<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission File Number: 1-8073
CV REIT, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-0950354
(State of Incorporation) (I.R.S. Employer Identification No.)
100 Century Boulevard, West Palm Beach, Florida 33417
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407-640-3155
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common stock, par value New York Stock Exchange
$.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
This report contains a total of 15 pages.
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CV REIT, INC. AND SUBSIDIARIES
PART I. Financial Information
Item 1. Financial Statements
The consolidated financial statements included herein
have been prepared by the registrant, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been consolidated or
omitted pursuant to such rules and regulations; however, the
registrant believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the
registrant's annual report on Form 10-K for the fiscal year ended
December 31, 1995.
The consolidated financial statements for the interim
periods included herein, which are unaudited, include, in the
opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial
position and results of operations of the registrant for the
periods presented. The results of operations for interim periods
should not be considered indicative of results to be expected for
the full year.
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CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
Mar.31, Dec.31,
Assets 1996 1995
------ -------- --------
Investments:
Real estate mortgage notes:
Long Term Recreation Notes $ 68,095 $ 68,243
Other 31,016 31,676
-------- --------
99,111 99,919
Real estate acquired by foreclosure 7,979 7,976
Less allowance for losses (3,064) (3,107)
Real estate and investments in real
estate partnerships, net of
accumulated depreciation 6,038 6,108
-------- --------
Total investments 110,064 110,896
Cash and cash equivalents (includes
$887 and $884 restricted) 7,849 7,633
Other 2,044 1,492
-------- --------
$119,957 $120,021
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities and other credits:
Collateralized Mortgage Obligations $ 36,588 $ 37,074
Accounts payable, accruals and
other liabilities 404 192
Dividends payable 2,406 2,407
Deferred income taxes 7,162 7,162
-------- --------
Total liabilities and other credits 46,560 46,835
-------- --------
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 54,827 54,616
-------- --------
Total stockholders' equity 73,397 73,186
-------- --------
$119,957 $120,021
======== ========
See accompanying notes to consolidated financial statements.
<PAGE> 4
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Three Months Ended
March 31,
-------------------
1996 1995
------- -------
Revenues:
Interest, substantially from
mortgage notes, and dividends $ 3,000 $ 3,039
Rent and income from real estate
partnerships 290 282
------- -------
3,290 3,321
------- -------
Expenses:
Interest 824 876
Operating, general and administrative 307 375
Depreciation 40 33
------- -------
1,171 1,284
------- -------
2,119 2,037
Recovery of losses, net 243 -
------- -------
Net income $ 2,362 $ 2,037
======= =======
Net income per common share $0.30 $0.26
======= =======
Dividends declared per common share $0.27 $0.27
======= =======
Average common shares outstanding 7,966,621 7,966,621
========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 5
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(in thousands)
Balance at December 31, 1995 $54,616
Net income for the three months
ended March 31, 1996 2,362
Dividends declared (2,151)
-------
Balance at March 31, 1996 $54,827
=======
See accompanying notes to consolidated financial statements.
<PAGE> 6
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,362 $2,037
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation 40 33
Equity in depreciation of real estate partnerships 44 45
Recovery of losses, net (243) -
-------- --------
2,203 2,115
Changes in operating assets and liabilities:
Increase in other assets (652) (688)
Increase (decrease) in accounts payable, accruals
and other liabilities 12 (649)
-------- --------
Net cash provided by operating activities 1,563 778
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate mortgage notes (3,895) (9,450)
Collections on real estate mortgage notes 5,203 4,117
Other (17) 19
-------- --------
Net cash provided by (used in) investing activities 1,291 (5,314)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings (486) (444)
Cash dividends paid (2,152) (2,153)
Increase in restricted cash (3) (4)
-------- --------
Net cash used in financing activities (2,641) (2,601)
-------- --------
Net increase (decrease) in unrestricted cash and
cash equivalents 213 (7,137)
Unrestricted cash and cash equivalents at
beginning of the period 6,749 9,130
-------- --------
Unrestricted cash and cash equivalents at
end of the period $6,962 $1,993
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 827 $ 873
======== ========
Supplemental schedule of non-cash investing and
financing activities:
Increase in real estate mortgage notes in connection
with redemption of the Company's investment in
Hilcoast Development Corp. Preferred Stock $ - $5,000
======== ========
See accompanying notes to consolidated financial statements.
<PAGE> 7
CV REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Investments
(a) Investments in real estate mortgage notes, substantially
all of which are collateralized by real estate located in southeast
Florida, consist of (in thousands):
Mar. 31, Dec. 31,
1996 1995
-------- --------
Long Term Recreation Notes (the
"Recreation Notes") (Note 1(b)) $ 68,095 $ 68,243
Hilcoast Development Corp.
("Hilcoast"): (Note 1(c)):
Lines of Credit 16,050 15,570
Other 7,245 8,039
First mortgage notes, maturing through
1998, with interest ranging primarily
from 8.9% to 11.5%, collateralized
primarily by real property in Palm
Beach and Broward Counties, Florida:
Residential 1,462 1,785
Commercial (Note 3(b)) 6,259 6,282
-------- --------
99,111 99,919
Less allowance for losses (38) (38)
-------- --------
Totals $ 99,073 $ 99,881
======== ========
(b) At March 31, 1996, the Recreation Notes consisted of $25
million due from Hilcoast (the "Hilcoast Recreation Note"),
collateralized by a first mortgage on certain residential and
commercial real estate at the Century Village at Pembroke Pines,
Florida adult condominium project (the "Pembroke Century Village"),
including the recreation facilities at that project (the "Pembroke
Recreation Facilities") and $43.1 million, collateralized by first
mortgages on the recreation facilities at the three previously
completed Century Village communities.
The Hilcoast Recreation Note bears interest at prime (8.25% at
March 31, 1996) plus 3%, but in any event not less than 9% nor more
than 11%, matures on July 31, 1998, and currently requires monthly
interest payments only. Upon the earlier to occur of delivery of
the last condominium apartment at the Pembroke Century Village or
July 31, 1998, the Hilcoast Recreation Note is scheduled to be
converted to an 11%, fixed rate, 25 year, $25 million, self-amortizing
loan providing for equal monthly payments of principal
and interest. This note may not be prepaid by Hilcoast without a
prepayment penalty and will be collateralized by a first mortgage
on the Pembroke Recreation Facilities.
<PAGE> 8
The remaining Recreation Notes principally provide for self-amortizing
equal monthly principal and interest payments due through 2012, with
interest rates averaging 13%, and contain certain prepayment prohibitions.
(c) Hilcoast
Lines of credit to Hilcoast consist of revolving construction
loan commitments which as of March 31, 1996, aggregated $17 million
of which $16.1 million was outstanding on that date. The Lines of
Credit are collateralized by certain residential and commercial
real estate at the Pembroke Century Village; bear interest, payable
monthly, ranging from prime plus 3% (but in any event not less than
9% nor more than 11%) to 12.5%; mature gradually from November 1996
through July 1998; provide for unused commitment fees ranging from
.9% to 1.8% per annum; and, require specific release prices,
principally based on sales of condominium apartments at the
Pembroke Century Village, to be applied as permanent reductions of
amounts available under the Lines of Credit.
Other real estate mortgage notes due from Hilcoast amounted to
$7.2 million as of March 31, 1996 and includes $5 million payable
July 31, 1998, with interest at 10%, collateralized by the Pembroke
Recreation Facilities. The remaining mortgage notes due from
Hilcoast mature variously through July 31, 1998 and bear interest,
ranging from 11% to 12%.
(d) Real estate acquired by foreclosure consists of (in
thousands):
Mar. 31, Dec. 31,
1996 1995
-------- --------
Commercial:
Broward County, Florida:
Nine acre commercial site in Dania $5,000 $5,000
29 acre commercial site in Miramar 2,595 2,595
------ ------
Total commercial 7,595 7,595
Residential 384 381
------ ------
7,979 7,976
Less allowance for losses (3,026) (3,069)
------ ------
Totals $4,953 $4,907
====== ======
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(e) Real estate and investments in real estate partnerships
are located in southeast Florida and consist of (in thousands):
Mar. 31, Dec. 31,
1996 1995
-------- --------
Days Inn motel $4,058 $4,054
Administration Building 962 959
Other 79 79
------ ------
5,099 5,092
Less accumulated depreciation (2,242) (2,202)
------ ------
2,857 2,890
45%-50% investments in self-storage
warehouse partnerships 3,181 3,218
------ ------
Totals $6,038 $6,108
====== ======
(2) Borrowings
The Collateralized Mortgage Obligations ("CMO's") amounted to
$36.6 million at March 31, 1996 (net of unamortized discount of
$915,000, based on an effective interest rate of 8.84%), are
collateralized by the Recreation Notes, excluding the Hilcoast
Recreation Note (Note 1(b)), require quarterly self-amortizing
principal and interest payments and mature on March 15, 2007.
(3) Commitments and Contingencies
(a) TGI Development, Inc. ("TGI")
On October 9, 1989, TGI filed a complaint in the Circuit Court
of Palm Beach County against the Company, H. Irwin Levy and certain
unrelated parties alleging misrepresentations by the defendants in
connection with TGI'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 Circuit Court granted a Final Judgment in favor of the
Company, which dismissed TGI's claim of common law fraud against
the Company and struck its punitive damage claim.
<PAGE> 10
In accordance with an agreement between the parties, on August 23,
1994, the Court dismissed the breach of contract claim with prejudice and
entered a judgment in the amount of $1.1 million in favor of the
Company on the aforementioned counterclaim. The Company agreed not
to execute that judgment until completion of TGI's appeal of the
Final Judgment on its claim for compensatory damages. On January
3, 1996, the Fourth District Court of Appeals reversed the Final
Judgment. The Company has appealed this order to the Florida
Supreme Court. If the appeal is unsuccessful, the case will be
remanded for trial to the Circuit Court. 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.
(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., an unrelated party (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, as amended, in the Circuit Court of Broward County,
Florida, against the Company seeking a judicial declaration as to
the Buyer's obligation to provide parking areas to members of a
religious institution located adjacent to Century Plaza. The basis
for the Complaint is that the Company failed to advise the Buyer
that in 1978, a former officer of the Company had allegedly
consented to a limited number of parking spaces to be allocated by
the City of Deerfield Beach to the religious institution. Should
the Court determine that the institution has parking rights, the
Buyer seeks recision of the original sales agreement and the
Century Plaza Note which has an outstanding balance of
approximately $6.3 million, 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 instituted foreclosure proceedings.
The Buyer has been remitting monthly interest payments to the
Company since maturity. In February 1996, the Company and the
Buyer reached an agreement in principle, whereby the Company agreed
to reacquire Century Plaza for an amount equal to $1.1 million in
excess of the outstanding balance of the Century Plaza Note,
subject to due diligence and certain other conditions. The Company
believes that the proposed purchase price represents an amount
which is not in excess of fair value. In the event the proposed
purchase transaction is not completed, the Company believes it has
substantial defenses to the Complaint; however, 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 financial condition.
<PAGE> 11
(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.
(4) Consulting and Advisory Agreement with Hilcoast
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, 1996, 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.
Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
Funds From Operations
The Company's Funds From Operations generally consists of net
income, excluding recovery of previously recorded losses, plus
depreciation of real property (including the Company's share of
depreciation in connection with its equity in earnings of
unconsolidated partnerships).
For the quarter ended March 31, 1996, Funds From Operations
was $2.2 million compared to $2.1 million for the same quarter of
1995.
<PAGE> 12
The increase in Funds From Operations reflects a reduction in
operating, general and administrative expenses.
Net Income
For the quarter ended March 31, 1996, net income was $2.4
million or $.30 per share compared to $2 million or $.26 per share
for the corresponding quarter of 1995.
The 1996 quarter includes a $243,000 net non-recurring credit,
primarily consisting of a recovery of previously recorded losses.
Liquidity and Capital Resources
At March 31, 1996, total assets were $120 million, including
$99 million in real estate mortgage notes. Approximately $68
million of the real estate mortgage notes are collateralized by
recreation facilities under long-term leases with unit owners at
approximately 28,700 apartments at Century Village adult
condominium communities at Pembroke Pines, West Palm Beach,
Deerfield Beach and Boca Raton, Florida, and generally provide for
self-amortizing, equal monthly installment payments through 2028
(the "Recreation Notes" - see Note 1(b) to Consolidated Financial
Statements). 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 $31 million of real estate mortgage notes are
collateralized by residential and commercial real estate, generally
in southeast Florida, including $23.3 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 (the "Pembroke Century
Village" - see Note 1(c) to Consolidated Financial Statements). At
March 31, 1996, 6,753 units had been sold and delivered at the
planned 7,780 unit Pembroke Century Village and the backlog of
units under contract for future delivery was 246 units with a sales
value of $19.9 million.
Collections on the Company's real estate mortgage notes may be
affected by the future success of the projects which collateralize
these notes, which may, in turn, be affected by conditions in the
housing and commercial real estate markets.
Operating funds are currently generated from interest income
on mortgage notes and rentals from income producing properties,
including distributions from self-storage warehouse partnerships.
Dividend payments to stockholders, in accordance with the
provisions of the Internal Revenue Code, limit the Company from
utilizing significant amounts of income-generated funds for
investment purposes.
<PAGE> 13
Since its qualification as a REIT and until 1990, monies
received from the repayment of existing mortgage notes and
borrowings were generally reinvested 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. The Company has generally reinvested its other
available funds in high quality short-term corporate and government
securities. The Company expects to pursue this strategy while it
continues to evaluate alternative real estate investments.
During the quarter ended March 31, 1996, there were no new
loan commitments. At March 31, 1996, commitments on outstanding
real estate loans consisted of $1.6 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. There are currently no material commitments for
capital expenditures.
During the quarter ended March 31, 1996, the Company declared
a cash dividend of $.27 per share, aggregating $2.2 million which
approximates the Company's Funds From Operations.
At March 31, 1996, the outstanding balance of the Company's
Collateralized Mortgage Obligations (the "CMO's") amounted to $36.6
million (net of unamortized discount of $915,000 based on an
effective interest rate of 8.84%). The CMO's are collateralized by
$43.1 million of 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 related
mortgage notes receivable of $6.5 million.
Inflation
As of March 31, 1996, the Company had no variable interest
rate borrowings; however, the Company's interest-sensitive mortgage
notes receivable amounted to $37 million. Of this amount, the
interest rate on $34 million is limited to the lower of 11% or
prime + 3%. As of March 31, 1996, the interest rate on those notes
had reached the 11% ceiling; accordingly, in the event of
inflation, even if such inflation is accompanied by rising interest
rates, the effect on the Company's results of operations is not
expected to be material.
<PAGE> 14
PART II. Other Information
Item 6 - Exhibits and Reports on Form 8-K:
Exhibits:
27 Financial Data Schedule
Reports on Form 8-K:
The Company was not required to file Form 8-K during the
quarter for which this report is filed.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CV REIT, INC.
_______________________________
(Registrant)
/s/ Alvin Wilensky
May 10, 1996 _______________________________
Alvin Wilensky, President
/s/ Elaine Kahant
May 10, 1996 _______________________________
Elaine Kahant, Vice President
and Treasurer
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,849
<SECURITIES> 0
<RECEIVABLES> 99,111
<ALLOWANCES> 3,064
<INVENTORY> 0
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<PP&E> 16,259
<DEPRECIATION> 2,242
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<BONDS> 36,588
0
0
<COMMON> 80
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<TOTAL-LIABILITY-AND-EQUITY> 119,957
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<TOTAL-REVENUES> 3,290
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