filed a counterclaim to a
lawsuit alleging misrepresentations by the Company in connection with the
plaintiff's purchase and development of land. On February 9, 1994, the
Company prevailed as to the fraud count; however, the plaintiff has appealed
that decision. The ultimate outcome of the litigation cannot presently be
determined. Accordingly, no provision for any liability that may result upon
adjudication has been made in the accompanying financial statements.
West Palm Beach, Florida BDO Seidman
January 18, 1995
<PAGE> 26
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
==============================
(dollars in thousands)
December 31,
--------------------
ASSETS 1994 1993
- - - - - - ------ --------------------
Investments (Notes 2, 3, 4 and 5)
Real estate mortgage notes $92,691 $105,863
Real estate acquired by foreclosure 8,469 8,688
Less allowance for losses (3,531) (5,119)
--------- ---------
97,629 109,432
GNMA certificates - 35,781
Real estate and investments in real estate
partnerships, net of accumulated depreciation 5,689 6,331
Investment in Hilcoast Development Corp.
10% Cumulative Preferred Stock 5,000 5,000
--------- ---------
Total investments 108,318 156,544
Cash and cash equivalents
(includes $868 and $822 restricted) 9,998 5,050
Short-term investments 2,920 -
Other 1,546 1,633
--------- ---------
$122,782 $163,227
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - - - - ------------------------------------
Liabilities and other credits:
Borrowings (Note 3) $38,908 $77,201
Accounts payable, accruals and
other liabilities 861 901
Dividends payable 2,418 2,250
Deferred income taxes (Note 6) 8,179 8,179
--------- ---------
Total liabilities and other credits 50,366 88,531
--------- ---------
Commitments and contingencies (Notes 2, 3, 4 and 8)
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 53,846 56,126
--------- ---------
Total stockholders' equity 72,416 74,696
--------- ---------
$122,782 $163,227
========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 27
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
=====================================
(in thousands, except per share data)
Year Ended December 31,
---------------------------
1994 1993 1992
Revenues: ------- ------- -------
Interest, substantially from
mortgage notes (Notes 2, 5 and 7) $12,296 $13,933 $12,776
Rent (Note 5) 537 502 1,391
Dividend on Hilcoast Development Corp.
Preferred Stock (Note 2(e)) 500 500 125
Other 554 482 791
------- ------- -------
13,887 15,417 15,083
Expenses: ------- ------- -------
Interest (Note 3) 4,156 6,038 7,721
Depreciation 161 133 251
Operating, general and administrative 1,615 2,228 3,729
------- ------- -------
5,932 8,399 11,701
------- ------- -------
7,955 7,018 3,382
Gain on sales of real estate (Note 2(g)) 130 285 8,009
Gain (loss) on sales of GNMA certificates
(Note 2(h)) (2,392) 1,138 1,394
Reversal of provision for losses (Note 2(f)) 630 2,857 200
------- ------- -------
Income before income tax expense 6,323 11,298 12,985
Income tax expense (Note 6) - 1,786 3,038
------- ------- -------
Net income $6,323 $9,512 $9,947
Per common share (Note 1): ======= ======= =======
Net income $ .79 $1.29 $1.38
======= ======= =======
Dividends declared:
Cash $1.08 $1.00 $0.45
Hilcoast Development Corp.
Common Stock (a) - - 0.19
------- ------- -------
$1.08 $1.00 $0.64
======= ======= =======
Average common shares outstanding 7,966,621 7,378,479 7,218,633
- - - - - - --------
(a) Based on 75 cents per share market price of Hilcoast Development Corp.
("Hilcoast") Common Stock on October 19, 1992. The distribution was based
upon one share of Hilcoast Common Stock for each four shares of the Company's
common stock owned.
See accompanying notes to consolidated financial statements.
<PAGE> 28
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
===============================================
(dollars in thousands)
Additional
Common Paid-in Retained
Stock Capital Earnings
------- ---------- --------
Balance at December 31, 1991 $72 $11,862 $48,521
Net income for the year - - 9,947
Dividends declared:
Cash - - (3,248)
Hilcoast Development Corp.
Common Stock (Note 2(e)) - - (1,200)
------- ---------- --------
Balance at December 31, 1992 72 11,862 54,020
Issuance of 747,988 shares of
Common Stock in connection
with Rights Offering 8 6,628 -
Net income for the year - - 9,512
Cash dividends declared - - (7,406)
------- ---------- --------
Balance at December 31, 1993 80 18,490 56,126
Net income for the year - - 6,323
Cash dividends declared - - (8,603)
------- ---------- --------
Balance at December 31, 1994 $80 $18,490 $53,846
======= ========== ========
See accompanying notes to consolidated financial statements.
<PAGE> 29
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================
(in thousands)
Year Ended December 31,
----------------------------
1994 1993 1992
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,323 $9,512 $9,947
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation 161 133 251
Gain on sales of real estate (130) (285) (8,009)
Deferred income tax expense - 1,786 2,906
Reversal oflosses (630) (2,857) (200)
Extraordinarygain - - (219)
Loss (gain)on sales of GNMA certificates 2,392 (1,138) (1,394)
Changes in operating assets and liabilities:
Decrease in accrued interest
receivable and other assets 87 244 2
Decrease in accounts payable, accruals
and other liabilities (40) (939) (559)
-------- -------- --------
Net cash provided by operating activities 8,163 6,456 2,725
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate mortgage notes (21,469) (25,046) (22,786)
Collections on real estate mortgage notes 33,436 26,907 30,226
Purchase of GNMA certificates and
short-term investments (2,920) (26,412) (30,205)
Sales of GNMA certificates 32,412 19,479 21,917
Return of principal on GNMA certificates 977 2,292 3,869
Proceeds from sales of real estate 1,030 4,224 25,104
Distributions from unconsolidated partnerships
in excess of equity in earnings 78 69 91
Improvements to real estate acquired
by foreclosure (31) (82) (794)
Investment in Hilcoast Development Corp. Common
Stock held for distribution (Note 2(e)) - - (1,200)
-------- -------- --------
Net cash provided by investing activities 43,513 1,431 26,222
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,150 31,477 28,550
Repayments of borrowings (41,443) (37,787) (55,549)
Cash dividends paid (8,435) (7,212) (3,210)
Increase in restricted cash (46) (56) (266)
Proceeds from issuance of Common Stock - 6,636 -
-------- -------- --------
Net cash used in financing activities (46,774) (6,942) (30,475)
-------- -------- --------
Net increase (decrease) in unrestricted
cash and cash equivalents 4,902 945 (1,528)
Unrestricted cash and cash equivalents at
beginning of the period 4,228 3,283 4,811
-------- -------- --------
Unrestricted cash and cash equivalents at
end of the period $9,130 $4,228 $3,283
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $4,307 $6,256 $7,938
======== ======== ========
Supplemental schedule of non-cash investing and
financing activities:
Hilcoast Development Corp. Preferrred Stock
acquired in connection with reduction of real
estate mortgage notes (Note 2(e)) $ - $ - $5,000
======== ======== ========
Additional borrowings arising from real
estate acquired by foreclosure $ - $ - $1,691
======== ======== ========
See accompanying notes to consolidated financial statements.
<PAGE> 30
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(1) Summary of Significant Accounting Policies
Business
CV Reit, Inc. is a real estate investment trust ("REIT") principally
engaged in investing in real estate mortgage notes.
Principles of Consolidation
The consolidated financial statements include the accounts of CV Reit,
Inc. and all subsidiaries ("the Company"). Certain subsidiaries own 45%-50%
interests in partnerships, which are accounted for on the equity method.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Real Estate Mortgage Notes, Real Estate Acquired
By Foreclosure, and Allowance For Losses
Mortgage notes are carried at the lower of cost or estimated net
realizable value. Accrual of interest is discontinued on mortgage notes when
management believes, after considering economic and business conditions and
collection efforts, that timely collection is doubtful.
Real estate acquired by foreclosure, which consists of various
properties acquired through foreclosure or deed in lieu thereof and held for
resale, is carried at the lower of cost (fair value at date of acquisition)
or fair value less selling costs. Carrying costs and subsequent declines in
net realizable value are charged to operations as incurred.
The allowance for losses is established through a provision charged to
operations based upon an evaluation by management of the loan portfolio and
real estate acquired by foreclosure. In evaluating possible losses,
management takes into consideration appropriate information which may include
the borrower's cash flow projections, historical operating results and
financial strength, pending sales, adverse conditions that may affect the
borrower's ability to repay, appraisals and current economic conditions.
<PAGE> 31
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(1) Summary of Significant Accounting Policies (continued)
Dividends and Income Taxes
The Company has elected to qualify as a REIT under the provisions of
Section 856-860 of the Internal Revenue Code. As a REIT, the Company is
required to distribute at least 95% of its ordinary taxable income to
stockholders and may deduct such distributions from taxable income. A REIT
is not required to distribute capital gain income but to the extent it does
not, it must pay the applicable capital gain income tax unless it has
ordinary losses to offset such capital gain income.
The federal income tax characteristics of dividends paid by the Company,
reported to stockholders in January of the subsequent year, consisted of:
1994 1993 1992
Ordinary income 80.2% 88.2% -
Capital gain distribution 19.8% 11.8% 100%
The Company accounts for income taxes based upon Financial Accounting
Standards Board Statement No.109 "Accounting for Income Taxes", which
requires, among other things, a liability approach to calculating deferred
income taxes.
Real Estate and Investments in Real Estate
Partnerships ("Real Estate")
Real Estate, recorded at cost, consists primarily of a motel, subject to
an operating lease, and partnership interests in self-storage warehouses. In
the event that the net carrying amount exceeds estimated net realizable
value, a provision is made to reduce the net carrying amount accordingly.
Depreciation is provided over the estimated useful lives of the assets on the
straight-line method.
Net Income Per Common Share
Net income per common share is based on the weighted average number of
common shares outstanding during each year.
<PAGE> 32
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(1) Summary of Significant Accounting Policies (concluded)
Statements of Cash Flows
For financial statement purposes, the Company considers all highly
liquid investments with initial maturities of three months or less to be cash
equivalents.
Recent Accounting Pronouncement
In May 1993, the FASB issued SFAS No.114, which was amended by SFAS
No.118, "Accounting by Creditors for Impairment of a Loan". This statement
addresses the accounting by creditors for impairment of certain loans and
requires that certain impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective interest
rate, observable market price, or the fair value of the collateral, if the
loan is collateral dependent. The statement is effective for fiscal years
beginning after December 15, 1994.
Management has not determined the impact, if any, the adoption of SFAS
No.114 and 118 may have on the Company's financial statements.
Reclassification
Certain 1993 and 1992 amounts have been reclassified to conform to the
1994 financial statement presentation.
(2) 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):
<PAGE> 33
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
December 31,
------------------
1994 1993
Hilcoast Development Corp. -------- --------
("Hilcoast") (Notes 2(b),
2(e) and 5):
Term Loan $ 28,345 $ 34,504
Lines of Credit 7,870 6,525
Land Acquisition Loan 1,350 1,350
Glen Abbey Note 1,602 1,845
-------- --------
39,167 44,224
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" -
Notes 3(a) and 5) 44,096 44,808
First mortgage notes, maturing
through 1998, with interest
ranging primarily from
8.9% to 10.5%, collateralized
principally by real property in
Palm Beach and Broward Counties,
Florida:
Residential 3,143 10,643
Commercial (Note 4(b)) 6,285 6,188
-------- --------
92,691 105,863
Less allowance for losses 62 1,600
-------- --------
Totals $ 92,629 $104,263
======== ========
<PAGE> 34
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
Interest Sensitivity
--------------------
Fixed Variable
Rate Rate
-------- --------
Maturity of real estate mortgage
notes at December 31, 1994:
One year or less $ 8,927 $ 8,827 $ 100
After one year through
five years 20,252 7,085 13,167
After five years 63,512 63,512 -
-------- ------- -------
Totals $ 92,691 $79,424 $13,267
======== ======= =======
(b) Hilcoast
Term Loan and Lines of Credit
On July 31, 1992, Hilcoast, an affiliate of the Company on that date
(Note 2(e)), acquired certain assets from affiliates of Cenvill Development
Corp. (the "Cenvill Affiliates") pursuant to approval by the Bankruptcy Court
of the Southern District of Florida in connection with Chapter 11 proceedings
filed by the Cenvill Affiliates. The assets were acquired subject to $48.2
million of loans to the Company and certain other indebtedness.
On July 31, 1992, immediately prior to the acquisition, the Company
modified the mortgage loans to which the acquired assets were subject. The
$48.2 million balance of such loans was converted to a $41.7 million term
loan (the "Term Loan") and a revolving $6.5 million construction loan
commitment (the "$6.5 million Line of Credit"). Upon satisfaction of the
Purchase Note (as described below), the $6.5 million Line of Credit may be
increased by Hilcoast to $7.5 million. On September 30, 1993, the Company
increased the revolving construction loan commitment to Hilcoast by $3
million (the "$3 million Line of Credit"). On September 15, 1994, the
Company agreed to a further increase up to a maximum of $2.5 million (the
"$2.5 million Line of Credit"), limited to 50% of the amount by which $30
million exceeds the outstanding principal balance of the Term Loan. The $6.5
million
<PAGE> 35
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
Line of Credit, the $3 million Line of Credit and the $2.5 million Line of
Credit are hereinafter collectively referred to as the Lines of Credit.
The Term Loan and the $6.5 million Line of Credit mature on July 31,
1998, except as described below with respect to the conversion of the Term
Loan, and bear interest, payable monthly, at prime (8.5% at December 31,
1994) plus 3%, but in any event not less than 9% nor more than 11%. The $3
million Line of Credit matures on December 31, 1996 and bears interest,
payable monthly, at prime plus 3% with a floor of 11%. The $2.5 million Line
of Credit matures on July 31, 1996 and bears interest, payable monthly, at
12.5%.
The Term Loan and the Lines of Credit are principally collateralized by
first mortgages on certain residential and commercial real estate at the
Century Village at Pembroke Pines, Florida adult condominium project
("Century Village"), and a second mortgage on the recreation facilities at
Century Village (subordinated to a first mortgage to The Daiwa Bank, Ltd.
(the "Daiwa Note")). In February 1995, the Company agreed to acquire the
Daiwa Note for the outstanding balance on the date the transaction is
closed. The Daiwa Note matures on October 31, 1996, bears interest, payable
monthly, at prime plus 1.5%, requires minimum quarterly principal payments
equal to the greater of available net cash flow (as defined) or $300,000 and
had an outstanding balance of $2.8 million as of January 31, 1995.
Hilcoast is required to pay commitment fees ranging from .9% to 1.8% per
annum on the unused portion of the Lines of Credit. The Term Loan requires
specific release prices principally based on sales of condominium apartments.
Provided that the Daiwa Note has been satisfied and the Term Loan has
been reduced to $25 million, by July 31, 1998, the Term Loan 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
<PAGE> 36
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
Lines of Credit. The Permanent Loan may not be prepaid by Hilcoast without
a prepayment penalty and will be collateralized by a first mortgage on the
recreation facilities at Century Village.
In connection with the acquisition by Hilcoast in July 1992, Hilcoast
issued a promissory note (the "Purchase Note") to the seller, guaranteed by
the Company and collateralized principally by $3 million of the Company's
investment in Hilcoast Preferred Stock (Note 2(e)). The Purchase Note bears
interest at prime plus 1/2%, is payable by Hilcoast on July 31, 1995 and had
an outstanding balance of $2 million at December 31, 1994.
Land Acquisition Loan
In August 1993, the Company provided a $1.3 million mortgage loan to
Hilcoast to finance Hilcoast's acquisition of certain unimproved land
adjacent to Century Village. The loan is collateralized by the acquired
land, bears interest, payable monthly, at 12%, matures on July 31, 1998, and
provides for specific release prices based on sales of condominium
apartments.
Glen Abbey Note
Effective August 18, 1992, the Company sold to Hilcoast all of the
capital stock of its subsidiary which owns unimproved land in Volusia County,
Florida, in an existing golf course community known as Glen Abbey ("Glen
Abbey") for approximately $2.5 million, which represented the Company's
approximate book value of those homesites on the date of sale. Hilcoast paid
approximately $.4 million in cash, and $2.1 million in the form of a
promissory note (the "Glen Abbey Note"). The Company acquired the property
in 1991 in a foreclosure proceeding in connection with a default under a loan
from the Company. Hilcoast is presently developing the land and plans to
sell approximately 200 improved single family homesites.
<PAGE> 37
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
The Glen Abbey Note is collateralized by the undelivered homesites at
Glen Abbey, bears interest, payable monthly, at 9% through August 1995 and
prime plus 3% thereafter, but in no event less than 9% nor more than 11%,
matures on December 31, 1997, and is recourse to the extent of Hilcoast's
guarantee of the first $1.5 million principal of the note. Payments of
principal are based on release prices for the homesites.
(c) At December 31, 1994 and 1993, the aggregate amount of real estate
mortgage notes on which the Company had discontinued the accrual of interest
was $.2 million and $.7 million, respectively. Interest income of $9,000,
$30,000 and $2.3 million, relating to non-earning loans, was not recognized
in the financial statements during 1994, 1993 and 1992, respectively.
(d) Real estate acquired by foreclosure consists of (in thousands):
December 31,
-----------------
1994 1993
------- -------
Commercial:
Broward County, Florida:
Nine acre office building site in Dania $ 5,000 $ 5,000
29 acre commercial site in Miramar (a) 2,563 2,563
Other 600 600
------- -------
Total commercial 8,163 8,163
Residential 306 525
------- -------
8,469 8,688
Less allowance for losses 3,469 3,519
------- -------
Totals $ 5,000 $ 5,169
======= =======
<PAGE> 38
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
__________
(a) In December 1994, the Company entered into a sales contract to sell this
parcel for $2.7 million, subject to certain conditions principally
related to rezoning. If the required rezoning is obtained, the Company
expects to close this sale by the beginning of 1996. The net sales
proceeds are expected to approximate $900,000 in excess of book value,
net of allowance for losses.
(e) Investment in Hilcoast Preferred Stock
and Common Stock
In connection with Hilcoast's acquisition of certain assets from the
Cenvill Affiliates (Note 2(b)), Hilcoast was capitalized through the issuance
of $5 million of 10% Cumulative Preferred Stock (5,000 shares - the
"Preferred Stock") to the Company, $1.8 million of non-voting Class A Common
Stock (1.8 million shares) to the Company, and $738,000 of voting Common
Stock (600,000 shares) to H. Irwin Levy, a principal stockholder and former
Chairman of the Board of the Company and the Chairman of the Board and Chief
Executive Officer of Hilcoast. All of the Common Stock was purchased for
cash and the Preferred Stock was acquired by the grant from the Company to
Hilcoast of a $5 million senior participation interest in certain of the
Company's mortgage loans to the Cenvill Affiliates. On the date of
acquisition (July 31, 1992), Hilcoast received from the Company a credit
against the purchase price equal to the amount of the senior participation
interest ($5 million) and that interest was deemed to have been satisfied.
<PAGE> 39
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
On October 23, 1992, the Company distributed 1,752,320 shares of the
Hilcoast Class A Common Stock to the Company's stockholders in the form of a
taxable dividend (the "Distribution"), based upon one share of Hilcoast
Common Stock for each four shares of the Company's Common Stock owned. Upon
such Distribution, the Class A Common Stock was automatically converted into
voting Common Stock. The remaining 47,680 shares of Class A Common Stock
were repurchased from the Company by Hilcoast at the original purchase price.
As a result of the Distribution, Hilcoast became independent of the Company.
Since the Company's investment in Hilcoast Common Stock was being held for
distribution, the Company's 1992 Consolidated Statement of Operations does
not reflect the Company's share of Hilcoast's results of operations through
the date of the Distribution. The book value of the Distribution charged to
Retained Earnings during 1992 consists of the following (in thousands):
Cash paid to Hilcoast in exchange for
Class A Common Stock $1,752
Professional fees incurred in connection
with the Distribution 285
Amounts earned on loans to Hilcoast and Hilcoast
Preferred Stock through the date of the
Distribution, not recognized as income (876)
Cash paid to stockholders in lieu of odd
lots and fractional shares 39
------
$1,200
======
<PAGE> 40
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (continued)
(f) Changes in the allowance for losses follow (in thousands):
1994 1993 1992
------- ------- -------
Balance, beginning of year $ 5,119 $ 8,593 $11,643
Reversal of allowance for losses (630) (2,857)(1) (200)
Charge-offs (1,158) (806) (5,063)
Interest earned on loans to the
Cenvill Affiliates from April
1, 1992 through July 31, 1992,
not recognized as income - - 1,499
Recoveries 200 189 714
------- ------- -------
Balance, end of year $ 3,531 $ 5,119 $ 8,593
======= ======= =======
________
(1) Principally relates to allowance established prior to the Hilcoast
acquisition from the Cenvill Affiliates (Note 2(b)).
(g) Real estate and investments in real estate partnerships are located
in southeast Florida and consist of (in thousands):
December 31,
-----------------
1994 1993
------- -------
Days Inn motel $ 3,654 $ 3,654
Administration Building 764 756
Other 82 520
------- -------
4,500 4,930
Accumulated depreciation (2,074) (1,940)
------- -------
2,426 2,990
45%-50% investments in self-
storage warehouse partnerships 3,263 3,341
------- -------
Totals $ 5,689 $ 6,331
======= =======
<PAGE> 41
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(2) Investments (concluded)
On May 11, 1992, the Company sold the Westward Shopping Center for a net
sales price of $18.3 million, substantially received in cash, and recognized
a gain of $8 million.
(h) During 1994, 1993 and 1992, the Company sold GNMA certificates
with an aggregate book value of $34.8 million, $18.5 million and $20.4
million, respectively, and recognized a loss of $2.4 million in 1994 and
gains of $1.1 million and $1.4 million, in 1993 and 1992, respectively.
(3) Borrowings
Borrowings consist of (in thousands):
1994 1993
-------- --------
Collateralized Mortgage Obligations (CMO's),
due through 2007, net of unamortized
discount of $1.1 million and $1.3
million based on an effective
interest rate of 8.84% (a) $38,908 $40,579
Short-term reverse repurchase
agreements, collateralized by
GNMA certificates - 32,622
Bank loan - 4,000
------- -------
Totals $38,908 $77,201
======= =======
(a) The CMO's are collateralized by the Recreation Notes (Note 2(a)),
require quarterly self-amortizing principal and interest payments and mature
on March 15, 2007.
<PAGE> 42
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(3) Borrowings (concluded)
(b) Maturities of borrowings are as follows (in thousands):
1995 $ 1,836
1996 2,009
1997 2,200
1998 2,408
1999 2,633
Thereafter 27,822
-------
$38,908
=======
(4) Commitments and Contingencies
(a) TGI Development, Inc. ("TGI")
On October 9, 1989, TGI filed a complaint against the Company, H. Irwin
Levy and certain unrelated parties alleging misrepresentations by the
defendants in connection with the Plaintiff's purchase and development of
land from a previous borrower of the Company. The complaint, as subsequently
amended, consisted of counts of common law fraud and breach of contract and
sought compensatory damages of approximately $2 million in addition to
punitive damages. On October 3, 1990, the Company filed a counterclaim
against TGI in connection with an $800,000 promissory note from TGI to the
Company. On February 9, 1994, the Court granted a Final Judgment in favor of
the Company as to the count of common law fraud which strikes the punitive
damage claim. In accordance with an agreement between the parties, on August
23, 1994, the Court dismissed the breach of contract count with prejudice and
entered a judgment in the amount of $1.1 million in favor of the Company on
the aforementioned counterclaim. The Company has agreed not to execute that
judgment until completion of the Plaintiff's appeal of the Final Judgment on
the punitive damage claim. 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 management's opinion, the final outcome of this litigation will not have
a material adverse effect on the Company's financial condition.
<PAGE> 43
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(4) Commitments and Contingencies (concluded)
(b) Century Plaza
In December 1989, the Company sold its 85,000 square feet Century Plaza
Shopping Center ("Century Plaza") in Deerfield Beach, Florida to Century
Plaza Investments, Inc. (the "Buyer") for $8 million, consisting of $1.6
million cash and a $6.4 million first mortgage note due on December 31, 1994
(the "Century Plaza Note").
On December 5, 1994, the Buyer filed a Complaint in Broward County
Circuit Court against the Company seeking a judicial declaration as to the
Buyer's obligation to provide parking areas within Century Plaza to members
of an adjacent religious institu-tion. The factual basis for the Buyer's
Complaint is that the Company failed to advise the Buyer that in 1978, a
former officer of the Company had apparently consented to a limited number of
parking spaces to be allocated to the religious institution in connection
with a request for site plan approval by that institution. Should the Court
determine that the institution has parking rights, the Buyer seeks recision
of the Century Plaza Note, restoration of amounts paid by the Buyer 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 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.
(c) Other
The Company is subject to various claims and complaints relative to its
business activities. In the opinion of management, the ultimate disposition
of these matters will not have a material adverse effect on the Company's
financial position.
<PAGE> 44
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(5) Related Party Transactions
Hilcoast
In connection with the acquisition by Hilcoast (Note 2(b)), on July 31,
1992, H. Irwin Levy resigned as Chairman of the Board of the Company, Joseph
D. Weingard resigned as a director, Michael S. Rubin resigned as Vice
President-Real Estate Management and Jack Jaiven resigned as Vice President
and Treasurer of the Company. Those individuals were elected to the
following positions with Hilcoast: H. Irwin Levy, Chairman of the Board and
Chief Executive Officer; Joseph D. Weingard, Director; Michael S. Rubin,
President, Chief Operating Officer and Director; and Jack Jaiven, Executive
Vice President, Chief Financial Officer and Director.
Effective July 31, 1992, the Company and Hilcoast entered into a
consulting and advisory agreement under which Hilcoast provides certain
investment advisory, consulting and administrative services to the Company,
excluding matters relating to Hilcoast's loan from the Company. The
agreement, which originally expired on July 31, 1994, has been extended to
July 31, 1995, and provides for the payment of $10,000 per month to Hilcoast,
plus reimbursement for all out of pocket expenses. The agreement may be
terminated by Hilcoast upon 180 days notice and by the Company upon 30 days
notice.
Recreation Notes
Mr. Levy owns the recreation facilities at the Century Village in Boca
Raton, acquired from the Company in 1981, which is collateral for one of the
Company's Recreation Notes (Note 2(a)), issued in connection with the
acquisition, in the original princi-pal amount of $12.6 million. The note
requires monthly payments of principal and interest in the aggregate amount
of $1.7 million per annum through 2011. At December 31, 1994, the
outstanding balance on the note was $11.6 million. In 1994, 1993 and 1992,
the Company recognized interest income of $1.6 million per annum on this
note.
<PAGE> 45
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(5) Related Party Transactions (concluded)
Since 1990, companies owned by Mr. Levy and certain members of his
family lease, manage and operate the recreation facilities at the Century
Villages in West Palm Beach, Deerfield Beach and Boca Raton, which are
collateral for the Company's Recreation Notes (Note 2(a)).
Days Inn
The Company owns a 154-room Days Inn motel, located near the entrance to
Century Village at West Palm Beach, Florida. The motel is leased to a
corporation controlled by Alan Shulman, the Chairman of the Board of the
Company.
The lease, as amended, provided for annual rental through the
expiration of the lease term on August 31, 1999, equal to a minimum of
$300,000, plus 30% of gross room revenues in excess of $1.2 million. In
February 1995, the Company and the lessee agreed to adjust the annual rental
to a minimum of $330,000, plus 30% of gross room revenues in excess of $1.3
million. The lease also provides for the Company to be paid 50% of the
amounts received by the lessee from the concessionaire who operates the food
and beverage facilities at the motel, excluding certain reimbursements for
taxes, insurance and maintenance. In 1994, 1993 and 1992, the Company
recognized rent income of $343,000, $310,000 and $302,000, respectively,
under the lease.
Administration Building
In March 1991, the Company acquired, for $750,000 cash, from a
subsidiary of Cenvill Development, an office building containing
approximately 28,000 square feet, located in the Century Village at West Palm
Beach community. During 1994 and 1993, the Company leased 4,800 square feet
on a month to month basis to a company owned by Mr. Levy and a member of his
family at a monthly rental of approximately $4,000, plus an allocation of
utility expenses, and 3,800 square feet to Hilcoast on a month to month
basis, at a monthly rental of approximately $3,400.
<PAGE> 46
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(6) Income Tax Expense
(a) Total deferred income tax expense differs from the amount computed
by applying the statutory federal income tax rate to income before income
taxes and extraordinary gain for the following reasons (in thousands):
1994 1993 1992
-------- -------- --------
Tax expense computed at
statutory rate $2,150 $3,841 $4,415
State income tax expense
(benefit), net of
federal effect (32) 203 308
Dividends paid deduction (2,453) (2,258) (1,796)
Taxable interest income not
recognized as income for
financial reporting purposes - - 269
Other 335 - (158)
-------- -------- --------
Totals $ - $1,786 $3,038
======== ======== ========
(b) The components of the net deferred tax liability are as follows:
December 31,
-----------------
1994 1993
------- -------
Deferred tax liabilities:
Gains on the sales of recreation
facilities reported on the install-
ment method for tax purposes $14,352 $14,553
Basis differential on certain notes
receivable 865 2,193
Other 423 235
------- -------
Total deferred tax liabilities 15,640 16,981
------- -------
<PAGE> 47
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(6) Income Tax Expense (concluded)
December 31,
-----------------
1994 1993
------- -------
Deferred tax assets:
Differences in reporting the
provision for losses 1,329 2,142
Net operating loss carryforwards
for tax purposes 6,065 6,065
Other 67 595
------- -------
Total deferred tax assets 7,461 8,802
------- -------
Net deferred tax liability $ 8,179 $ 8,179
======= =======
(c) As of December 31, 1994, the Company has aggregate net operating
loss carryforwards for tax purposes of approximately $16.1 million, expiring
$7.1 million in 2007 and $9.0 million in 2006.
(7) Major Customers
During 1994, interest income from four borrowers provided 32%
(Hilcoast), 16%, 14% and 11% (H. Irwin Levy), respectively, of total
revenues. During 1993, interest income from four borrowers provided 26%
(Hilcoast), 15%, 13% and 10% (H. Irwin Levy), respectively, of total
revenues. During 1992, interest income from three borrowers provided 15%,
13% and 11% (H. Irwin Levy), respectively, of total revenues. See Note 2(a)
regarding concentration of credit risk.
<PAGE> 48
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(8) Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers, including commitments to extend credit and standby letters of
credit to guarantee the contractual performance of certain borrowers to third
parties. Those instru-ments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheet. The contract
amounts of those instruments reflect the extent of involvement and the
exposure to credit loss the Company has in particular classes of financial
instruments. The Company uses the same credit policies and has the same
credit risk in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
At December 31, 1994, financial instruments whose contract amounts
represent credit risk consisted of $5.1 million of commitments to extend
credit and $1.3 million standby letters of credit. Commitments to extend
credit are agreements to lend to a borrower as long as there is no violation
of any condition established in the contract. Commitments generally have
fixed expiration dates or other termination clauses. Since commitments may
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
(9) Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments as of
December 31, 1994 are as follows:
Carrying Fair
Amount Value
-------- --------
Real estate mortgage notes $ 92,691 $102,300
Investment in Hilcoast
Preferred Stock 5,000
Cash and cash equivalents 9,998 9,998
Short-term investments 2,920 2,920
Borrowings (38,908) (37,103)
<PAGE> 49
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(continued)
(9) Fair Value of Financial Instruments (concluded)
Real estate mortgage notes - Except for the Recreation Notes (Note 2(a)),
the Company's real estate mortgage notes principally consist of variable rate
loans or loans which mature within two years, and have carrying amounts that
approximate fair value. The fair value of the long-term, fixed rate
Recreation Notes is estimated by discounting the future cash flows using the
current rates at which similar loans would be made with similar credit
ratings and for the same remaining maturities.
Investment in Hilcoast Preferred Stock - There is no quoted market price for
this investment; accordingly, a reasonable estimate of fair value could not
be made without incurring significant costs.
Short-term investments - Fair value approximates carrying amounts due to
their short-term maturity.
Borrowings - Rates currently available to the Company for debt with similar
terms and remaining maturities are used to estimate the fair value of the
Company's long-term, fixed rate CMO's.
<PAGE> 50
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
(concluded)
(10) Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data follows (in thousands, except per share
data):
Quarter Ended
-----------------------------------------
Mar. 31, Jun. 30, Sept.30, Dec. 31,
1994
Revenues $3,848 $3,367 $3,365 $3,307
Net income (loss) 2,127 (397)(1) 2,240 2,354
Per common share .27 (.05)(1) .28 .30
1993
Revenues $3,841 $ 3,803 $3,826 $3,947
Net income 1,561 1,803 1,811 4,337
Per common share .22 .25 .25 .55
__________
(1) During the quarter ended June 30, 1994 the Company sold its GNMA
certificates and recognized a loss of $2.4 million.
<PAGE> 51
<TABLE>
CV REIT, INC. AND SUBSIDIARIES
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1994
=============================================
(dollars in thousands)
<CAPTION>
Principal
amount of
Carrying loans subject
Final Face amount of to delinquent
Interest maturity Prior amount of mortgages principal or
Description rate date Periodic payment terms liens mortgages (a) interest
- - - - - - ----------- -------- --------- ---------------------- ------ ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Permanent - Recreation Facilities
(1st mortgages, except where noted):
Century Village at Boca Raton, FL
Level principal and
13.25% 12/31/11 interest due monthly -- $12,533 $11,630 $ --
Century Village at West Palm Beach, FL
Level principal and
13.50% 01/15/12 interest due monthly -- 18,342 17,044 --
Century Village at Deerfield Beach, FL
(2nd mortgage) Level principal and
13.25% 01/15/12 interest due monthly N/A 13,235 12,313 --
Century Village at Deerfield Beach, FL
Level principal and
8.84% 03/01/07 interest due monthly -- 3,485 3,109 --
-------- --------
44,096 --
-------- --------
Residential Construction and Development:
Condominium project (1st mortgage) and
recreation facilities therein (2nd mortgage)
in Pembroke Pines, FL
Interest monthly,
Prime + 3% 07/31/98(c) principal at maturity -- 49,873 37,565 --
(Minimum 9%, Maximum 11%)
Residential project in Deland, FL
(1st mortgage) Interest monthly,
9%(d) 12/31/97 principal at maturity -- 2,100 1,602 --
Aggregate of mortgage loans which
individually do not exceed 3%
8.9% to
10.5% Various 3,143 231
thru 12/98 -------- --------
42,310 231
-------- --------
1st Mortgage on shopping center in
Deerfield Beach, FL
N/A 12/31/94 (e) -- 6,400 6,285 --
--------- --------
$92,691(b) $231
========= ========
- - - - - - ----------
(a) The tax carrying value of the notes is approximately $52 million. 1994 1993 1992
(b) The changes in the carrying amounts are summarized as follows: -------- -------- --------
Balance, beginning of period $105,863 $107,935 $116,212
Advances on new mortgage loans 21,469 25,046 26,868
Collections of principal(net) (33,236) (26,718) (34,145)
Foreclosures (321) -- --
Charge-offs (1,084) (400) (1,000)
-------- -------- --------
Balance, end of period $92,691 $105,863 $107,935
======== ======== ========
(c) See Note 2(b) to Consolidated Financial Statements regarding conversion of $25 million of this loan to
an 11%, fixed rate, 25 year self-amortizing loan.
(d) August 1995 through prime plus 3% thereafter (minimum 9%, maximum 11%).
(e) See Note 4(b) to Consolidated Financial Statements regarding litigation instituted by borrower.
</TABLE>
<PAGE> 52
Item 9. Disagreement on Accounting
and Financial Disclosure
None
PART III
Information in response to Items 10, 11, 12 and 13 is not included
in this Report, since the Registrant anticipates filing a definitive proxy
statement for its next annual meeting of stockholders prior to May 1, 1994.
Such definitive proxy statement is incorporated by reference herein.
<PAGE> 53
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(a) (1) List of Consolidated Financial Statements:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income - Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity - Years
Ended December 31, 1994, 1993, and 1992
Consolidated Statements of Cash Flows - Years Ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(2) List of Consolidated Financial Statements Schedules:
Schedule IV - Mortgage Loans on Real Estate
(3) List of Exhibits:
(3)(i) Amended Certificate of Incorporation of CV Reit, Inc., filed
with Secretary of State of Delaware on June 17, 1991.
(Incorporated by reference to Exhibit (3)(i) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1991.)
(3)(ii) By-laws of CV Reit, Inc. (Incorporated by
reference to Exhibit (3)(ii) to the Annual Report
on Form 10-K of the Company for the fiscal year
ended December 31, 1990.)
(10)(i) Agreement between Cenvill Investors, Inc. and H. Irwin Levy,
dated December 31, 1981. (Incorporated by reference to
Exhibit (2)(i) to the current report on Form 8-K filed by the
Company to report event of December 31, 1981.)
<PAGE> 54
(10)(ii) Agreement of Lease between Cenvill Investors, Inc. and B.R.F.,
Inc., dated December 30, 1981. (Incorporated by reference to
Exhibit (2) (ii) to the current report on Form 8-K filed by
the Company to report event of December 31, 1981.)
(10)(iii) Agreement dated January 15, 1982, between Century Village,
Inc. and Benenson Capital Company. (Incorporated by reference
to Exhibit (2)(i) to the current report on Form 8-K filed by
Cenvill Investors, Inc. (File No. 0-03427) to report event of
January 15, 1982.)
(10)(iv) Agreement dated January 15, 1982, between Century Village
East, Inc. and CVRF Deerfield Limited. (Incorporated by
reference to exhibit (2) (ii) to the current report on Form 8-
K filed by Cenvill Investors, Inc. (File No. 0-03427) to
report event of January 15, 1982.)
(10)(v) Lease dated as of November 8, 1988 between Cenvill Investors,
Inc. and Century Inn Operating Corp. (Incorporated by
reference to Exhibit (10) (xiii) to the Annual Report on Form
10-K of the Company for the fiscal year ended December 31,
1988.)
(10)(vi) Revolving Credit and Term Loan Agreement dated July 3, 1990
between Cenvill Development Corp. and CV Reit, Inc.
(Incorporated by reference to Exhibit (10)(xvi) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1990.)
(10)(vii) Loan Agreement among CV Reit, Inc. and Cenvill Development
Corp. and various subsidiaries, dated June 6, 1991.
(Incorporated by reference to Exhibit (10)(xiv) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1991.)
(10)(viii) Subordination Agreement among C.V.P. Community Center, Inc.,
CV Reit, Inc. and The Daiwa Bank, dated June 6, 1991.
(Incorporated by reference to Exhibit (10)(xv) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1991.)
<PAGE> 55
(10)(ix) Indenture for Collateralized Mortgage Obligations, dated as of
December 30, 1991 between Recreation Mortgages, Inc. (Issuer)
and Bankers Trust Company (Trustee). (Incorporated by
reference to Exhibit (10)(xvi) to the Annual Report on Form
10-K of the Company for the fiscal year ended December 31,
1991.)
(10)(x) Agreement to Use Best Reasonable Efforts to Obtain
Construction Financing, dated as of September 17, 1992,
between CV Reit, Inc. and Hilcoast Development Corp.
(Incorporated by reference to Exhibit (10)(v) to Amendment
No. 1 to the Form S-1 Registration Statement of Hilcoast
Development Corp. (File No. 33-51388) filed with the
Commission on October 1, 1992.)
(10)(xi) Restated Loan Agreement, dated July 31, 1992, between CV Reit,
Inc. and Cenvill Development Corp. and certain subsidiaries
and affiliates thereof. (Incorporated by reference to Exhibit
(10)(xi) to the Annual Report on Form 10-K of the Company for
the fiscal year ended December 31, 1992.)
(10)(xii) Consent and Composite Amendment Agreement, dated June 19,
1992, by and among C.V.P. Community Center, Inc. and certain
subsidiaries and affiliates thereof, Cenvill Development
Corp., CV Reit, Inc. and The Daiwa Bank, Limited.
(Incorporated by reference to Exhibit (10)(xiii) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1992.)
(10)(xiii) Proposal for the Acquisition of Certain Assets, dated June 19,
1992, by and among CV Reit, Inc., Cenvill Development Corp.
and certain subsidiaries and affiliates thereof.
(Incorporated by reference to Exhibit (10)(xiv) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1992.)
(10)(xiv) Order granting Motion of Debtor's [sic] for Approval of Sale
of Assets dated July 17, 1992. (Incorporated by reference to
Exhibit (10)(xv) to the Annual Report on Form 10-K of the
Company for the fiscal year ended December 31, 1992.)
<PAGE> 56
(10)(xv) Pledge Agreement, dated as of July 31, 1992, between CV Reit,
Inc., Hilcoast Development Corp. and Jerry Markowitz, as
Escrow Agent. (Incorporated by reference to Exhibit (10)(xvi)
to the Annual Report on Form 10-K of the Company for the
fiscal year ended December 31, 1992.)
(10)(xvi) Stock Purchase Agreement, dated as of August 5, 1992, between
CV Reit, Inc. and Hilcoast Development Corp. (Incorporated by
reference to Exhibit (10)(xvii) to the Annual Report on Form
10-K of the Company for the fiscal year ended December 31,
1992.)
(10)(xvii) Consulting and Advisory Agreement, dated July 31, 1992,
between CV Reit, Inc. and Hilcoast Development Corp.
(Incorporated by reference to Exhibit (10)(xviii) to the
Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1992.)
(10)(xviii) Loan Agreement, Security Agreement and Collateral Assignment
of Loans, Notes, Mortgages and Security Documents with Ohio
Savings Bank dated October 26, 1993. (Incorporated by
reference to Exhibit 10(a) to the Quarterly Report on Form 10-
Q of the Company for the quarter ended September 30, 1993.)
(10)(xix) $1.3 million Promissory Note, dated August 27, 1993, between
CV Reit, Inc. and NewCen Communities, Inc. (Incorporated by
reference to Exhibit (10)(xx) to the Annual Report on Form
10-K of the Company for the fiscal year ended December 31,
1993.)
(10)(xx) $3.0 million Promissory Note and Side Letter, dated September
30, 1993, between CV Reit, Inc. and NewCen Communities, Inc.
(Incorporated by reference to Exhibit (10)(xxi) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1993.)
(10)(xxi) First Amendment to Loan Agreement, Security Agreement and
Collateral Assignment of Loans, Notes, Mortgages and Security
Documents with Ohio Savings Bank dated February 25, 1994.
(Incorporated by reference to Exhibit 10(a) to the Quarterly
Report on Form 10-Q of the Company for the quarter ended March
31, 1994.)
<PAGE> 57
(10)(xxii) $2.5 million Future Advance Promissory Note, dated September
15, 1994 from NewCen Communities, Inc. (a subsidiary of
Hilcoast Development Corp.) to CV Reit, Inc., Notice and
Agreement of Future Advance and Side Letters between CV Reit,
Inc. and NewCen Communities, Inc. (Incorporated by reference
to Exhibit 10(a) to the Quarterly Report on Form 10-Q of the
Company for the quarter ended September 30, 1994.)
(10)(xxiii) Letter, dated February 5, 1995, from Hilcoast Development
Corp. to CV Reit, Inc. in connection with $3.0 million
Promissory Note.
(10)(xxiv) Letter, dated February 6, 1995, from CV Reit, Inc. to NewCen
Communities, Inc. in connection with $3.0 million Promissory
Note.
(10)(xxv) Letter, dated February 5, 1995, from Hilcoast Development
Corp. to CV Reit, Inc. in connection with $2.5 million Future
Advance Promissory Note.
(10)(xxvi) Letter, dated February 6, 1995, from CV Reit, Inc. to NewCen
Communities, Inc. in connection with $2.5 million Future
Advance Promissory Note.
(11) Statement regarding computation of per share earnings.
Omitted; computation can be clearly determined from material
contained in the report.
(21) Subsidiaries of the Company.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December
31, 1994.
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) 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.
By: /s/ Elaine Kahant
Elaine Kahant, Vice President
and Treasurer
Dated: February 22, 1995
<PAGE> 59
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.
February 14, 1995 /s/ ALAN L. SHULMAN
Alan L. Shulman, Chairman of the
Board of Directors
February 14, 1995 /s/ ALVIN WILENSKY
Alvin Wilensky, President
and Director
(Principal Executive Officer)
February 22, 1995 /s/ Elaine Kahant
Elaine Kahant, Vice President,
and Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
February 14, 1995 /s/ MAC GACHE
Mac Gache, Director
February 14, 1995 /s/ STANLEY BRENNER
Stanley Brenner, Director
February 14, 1995 /s/ ALLYN LEVY
Allyn Levy, Director
Exhibit (10)(xxiii)
HILCOAST DEVELOPMENT CORP.
100 Century Blvd.
West Palm Beach, FL 33417
February 5, 1995
CV Reit, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attn: Mr. Alvin Wilensky, President
RE: $3,000,000.00 Promissory Note ("Note") dated September 30,
1993 from NewCen Communities, Inc., a Florida corporation
("Maker") in favor of CV Reit, Inc., a Delaware corporation
("Payee") Guaranteed by Hilcoast Development Corp., a Delaware
corporation ("Guarantor"); said Note being secured by that
certain Mortgage ("Mortgage") recorded in Official Records
Book 21247, at Page 768 of the Public Records of Broward
County, Florida ("Mortgage")
Dear Al:
The Guarantor is aware of the fact that the Maker has
requested the Payee to extend the "Maturity Date" as set forth in
the Note, as extended by that certain letter agreement, dated
September 30, 1994, a copy of which is attached hereto, to December
31, 1996 provided, of course, that the monthly interest payments
shall continue to be made to and including the first business day
of December, 1996.
Please be advised that the Guarantor consents to the foregoing
and same shall in no way affect the obligations of the Guarantor as
the guarantor of the Note.
Very truly yours,
HILCOAST DEVELOPMENT CORP.
By: /s/ Michael S. Rubin
Michael S. Rubin, President
September 30, 1994
CV Reit, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attention: Mr. Alvin Wilensky, President
RE: $3,000,000.00 Promissory Note ("Note") dated September 30,
1993 from NewCen Communities, Inc., a Florida corporation
("Maker") in favor of CV Reit, Inc., a Delaware corporation
("Payee") Guaranteed by Hilcoast Development Corp., a Delaware
corporation ("Guarantor"); said Note being secured by that
certain Mortgage ("Mortgage") recorded in Official Records
Book 21247, at Page 768 of the Public Records of Broward
County, Florida ("Mortgage")
Dear Al:
The Guarantor is aware of the fact that the Maker has
requested the Payee to extend the "Maturity Date" as set forth in
the Note to March 31, 1996 provided, of course, that the monthly
interest payments shall continue to be made to and including the
first business day of March, 1996.
Please be advised that the Guarantor consents to the foregoing
and same shall in no way affect the obligtions of the Guarantor as
the guarantor of the Note.
Very truly yours,
HILCOAST DEVELOPMENT CORP.
bY: /s/ Michael S. Rubin
Michael S. Rubin, President
September 30, 1994
NewCen Communities, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attn: Mr. Michael S. Rubin, President
RE: $3,000,000.00 Promissory Note ("Note") dated September 30,
1993 from NewCen Communities, Inc., a Florida corporation
("Maker") in favor of CV Reit, Inc., a Delaware corporation
("Payee") Guaranteed by Hilcoast Development Corp., a Delaware
corporation ("Grantor"); said Note being secured by that
certain Mortgage ("Mortgage") recorded in Official Records
Book 21247, at Page 768 of the Public Records of Broward
County, Florida ("Mortgage")
Dear Michael:
This letter will confirm that CV Reit has extended the
"Maturity Date" as set forth in the Note to March 31, 1996
provided, of course, that the monthly interest payments shall
continue to be made through and including the first business day of
March, 1996. In all other respects the Note shall remain in full
force and effect in accordance with the terms and provisions
thereof.
Very truly yours,
CV REIT, INC.
By: /s/ Alvin Wilensky
Alvin Wilensky, President
Exhibit (10)(xxiv)
CV REIT, INC.
100 Century Blvd.
West Palm Beach, FL 33417
February 6, 1995
NewCen Communities, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attn: Mr. Michael S. Rubin, President
RE: $3,000,000.00 Promissory Note ("Note") dated September 30,
1993 from NewCen Communities, Inc., a Florida corporation
("Maker") in favor of CV Reit, Inc., a Delaware corporation
("Payee") Guaranteed by Hilcoast Development Corp., a Delaware
corporation ("Grantor"); said Note being secured by that
certain Mortgage ("Mortgage") recorded in Official Records
Book 21247, at Page 768 of the Public Records of Broward
County, Florida ("Mortgage")
Dear Michael:
This letter will confirm that CV Reit has extended the
"Maturity Date" as set forth in the Note, as extended by that
certain letter agreement, dated September 30, 1994, a copy of which
is attached hereto, to December 31, 1996 provided, of course, that
the monthly interest payments shall continue to be made through and
including the first business day of December, 1996. In all other
respects the Note shall remain in full force and effect in
accordance with the terms and provisions thereof.
Very truly yours,
CV REIT, INC.
By: /s/ Alvin Wilensky
Alvin Wilensky, President
September 30, 1994
CV Reit, Inc.
Century Village Administration Building
100 Century Boulevard
West Palm Beach, Forida 33417
Attention: Mr. Alvin Wilensky, President
RE: $3,000,000.00 Promissory Note ("Note") dated September 30,
1993 from NewCen Communities, Inc., a Florida corporation
("Maker") in favor of CV Reit, Inc., a Delaware corporation
("Payee") Guaranteed by Hilcoast Development Corp., a Delaware
corporation ("Grantor"); said Note being secured by that
certain Mortgage ("Mortgage") recorded in Official Records
Book 21247, at Page 768 of the Public Records of Broward
County, Florida ("Mortgage")
Dear Al:
The Guarantor is aware of the fact that the Maker has
requested the Payee to extend the "Maturity Date" as set forth in
the Note to March 31, 1996 provided, of course, that the monthly
interest payments shall continue to be made to the foregoing and
same shall in no way affect the obligations of the Guarantor as the
guarantor of the Note.
Very truly yours,
HILCOAST DEVELOPMENT CORP.
By: /s/ Michael S. Rubin
Michael S. Rubin, Presient
September 30, 1994
NewCen Communities, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attn: Mr. Michael S. Rubin, President
RE: $3,000,000.00 Promissory Note ("Note") dated September 30,
1993 from NewCen Communities, Inc., a Florida corporation
("Maker") in favor of CV Reit, Inc., a Delaware corporation
("Payee") Guaranteed by Hilcoast Development Corp., a Delaware
corporation ("Grantor"); said Note being secured by that
certain Mortgage ("Mortgage") recorded in Official Records
Book 21247, at Page 768 of the Public Records of Broward
County, Florida ("Mortgage")
Dear Michael:
This letter will confirm that CV Reit has extended the
"Maturity Date" as set forth in the Note to March 31,1996 provided,
of course, that the monthly interest payments shall continue to be
made through and including the first business day of March, 1996.
In all other respects the Note shall remain in full force and
effect in accordance with the terms and provisions thereof.
Very truly yours,
CV REIT, INC.
By: /s/ Alvin Wilensky
Alvin Wilensky, President
Exhibit (10)(xxv)
HILCOAST DEVELOPMENT CORP.
100 Century Blvd.
West Palm Beach, FL 33417
February 5, 1995
CV Reit, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attn: Mr. Alvin Wilensky, President
RE: $2,500,000.00 Future Advance Promissory Note ("Note") dated
September 15, 1994 from NewCen Communities, Inc., a Florida
corporation ("Maker") in favor of CV Reit, Inc., a Delaware
corporation ("Payee") Guaranteed by Hilcoast Development
Corp., a Delaware corporation ("Guarantor"); said Note being
secured by that certain Mortgage ("Mortgage") recorded in
Official Records Book 21247, at Page 768 of the Public Records
of Broward County, Florida ("Mortgage")
Dear Al:
The Guarantor is aware of the fact that the Maker has
requested the Payee to extend the "Maturity Date" as set forth in
the Note to July 31, 1996 provided, of course, that the monthly
interest payments shall continue to be made to and including the
first business day of July, 1996.
Please be advised that the Guarantor consents to the foregoing
and same shall in no way affect the obligations of the Guarantor as
the guarantor of the Note.
Very truly yours,
HILCOAST DEVELOPMENT CORP.
By: /s/ Michael S. Rubin
Michael S. Rubin, President
Exhibit (10)(xxvi)
CV REIT, INC.
100 Century Blvd.
West Palm Beach, FL 33417
February 6, 1995
NewCen Communities, Inc.
Century Village Administration Building
100 Century Blvd.
West Palm Beach, FL 33417
Attn: Mr. Michael S. Rubin, President
RE: $2,500,000.00 Future Advance Promissory Note ("Note") dated
September 15, 1994 from NewCen Communities, Inc., a Florida
corporation ("Maker") in favor of CV Reit, Inc., a Delaware
corporation ("Payee") Guaranteed by Hilcoast Development
Corp., a Delaware corporation ("Grantor"); said Note being
secured by that certain Mortgage ("Mortgage") recorded in
Official Records Book 21247, at Page 768 of the Public Records
of Broward County, Florida ("Mortgage")
Dear Michael:
This letter will confirm that CV Reit has extended the
"Maturity Date" as set forth in the Note to July 31, 1996 provided,
of course, that the monthly interest payments shall continue to be
made through and including the first business day of July, 1996.
In all other respects the Note shall remain in full force and
effect in accordance with the terms and provisions thereof.
Very truly yours,
CV REIT, INC.
By: /s/ Alvin Wilensky
Alvin Wilensky, President
EXHIBIT 21
CV REIT, INC. AND SUBSIDIARIES
Subsidiaries of the Company
State of Date of
Name Incorporation Incorporation
D.X. Properties, Inc. Florida November 27, 1989
CV Warehouse 75, Inc. Florida June 6, 1990
CV Warehouse 76, Inc. Florida June 6, 1990
CV Warehouse 78, Inc. Florida June 6, 1990
GRX Corp. Florida November 16, 1990
Recreation Mortgages, Inc. Delaware December 23, 1991
W.X. Properties, Inc. Florida January 10, 1992
CX Properties, Inc. California January 15, 1992
LRX Properties, Inc. Florida March 19, 1993
Boca Mortgage Funding, Inc. Florida March 19, 1993
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 9,998<F1>
<SECURITIES> 2,920
<RECEIVABLES> 92,691
<ALLOWANCES> 3,531
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 16,232
<DEPRECIATION> 2,074
<TOTAL-ASSETS> 122,782
<CURRENT-LIABILITIES> 0
<BONDS> 38,908
<COMMON> 80
0
0
<OTHER-SE> 72,416
<TOTAL-LIABILITY-AND-EQUITY> 122,782
<SALES> 0
<TOTAL-REVENUES> 13,887
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,615
<LOSS-PROVISION> (630)
<INTEREST-EXPENSE> 4,156
<INCOME-PRETAX> 6,323
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,323
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
<FN>
<F1>Includes $868 restricted.
</FN>
</TABLE>
