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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
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 ]
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, 1996. 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, 1997
($13.50), the aggregate market value of the 6,206,333 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 $84 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 January 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement of CV Reit, Inc.
for the 1997 Annual Meeting of Stockholders
(incorporated in Part III)
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.
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.
Recent Development
On February 3, 1997, the Company announced that it was engaged in
discussions with private parties with respect to several related
transactions under which the Company would acquire controlling
interests in a number of strip shopping centers. Under the
proposed transactions, the Company would issue additional shares
and would, together with others, transfer real estate interests to
an operating partnership of which a principal of one of the other
parties would be the chief executive officer. The Company has
entered into an agreement with respect to the sharing of certain
due diligence expenses relating to the proposed transactions, which
are also subject to the negotiation of agreements, board and
shareholder approvals, and other conditions. There is no assurance
that the proposed transactions will be consummated.
Real Estate Mortgage Notes
At December 31, 1996, total assets of the Company were
approximately $119 million, including $84.8 million in real
estate mortgage notes, $5.5 million in real estate acquired by
foreclosure (net of allowance for losses), $13.2 million of income
producing real estate (primarily partnership interests in three
self-storage warehouses, a shopping center, a motel and an office
building) and $14 million in cash, cash equivalents and short-term
investments. The Company's principal investments in real estate
mortgage notes are described in detail herein and are summarized as
follows (in thousands):
December 31,
------------------
1996 1995
-------- --------
Long Term Recreation Notes
(the "Recreation Notes") $67,302 $68,243
Hilcoast Development Corp. ("Hilcoast"):
Lines of Credit 10,039 15,570
Other 6,308 8,039
Century Plaza Note (1) - 6,282
First mortgage notes, maturing through
1998, with interest ranging from
8.9% to 11.5%, collateralized
primarily by real property in Palm
Beach and Broward Counties, Florida 1,159 1,785
-------- --------
Totals (2) $84,808 $99,919
======== ========
_________
(1) See Item 3. Legal Proceedings - Century Plaza regarding the
acquisition of the Century Plaza Shopping Center in connection
with certain litigation.
(2) As of December 31, 1996, none of the above real estate
mortgage notes were delinquent.
Recreation Notes
At December 31, 1996, the Recreation Notes consisted of $25
million due from Hilcoast (the "Hilcoast Recreation Note" - see
Relationship Between the Company and Hilcoast), collateralized by
a first mortgage on certain real estate within the Century Village
at Pembroke Pines, Florida adult condominium project ("Pembroke
Century Village"), including the recreation facilities at that
project (the "Pembroke Recreation Facilities"), and $42.3 million,
collateralized by first mortgages on the recreation facilities at
the three previously completed Century Village communities,
including $11.2 million due from H. Irwin Levy (the "Levy Note"),
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.
The Hilcoast Recreation Note bears interest at prime (8.25% at
December 31, 1996) plus 3%, but in any event not less than 9% nor
more than 11%, 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 in
the aggregate amount of $2.9 million per annum. 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.
The remaining Recreation 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 of the Levy Note, were substantially the same as the terms
of the sales (negotiated independently) of the other two recreation
facilities. These notes principally consist of 30 year non-recourse
notes maturing in 2012, with interest rates averaging 13% (13.25% in
the case of the Levy Note). 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 Levy
Note may not be prepaid; prepayments on the other Recreation Notes
generally are not permitted until 2007. 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 these notes.
The Recreation Notes, excluding the Hilcoast Recreation Note, are
pledged as collateral for Collateralized Mortgage Obligations
("CMO's") issued by the Company which, as of December 31, 1996, had
an outstanding balance of $35.1 million (net of $809,000
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.
The Hilcoast Recreation Note is pledged as collateral for a $2.5
million promissory note to a bank, consisting of a $1 million line
of credit through May 1, 1998 which as of December 31, 1996, had no
outstanding balance, and a $1.5 million Letter of Credit issued by
that bank for the benefit of Hilcoast.
Hilcoast
Lines of Credit
Lines of credit to Hilcoast (the "Lines of Credit" - see
Relationship Between the Company and Hilcoast) consist of revolving
construction loan commitments which as of December 31, 1996,
aggregated $12.9 million of which $10 million was outstanding on
that date. The Lines of Credit are collateralized by certain real
estate within 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 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
Other real estate mortgage notes due from Hilcoast amounted to $6.3
million as of December 31, 1996 and included $5 million payable
July 31, 1998, with interest, payable quarterly, at 10%,
collateralized by the Pembroke Recreation Facilities. The
remaining mortgage note due from Hilcoast matures in December 1997
and bears interest, payable monthly, at prime plus 3% (but in any
event not less than 9% nor more than 11%).
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,
-----------------
1996 1995
Commercial: ------- -------
Broward County, Florida:
Nine acre site in Dania $ 5,000 $ 5,000
29 acre site in Miramar 2,595 2,595
------- -------
Total commercial 7,595 7,595
Residential 257 381
------- -------
7,852 7,976
Less allowance for losses (2,401) (3,107)
------- -------
Totals $ 5,451 $ 4,869
======= =======
Real Estate and Investments in Real Estate Partnerships
The Company's real estate equities are located in southeast
Florida and are summarized as follows (in thousands):
December 31,
-----------------
1996 1995
------- -------
Century Plaza Shopping Center $ 7,402 $ -
Days Inn motel 4,058 4,054
Administration Building 962 959
Other 81 79
------- -------
12,503 5,092
Less accumulated depreciation (2,425) (2,202)
------- -------
10,078 2,890
45%-50% investments in self-storage
warehouse partnerships 3,165 3,218
------- -------
Totals $13,243 $ 6,108
======= =======
Century Plaza Shopping Center
On September 30, 1996, the Company purchased the Century Plaza
Shopping Center (see Item 3. Legal Proceedings - Century Plaza for
a detailed discussion), located near the main entrance to Century
Village at Deerfield Beach, Florida. The center contains
approximately 85,000 square feet and as of December 31, 1996, was
92% leased, including 38% leased to medical and medical-related
tenants. The Broward County Library leases the greatest amount of
space at the center, occupying approximately 6,200 square feet.
The leases are generally for three, five or ten year terms on a
triple net basis, with annual increases based on increases in the
consumer price index.
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, a director
of the Company.
The lease, as amended, provides for annual rental through the
expiration of the lease term on August 31, 1999, equal to a minimum
of $330,000, plus 30% of gross room revenues in excess of $1.3
million. The lease also provides for the lessee to pay all
operating costs of the motel, including real estate taxes and
insurance, and to pay to the Company 50% of certain amounts
received by the lessee from the concessionaire who operates the
food and beverage facilities at the motel.
Administration Building
The Company owns a two-story office building containing
approximately 25,000 square feet (the "Administration Building"),
located within the Century Village at West Palm Beach community, a
minor portion of which is occupied by the Company as its corporate
headquarters. The Company leases approximately 15,000 square feet
to an unrelated party for provision of physician and medically
related services through May 9, 2000, with five additional five-year
options, at a current annual base rent of $10.30 per square
foot on a triple net basis plus annual increases of 3%-4%. The
Company leases approximately 3,000 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 $2,500, plus an allocation of
utility expenses.
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 3,000 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.
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 within residential projects, generally located in
southeast Florida. 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 shopping center, 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 similar facilities in those areas.
Relationship Between the Company and Hilcoast
On July 31, 1992, Hilcoast, an affiliate of the Company on that
date, acquired certain assets from a previous borrower of the
Company, pursuant to approval by the Bankruptcy Court of the
Southern District of Florida in connection with Chapter 11
proceedings filed by that borrower. The assets were acquired by
Hilcoast subject to the borrower's indebtedness to the Company,
consisting of a term loan in the amount of $41.7 million which as
of December 31, 1996 had an outstanding balance of $25 million (see
Real Estate Mortgage Notes - Recreation Notes) and certain lines of
credit (see Real Estate Mortgage Notes - Hilcoast - Lines of
Credit).
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 positions as directors and/or
officers of 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, 1997 and provides for the
payment of $10,000 per month to Hilcoast, plus reimbursement for
reasonable out of pocket expenses. The agreement may be terminated
by Hilcoast upon 180 days notice and by the Company upon 30 days
notice. During 1996, the Company paid $120,000 to Hilcoast under
this agreement, plus expense reimbursement.
Employees
On December 31, 1996, the Company employed 3 persons.
Item 2. Properties
See Item 1. Business - Real Estate and Investments in Real Estate
Partnerships.
Item 3. Legal Proceedings
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. 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 unsuccessfully appealed this reversal to the
Florida Supreme Court and the case has been 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.
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, 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 (the "Plaintiff") filed a Complaint,
as amended, in the Circuit Court of Broward County, Florida,
against the Company seeking a judicial declaration as to the
Plaintiff's obligation to provide parking areas to members of a
religious institution located adjacent to Century Plaza. The basis
for the Complaint was that the Company failed to advise the
Plaintiff that in 1978, a former officer of the Company had
allegedly consented to a limited number of parking spaces to be
allocated by the City of Deerfield Beach to the religious
institution. The Plaintiff sought recision of the original sales
agreement and the Century Plaza Note, restoration of amounts paid
by the Plaintiff to the Company pursuant to the sales agreement,
plus interest thereon, and reconveyance of Century Plaza to the
Company.
The Century Plaza Note was not paid on its December 31, 1994
maturity date and the Company instituted foreclosure proceedings.
During 1995 and through September 30, 1996, the Plaintiff remitted
monthly interest payments to the Company. On September 30, 1996,
a subsidiary of the Company acquired Century Plaza from the
Plaintiff for $1.1 million cash in excess of the approximately $6.3
million outstanding balance of the Century Plaza Note, an amount
which is not in excess of fair value. In connection with this
acquisition, the Plaintiff and the Company filed voluntary
dismissals of their respective claims with prejudice.
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.
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
---- --- ------------
1996
First Quarter 11-7/8 10-5/8 $ .27
Second Quarter 11-1/2 10-3/8 .29
Third Quarter 12-1/8 11 .29
Fourth Quarter 13-3/4 11-7/8 .29
-----
$1.14
=====
1995
First Quarter 9-1/2 8-7/8 $ .27
Second Quarter 9-7/8 8-7/8 .27
Third Quarter 9-3/4 8-7/8 .27
Fourth Quarter 11-1/4 9-3/8 .27
-----
$1.08
=====
As of January 31, 1997, the Company had 7,966,621 shares of Common
Stock outstanding and 1,999 holders of record of such stock.
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.
Item 6. Selected Financial Data
(in millions, except per share data)
Year Ended December 31,
--------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Total revenues $13.2 $13.4 $13.9 $15.4 $15.1
====== ====== ====== ====== ======
Income before income taxes $9.4 $8.4 $6.3 $11.3 $13.0
====== ====== ====== ====== ======
Net income $9.6 $9.4 $6.3 $9.5 $9.9
====== ====== ====== ====== ======
Net income per common share $1.20 $1.18 $0.79 $1.29 $1.38
====== ====== ====== ====== ======
Dividends declared per share:
Cash $1.14 $1.08 $1.08 $1.00 $0.45
Hilcoast Development Corp.
Common Stock - - - - 0.19(1)
------ ------ ------ ------ ------
$1.14 $1.08 $1.08 $1.00 $0.64
====== ====== ====== ====== ======
At Year End:
Total assets $118.9 $120.0 $122.8 $163.2 $160.0
====== ====== ====== ====== ======
Borrowings $35.1 $37.1 $38.9 $77.2 $83.5
====== ====== ====== ====== ======
Stockholders' equity:
Total $73.7 $73.2 $72.4 $74.7 $66.0
====== ====== ====== ====== ======
Per common share $9.25 $9.19 $9.09 $9.38 $9.14
====== ====== ====== ====== ======
________
(1) 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.
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
1996 Compared to 1995
Funds From Operations
The Company's Funds From Operations generally consists of net
income, excluding reversal of previously recorded losses, gains or
losses on the sales of GNMA certificates and real estate, and
income tax benefit, 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, 1996, Funds From Operations was
$8.9 million compared to $8.7 million for 1995.
The increase in Funds From Operations reflects reductions in
general and administrative expenses, principally personnel costs,
professional fees and insurance, partially offset by lower net
interest income (interest income less interest expense) resulting
from net principal payments received under the Hilcoast mortgage
notes, which repayments were generally reinvested in lower yielding
short-term investments (see Liquidity and Capital Resources).
As a result of the acquisition of the Century Plaza shopping center
on September 30, 1996, the Company expects net rental income (rent
income less related operating costs) to increase during 1997. This
increase will be partially offset by the elimination of interest
income on the Century Plaza Note (see Item 3. Legal Proceedings -
Century Plaza).
Net Income
For the year ended December 31, 1996, net income was $9.6 million
or $1.20 per share compared to $9.4 million or $1.18 per share for
the same period in 1995.
The 1996 net income includes a $906,000 credit, primarily
consisting of a reversal of previously recorded losses, and a
$121,000 deferred income tax benefit. The 1995 net income includes
a $1 million deferred income tax benefit.
1995 Compared to 1994
Funds From Operations
For the year ended December 31, 1995, Funds From Operations was
$8.7 million compared to $8.4 million for 1994.
The increase in Funds From Operations reflects a reduction in
general and administrative expenses and higher rental income
received from the Days Inn motel and the Administration Building.
In addition, although there was a $386,000 reduction in net
interest income in 1995 resulting from the sale in April 1994 of
the Company's leveraged GNMA certificate portfolio, this reduction
was offset by an increase in interest income earned on the
Company's variable rate mortgage notes receivable, primarily due to
increases in the prime rate.
Net Income
For the year ended December 31, 1995, net income was $9.4 million
or $1.18 per share compared to $6.3 million or $.79 per share for
the same period in 1994.
The 1995 net income includes a $1 million deferred income tax
benefit. The 1994 period includes a $2.4 million loss on the
aforementioned sale of the Company's GNMA certificate portfolio and
a $630,000 reversal of previously recorded losses.
Liquidity and Capital Resources
At December 31, 1996, total assets were $119 million, including
$84.8 million in real estate mortgages notes. Approximately $67.3
million of the real estate mortgage notes are collateralized by
recreation facilities under long-term leases with unit owners at
approximately 29,000 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 2(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 $17.5 million of real estate mortgage notes are
collateralized by real estate within residential projects,
generally located in southeast Florida, including $16.3 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 2(c) to Consolidated Financial
Statements). At December 31, 1996, 7,113 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 140
units with a sales value of $11.7 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 market.
Operating funds are currently generated from interest income on
mortgage notes and rentals from income producing properties.
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, 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. See Item 1. Business - Recent
Development regarding discussions concerning possible acquisition
of controlling interests in a number of shopping centers. During
1996, there were no new loan commitments.
At December 31, 1996, commitments on outstanding real estate loans
consisted of $2.9 million under the Hilcoast Lines of Credit. The
Company expects to be able to meet these commitments with operating
cash flows and existing cash balances. There are currently no
material commitments for capital expenditures.
During 1996 and 1995, the Company declared cash dividends of $1.14
and $1.08 per share, respectively, aggregating $9.1 million and
$8.6 million, respectively, which approximates the Company's Funds
From Operations.
At December 31, 1996, the outstanding balance of the Company's
Collateralized Mortgage Obligations (the "CMO's") amounted to $35.1
million (net of unamortized discount of $809,000 based on an
effective interest rate of 8.84%). The CMO's are collateralized by
$42.3 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 December 31, 1996, the Company had no variable interest rate
borrowings; however, the Company's interest-sensitive mortgage
notes receivable amounted to $34 million on which the interest rate
is limited to the lower of 11% or prime + 3%. As of December 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.
Forward Looking Information: Certain Cautionary Statements
Certain statements contained in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and
elsewhere in this Form 10-K, that are not related to historical
results, are forward looking statements, such as collectibility of
the Company's real estate mortgage notes, its anticipated liquidity
and capital requirements and the results of legal proceedings. The
matters referred to in forward looking statements are based on
assumptions of future events which may not prove to be accurate and
which could be affected by the risks and uncertainties involved in
the Company's business; accordingly, actual results may differ
materially from those projected and implied in the forward looking
statements. These risks and uncertainties include, but are not
limited to, the effect of conditions in the residential and
commercial real estate market and the economy in general, the level
and volatility of interest rates, Court decisions regarding the
Company's litigation, the impact of current or pending legislation
and regulation, as well as certain other risks described in the
Form 10-K. Subsequent written and oral forward looking statements
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by cautionary statements in
this paragraph and elsewhere described in this Form 10-K and in
other reports filed by the Company with the Securities and Exchange
Commission.
Item 8. Financial Statements and Supplementary Data
Table of Contents to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accountants 20
Consolidated Financial Statements:
Balance Sheets - December 31, 1996 and 1995 21
Statements of Income - Years Ended
December 31, 1996, 1995 and 1994 22
Statements of Stockholders' Equity - Years
Ended December 31, 1996, 1995 and 1994 23
Statements of Cash Flows - Years Ended
December 31, 1996, 1995 and 1994 24
Notes to Consolidated Financial Statements 25-37
Consolidated Financial Statements Schedules:
Schedule IV - Mortgage Loans on Real Estate 38
Schedules, other than that 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.
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, 1996 and 1995 and
the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended
December 31, 1996. 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, 1996 and
1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
West Palm Beach, Florida BDO SEIDMAN, LLP
February 3, 1997
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31,
-------------------
ASSETS 1996 1995
------ -------- --------
Real estate mortgage notes (Notes 2 and 8):
Long Term Recreation Notes $ 67,302 $ 68,243
Other 17,506 31,676
-------- --------
84,808 99,919
Real estate acquired by foreclosure
(net of allowance for losses of $2,401
and $3,107 - Note 3) 5,451 4,869
Real estate and investments in real
estate partnerships, net of
accumulated depreciation (Note 4) 13,243 6,108
Cash and cash equivalents (includes
$898 and $884 restricted) 7,564 7,633
Short-term investments 6,436 -
Other 1,428 1,492
-------- --------
$118,930 $120,021
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities and other credits:
Collateralized Mortgage Obligations
(Note 5) $ 35,064 $ 37,074
Accounts payable, accruals and
other liabilities 599 192
Dividends payable 2,552 2,407
Deferred income taxes (Note 9) 7,041 7,162
-------- --------
Total liabilities and other credits 45,256 46,835
-------- --------
Commitments and contingencies (Notes 2, 5, 6 and 11)
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 55,104 54,616
-------- --------
Total stockholders' equity 73,674 73,186
-------- --------
$118,930 $120,021
======== ========
See accompanying notes to consolidated financial statements.
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Year Ended December 31,
---------------------------------
1996 1995 1994
Revenues: --------- --------- ---------
Interest, substantially
from mortgage notes, and
dividends (Notes 2, 8 and 10) $ 11,695 $ 12,231 $ 12,796
Rent, income from real estate
partnerships and other 1,547 1,194 1,091
--------- --------- ---------
13,242 13,425 13,887
--------- --------- ---------
Expenses:
Interest (Note 5) 3,232 3,434 4,156
Operating, general and
administrative 1,244 1,496 1,615
Depreciation 223 138 161
--------- --------- ---------
4,699 5,068 5,932
--------- --------- ---------
8,543 8,357 7,955
Gain on sales of real estate - - 130
Loss on sales of GNMA certificates
(Note 7) - - (2,392)
Reversal of provision for losses, net 906 - 630
--------- --------- ---------
Income before income tax benefit 9,449 8,357 6,323
Income tax benefit (Note 9) (121) (1,017) -
--------- --------- ---------
Net income $ 9,570 $ 9,374 $ 6,323
========= ========= =========
Net income per common share $ 1.20 $ 1.18 $ .79
========= ========= =========
Dividends declared per common
share $ 1.14 $ 1.08 $ 1.08
========= ========= =========
Average common shares outstanding 7,966,621 7,966,621 7,966,621
========= ========= =========
See accompanying notes to consolidated financial statements.
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, 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
Net income for the year - - 9,374
Cash dividends declared - - (8,604)
------ --------- --------
Balance at December 31, 1995 80 18,490 54,616
Net income for the year - - 9,570
Cash dividends declared - - (9,082)
------ --------- --------
Balance at December 31, 1996 $ 80 $18,490 $55,104
====== ========= ========
See accompanying notes to consolidated financial statements.
CV REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
---------------------------
1996 1995 1994
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,570 $ 9,374 $ 6,323
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation 223 138 161
Equity in depreciation of real estate
partnerships 175 178 179
Gain on sales of real estate - - (130)
Deferred income tax benefit (121) (1,017) -
Reversal of provision for losses, net (906) - (630)
Loss on sales of GNMA certificates - - 2,392
------- ------- -------
8,941 8,673 8,295
Changes in operating assets and liabilities:
(Increase) decrease in other assets (36) 38 87
Increase (decrease) in accounts payable,
accruals and other liabilities 207 (669) (40)
------- ------- -------
Net cash provided by operating activities 9,112 8,042 8,342
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate mortgage notes (16,369) (23,068) (21,469)
Collections on real estate mortgage notes 25,732 20,661 33,436
Purchase of real estate (1,154) - -
(Purchase) maturity of short-term investments (6,436) 2,920 (2,920)
Sale of GNMA certificates - - 32,412
Return of principal of GNMA certificates - - 977
Proceeds from sales of real estate and other (7) (471) 898
------- ------- -------
Net cash provided by investing activities 1,766 42 43,334
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 500 3,150
Repayments of borrowings (2,010) (2,334) (41,443)
Cash dividends paid (8,937) (8,615) (8,435)
Increase in restricted cash (14) (16) (46)
------- ------- -------
Net cash used in financing activities (10,961) (10,465) (46,774)
------- ------- -------
Net (decrease) increase in unrestricted
cash and cash equivalents (83) (2,381) 4,902
Unrestricted cash and cash equivalents at
beginning of the period 6,749 9,130 4,228
------- ------- -------
Unrestricted cash and cash equivalents at
end of the period $ 6,666 $ 6,749 $ 9,130
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,239 $ 3,436 $ 4,307
======= ======= =======
Supplemental schedule of non-cash investing
and financing activities:
Mortgage notes received in exchange for
investment security $ - $ 5,000 $ -
======= ======= =======
Reduction of mortgage notes receivable in
connection with purchase of real estate
(Note 6(b)) $ 6,248 $ - $ -
======= ======= =======
See accompanying notes to consolidated financial statements.
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.
New Accounting Pronouncements
Effective January 1, 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". SFAS No. 121 requires companies
to evaluate long-lived assets for impairment based on the
undiscounted future cash flows of the asset. If a long-lived asset
is identified as impaired, the value of the asset must be reduced
to its fair value. The Company's real estate, including its income
producing properties, are considered long-lived assets under this
pronouncement. Adoption of this standard did not have a material
impact on the Company's financial position or results of
operations.
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:
1996 1995 1994
Ordinary income 91.9% 65.6% 80.2%
Capital gain distribution 8.1% 34.4% 19.8%
The Company accounts for income taxes based upon SFAS 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 shopping
center, a motel and an office building, subject to operating
leases, 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.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Net Income Per Common Share
Net income per common share is based on the weighted average number
of common shares outstanding during each year.
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.
Reclassification
Certain 1995 and 1994 amounts have been reclassified to conform to
the 1996 financial statement presentation.
(2) Real Estate Mortgage Notes
(a) Real estate mortgage notes, substantially all of which are
collateralized by real estate located in southeast Florida, consist
of (in thousands):
December 31,
------------------
1996 1995
Long Term Recreation Notes (the ------- -------
"Recreation Notes") (Note 2(b)) $67,302 $68,243
Hilcoast Development Corp.
("Hilcoast") (Note 2(c)):
Lines of Credit 10,039 15,570
Other 6,308 8,039
First mortgage notes, maturing through
1998, with interest ranging from 8.9%
to 11.5%, collateralized primarily by
real property in Palm Beach and Broward
Counties, Florida:
Residential 1,159 1,785
Commercial - 6,282
------- -------
Totals $84,808 $99,919
======= =======
Interest Sensitivity
--------------------
Fixed Variable
Rate Rate
------- -------
Maturity of real estate
mortgage notes at
December 31, 1996:
One year or less $ 1,677 $ 1,577 $ 100
After one year through
five years 23,399 11,902 11,497
After five years 59,732 59,732 -
------- ------- -------
Totals $84,808 $73,211 $11,597
======= ======= =======
(b) At December 31, 1996, the Recreation Notes consisted of $25
million due from Hilcoast (the "Hilcoast Recreation Note"),
collateralized by a first mortgage on certain real estate within
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 $42.3 million, collateralized by first mortgages on the
recreation facilities at the three previously completed Century
Village communities (Note 8).
The Hilcoast Recreation Note bears interest at prime (8.25% at
December 31, 1996) plus 3%, but in any event not less than 9% nor
more than 11%, 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.
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 (Notes 5(a) and 8).
(c) Hilcoast
Lines of credit to Hilcoast consist of revolving construction loan
commitments which as of December 31, 1996, aggregated $12.9 million
of which $10 million was outstanding on that date. The Lines of
Credit are collateralized by real estate within 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 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 $6.3
million as of December 31, 1996 and included $5 million payable
July 31, 1998, with interest, payable quarterly, at 10%,
collateralized by the Pembroke Recreation Facilities. The
remaining mortgage note due from Hilcoast matures in December 1997
and bears interest, payable monthly, at prime plus 3% (but in any
event not less than 9% nor more than 11%).
(3) Real Estate Acquired by Foreclosure
(a) Real estate acquired by foreclosure consists of (in
thousands):
December 31,
--------------------
1996 1995
Commercial: ------- -------
Broward County, Florida:
Nine acre site in Dania $5,000 $5,000
29 acre site in Miramar 2,595 2,595
------ ------
Total commercial 7,595 7,595
Residential 257 381
------ ------
7,852 7,976
Less allowance for losses (2,401) (3,107)
------ ------
Totals $5,451 $4,869
====== ======
(b) Changes in the allowance for losses follow (in thousands):
1996 1995 1994
------ ------ ------
Balance, beginning of year $3,107 $3,531 $5,119
Reversal of allowance for
losses (1,163) - (630)
Charge-offs (43) (424) (1,158)
Recoveries 500 - 200
------ ------ ------
Balance, end of year $2,401 $3,107 $3,531
====== ====== ======
(4) Real Estate and Investments in Real Estate Partnerships
Real estate and investments in real estate partnerships are located
in southeast Florida and consist of (in thousands):
December 31,
-------------------
1996 1995
------- ------
Century Plaza shopping center (Note 6(b)) $ 7,402 $ -
Days Inn motel 4,058 4,054
Administration Building 962 959
Other 81 79
------- ------
12,503 5,092
Less accumulated depreciation (2,425) (2,202)
------- ------
10,078 2,890
45%-50% investments in self-
storage warehouse partnership 3,165 3,218
------- ------
Totals $13,243 $6,108
======= ======
(5) Borrowings
(a) The Collateralized Mortgage Obligations ("CMO's") amounted to
$35.1 million at December 31, 1996 and $37.1 million at December
31, 1995 (net of unamortized discounts of $809,000 in 1996 and
$950,000 in 1995, based on an effective interest rate of 8.84%),
are collateralized by the Recreation Notes, excluding the Hilcoast
Recreation Note (Note 2(b)), require quarterly self-amortizing
principal and interest payments and mature on March 15, 2007.
(b) Maturities of borrowings are as follows (in thousands):
1997 2,200
1998 2,408
1999 2,633
2000 2,877
2001 3,141
Thereafter 21,805
-------
$35,064
=======
(6) 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. 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 unsuccessfully appealed this reversal to the
Florida Supreme Court and the case has been 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, 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 (the "Plaintiff") filed a Complaint,
as amended, in the Circuit Court of Broward County, Florida,
against the Company seeking a judicial declaration as to the
Plaintiff's obligation to provide parking areas to members of a
religious institution located adjacent to Century Plaza. The basis
for the Complaint was that the Company failed to advise the
Plaintiff that in 1978, a former officer of the Company had
allegedly consented to a limited number of parking spaces to be
allocated by the City of Deerfield Beach to the religious
institution. The Plaintiff sought recision of the original sales
agreement and the Century Plaza Note, restoration of amounts paid
by the Plaintiff to the Company pursuant to the sales agreement,
plus interest thereon, and reconveyance of Century Plaza to the
Company.
The Century Plaza Note was not paid on its December 31, 1994
maturity date and the Company instituted foreclosure proceedings.
During 1995 and through September 30, 1996 the Plaintiff remitted
monthly interest payments to the Company. On September 30, 1996,
a subsidiary of the Company acquired Century Plaza from the
Plaintiff for $1.1 million cash in excess of the approximately $6.3
million outstanding balance of the Century Plaza Note, an amount
which is not in excess of fair value. In connection with this
acquisition, the Plaintiff and the Company filed voluntary
dismissals of their respective claims with prejudice.
(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.
(7) Loss on Sale of GNMA Certificates
During 1994, the Company sold GNMA certificates with an aggregate
book value of $34.8 million and recognized a loss of $2.4 million.
(8) Related Party Transactions
Hilcoast
On July 31, 1992, Hilcoast, an affiliate of the Company on that
date, acquired certain assets from a previous borrower of the
Company, pursuant to approval by the Bankruptcy Court of the
Southern District of Florida in connection with Chapter 11
proceedings filed by that borrower. The assets were acquired by
Hilcoast subject to the borrower's indebtedness to the Company,
consisting of a term loan in the amount of $41.7 million which as
of December 31, 1996 had an outstanding balance of $25 million
(Note 2(b)) and certain lines of credit (Note 2(c))
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 positions as directors and/or
officers of 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, 1997, and provides for the
payment of $10,000 per month to Hilcoast, plus reimbursement for
reasonable out of pocket expenses. The agreement may be terminated
by Hilcoast upon 180 days notice and by the Company upon 30 days
notice. During the three years ended December 31, 1996, the
Company paid $120,000 per year to Hilcoast under this agreement,
plus expense reimbursement.
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(b)), issued in
connection with the acquisition, in the original principal amount
of $12.6 million. The note bears interest at 13.25%, requires
self-amortizing equal monthly payments of principal and interest in
the aggregate amount of $1.7 million per annum through 2011 and may
not be prepaid. At December 31, 1996, the outstanding balance on
the note was $11.2 million. During 1996, 1995 and 1994, the
Company recognized interest income of $1.5 million, $1.5 million,
$1.6 million, respectively, on this note.
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 $42.3 million of the Company's
Recreation Notes (Note 2(b)).
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, a director
of the Company.
The lease, as amended, provides for annual rental through the
expiration of the lease term on August 31, 1999, equal to a minimum
of $330,000, plus 30% of gross room revenues in excess of $1.3
million. The lease also provides for the lessee to pay all
operating costs of the motel, including real estate taxes and
insurance, and to pay to the Company 50% of certain amounts
received by the lessee from the concessionaire who operates the
food and beverage facilities at the motel. In 1996, 1995 and 1994,
the Company recognized rent income of $454,000, $472,000 and
$343,000, respectively, under the lease.
Administration Building
The Company leases approximately 3,000 square feet of its
Administration Building, located within the Century Village at West
Palm Beach community, 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 $2,500, plus an allocation of utility expenses.
(9) Deferred Income Tax Benefit
(a) Deferred income tax benefit differs from the amount computed
by applying the statutory federal income tax rate to income before
income taxes for the following reasons (in thousands):
1996 1995 1994
------ ------ ------
Tax expense computed at
statutory rate $3,213 $2,841 $2,150
State income tax benefit,
net of federal effect (6) (86) (32)
Dividends paid deduction (3,266) (3,644) (2,453)
Other (62) (128) 335
------ ------ ------
Totals ($ 121) ($1,017) $ -
====== ====== ======
(b) The components of the net deferred tax liability are as
follows (in thousands):
December 31,
-----------------
1996 1995
------- -------
Deferred tax liabilities:
Gains on the sales of recreation
facilities reported on the install-
ment method for tax purposes $13,833 $14,106
Other 235 235
------- -------
Total deferred tax liabilities 14,068 14,341
------- -------
Deferred tax assets:
Differences in reporting the
provision for losses 903 1,169
Net operating loss carryforwards
for tax purposes 5,899 5,899
Other 225 111
------- -------
Total deferred tax assets 7,027 7,179
------- -------
Net deferred tax liability $ 7,041 $ 7,162
======= =======
(c) As of December 31, 1996, the Company has aggregate net
operating loss carryforwards for tax purposes of approximately
$15.7 million, expiring $7.1 million in 2007 and $8.6 million in
2006.
(10) Major Customers
During 1996, interest income from four borrowers provided 38%
(Hilcoast), 17%, 14% and 11% (H. Irwin Levy), respectively, of
total revenues. During 1995, interest income from four borrowers
provided 38% (Hilcoast), 17%, 14% and 12% (H. Irwin Levy),
respectively, of total revenues. During 1994, interest income from
four borrowers provided 32% (Hilcoast), 16%, 14% and 11% (H. Irwin
Levy), respectively, of total revenues. See Note 2 regarding
concentration of credit risk.
(11) 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 instruments 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, 1996, financial instruments whose contract amounts
represent credit risk consisted of $2.9 million of commitments to
extend credit and $575,000 of 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.
(12) Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments
are as follows:
December 31,
-------------------------------------
1996 1995
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
Real estate mortgage notes $84,808 $104,189 $99,919 $125,063
Cash and cash equivalents 7,564 7,564 7,633 7,633
Short-term investments 6,436 6,436 - -
CMO's (35,064) (35,894) (37,074) (39,445)
Real estate mortgage notes - Except for the Recreation Notes (Note
2(b)), 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 fixed rate, Long Term 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.
Short-term investments - Fair value approximates carrying amounts
due to their short-term maturity.
CMO's - 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.
(13) Subsequent Event
On February 3, 1997, the Company announced that it was engaged in
discussions with private parties with respect to several related
transactions under which the Company would acquire controlling
interests in a number of strip shopping centers. Under the
proposed transactions, the Company would issue additional shares
and would, together with others, transfer real estate interests to
an operating partnership of which a principal of one of the other
parties would be the chief executive officer. The Company has
entered into an agreement with respect to the sharing of certain
due diligence expenses relating to the proposed transactions, which
are also subject to the negotiation of agreements, board and
shareholder approvals, and other conditions. There is no assurance
that the proposed transactions will be consummated.
(14) 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,
1996
Revenues $3,290 $3,311 $3,274 $3,367
Net income 2,362 2,140 2,189 2,879
Per common share .30 .27 .27 .36
1995
Revenues $3,321 $3,318 $3,338 $3,448
Net income 2,037 2,037 2,136 3,164
Per common share .26 .26 .27 .40
<TABLE>
CV REIT, INC. AND SUBSIDIARIES
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1996
(dollars in thousands)
<CAPTION>
Carrying
Final Face amount of
Interest maturity amount of mortgage
Description Rate date Periodic pmt terms mortgages (a)
- ---------------------- --------- -------- ---------------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Permanent -
Recreation Facilities
Century Village at:
Boca Raton, FL 13.25% 12/31/11 Level P & I due monthly $12,533 $11,213
West Palm Beach, F 13.50% 01/15/12 Level P & I due monthly 18,342 16,410
Deerfield Beach, FL
(2nd mortgage) 13.25% 01/15/12 Level P & I due monthly 13,235 11,882
Deerfield Beach, F 8.84% 03/01/07 Level P & I due monthly 3,485 2,797
Pembroke Pines, FL Prime + 3% (c) (c) 25,000 25,000
(Minimum 9%, Maximum 11%) -------
67,302
-------
Residential Construction
and Development:
Condominium project
in Pembroke Pines (d) 07/31/98 Interest monthly, 13,000 10,039
principal at maturity
Recreation facilities
at Century Village,
Pembroke Pines, F 10% 07/31/98 Interest quarterly, 5,000 5,000
(2nd mortgage) principal at maturity
Aggregate of mortgage loans
which individually do not
do not exceed 3% 8.9% to Various 2,467
11.5% thru 12/98
-------
17,506
-------
$84,808(b)
=======
Note: All loans are first mortgages except where noted, there are no prior liens
and no delinquent principal or interest.
(a) The tax carrying value of the notes is approximately $48 million.
(b) The changes in the carrying amounts are summarized as follows:
1996 1995 1994
-------- ------- ---------
Balance, beginning of period $99,919 $92,691 $105,863
Advances on new mortgage loans 16,369 23,068 21,469
Collections of principal (25,732) (20,661) (33,436)
Reduction of mortgage note in connection
with purchase of real estate (6,248) - -
Mortgage note received in exchange for
investment security - 5,000 -
Foreclosures - (171) (247)
Recoveries (charge-offs) 500 (8) (958)
-------- ------- --------
Balance, end of period $84,808 $99,919 $92,691
======== ======= ========
(c) Currently requires monthly interest only payments - see Note 2(b) to Consoidated
Financial Statements regarding future conversion of this loan to an 11%, fixed rate,
25 year self-amortizing loan.
(d) Ranging from prime plus 3% (minimum 9%, maximum 11%) to 12.5%.
</TABLE>
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, 1997.
Such definitive proxy statement is incorporated by reference herein.
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, 1996 and 1995
Consolidated Statements of Income - Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity - Years
Ended December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows - Years Ended
December 31, 1996, 1995 and 1994
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.)
(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) 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)(vii) 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)(viii) 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)(ix) 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.)
(10)(x) 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)(xi) 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)(xii) 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)(xiii) $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)(xiv) 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.)
(10)(xv) $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)(xvi) Letter, dated February 5, 1995, from Hilcoast Development Corp.
to CV Reit, Inc. in connection with $3.0 million Promissory
Note. (Incorporated by reference to Exhibit 10(xxiii) to the
Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1994.)
(10)(xvii) Letter, dated February 6, 1995, from CV Reit, Inc. to NewCen
Communities, Inc. in connection with $3.0 million Promissory Note
(Incorporated by reference to Exhibit 10(xxiv) to the Annual
Report on Form 10-K of the Company for the fiscal year ended
December 31, 1994.)
(10)(xviii) Letter, dated February 5, 1995, from Hilcoast Development Corp.
to CV Reit, Inc. in connection with $2.5 million Future Advance
Promissory Note. (Incorporated by reference to Exhibit 10(xxv) to
the Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1994.)
(10)(xix) Letter, dated February 6, 1995, from CV Reit, Inc. to NewCen
Communities, Inc. in connection with $2.5 million Future Advance
Promissory Note. (Incorporated by reference to Exhibit 10(xxvi)
to the Annual Report on Form 10-K of the Company for the fiscal
year ended December 31, 1994.)
(10)(xx) Agreement dated February 17, 1995, between CV Reit, Inc., NewCen
Communities, Inc. and Hilcoast Development Corp. (Incorporated
by reference to Exhibit 10(i) to the Quarterly Report on Form
10-Q of the Company for the quarter ended March 31, 1995.)
(10)(xxi) $5.0 million Promissory Note, dated March 31, 1995, from C.V.P.
Community Center, Inc. to Hilcoast Development Corp.
(Incorporated by reference to Exhibit 10(ii) to the Quarterly
Report on Form 10-Q of the Company for the quarter ended March 31
1995.)
(10)(xxii) Allonge dated March 31, 1995, which assigns the $5.0 million
Promissory Note, dated March 31, 1995, from Hilcoast Development
Corp. to CV Reit, Inc. (Incorporated by reference to Exhibit
10(iii) to the Quarterly Report on Form 10-Q of the Company for
the quarter ended March 31, 1995.)
(10)(xxiii) Letter, dated August 11, 1995, from Hilcoast Development Corp. to
CV Reit, Inc. in connection with $3.0 million Promissory Note.
(Incorporated by reference to Exhibit 10(ii) to the Quarterly
Report on Form 10-Q of the Company for the quarter ended
September 30, 1995.)
(10)(xxiv) Letter, dated August 11, 1995, from CV Reit, Inc. to Hilcoast
Development Corp. in connection with $3.0 million Promissory
Note. (Incorporated by reference to Exhibit 10(iii) to the
Quarterly Report on Form 10-Q of the Company for the quarter
ended September 30, 1995.)
(10)(xxv) Letter, dated August 11, 1995, from Hilcoast Development Corp. to
CV Reit, Inc. in connection with $2.5 million Promissory Note.
(Incorporated by reference to Exhibit 10(iv) to the Quarterly
Report on Form 10-Q of the Company for the quarter ended
September 30, 1995.)
(10)(xxvi) Letter, dated August 11, 1995, from CV Reit, Inc. to Hilcoast
Development Corp. in connection with $2.5 million Promissory
Note. (Incorporated by reference to Exhibit 10(v) to the
Quarterly Report on Form 10-Q of the Company for the quarter
ended September 30, 1995.)
(10)(xxvii) Letter Agreements, dated July 11, 1994 and August 3, 1995,
between CV Reit, Inc. and Hilcoast Advisory Services, Inc.
extending the Consulting and Advisory Agreement to July 31,
1995 and July 31, 1996, respectively. (Incorporated by
reference to Exhibit 10(vi) to the Quarterly Report on Form
10-Q of the Company for the quarter ended September 30, 1995.)
(10)(xxviii) Letter Agreement, dated July 12, 1996, between CV Reit, Inc. and
Hilcoast Advisory Services, Inc. extending the Consulting and
Advisory Agreement to July 31, 1997. (Incorporated by reference
to Exhibit 10(i) to the Quarterly Report on Form 10-Q of the
Company for the quarter ended September 30, 1996.)
(10)(xxix) Second Amendment to Loan Agreement, Security Agreement and
Collateral Assignment of Loans, Notes, Mortgages and Security
Documents with Ohio Savings Bank dated October 31, 1996.
(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,
1996.
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.
/s/ Elaine Kahant
By:__________________________________
Dated: February 27, 1997 Elaine Kahant, Vice President
and Treasurer
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.
/s/ Alvin Wilensky
February 27, 1997 _________________________________
Alvin Wilensky, Chairman of the
Board of Directors
/s/ Stanley Brenner
February 27, 1997 _________________________________
Stanley Brenner, President and
Director
/s/ Elaine Kahant
February 27, 1997 _________________________________
Elaine Kahant, Vice President,
and Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
/s/ Mac Gache
February 27, 1997 _________________________________
Mac Gache, Director
/s/ Allyn Levy
February 27, 1997 _________________________________
Allyn Levy, Director
/s/ Alan L. Shulman
February 27, 1997 ________________________________
Alan L. Shulman, Director
This Instrument Prepared By Exhibit (10)(xxix)
and return to:
James Sadock, Jr., Esq.
5550 Glades Road, Suite 100
Boca Raton, Florida 33431
SECOND AMENDMENT TO
LOAN AGREEMENT, SECURITY AGREEMENT AND COLLATERAL
ASSIGNMENT OF LOANS, NOTES, MORTGAGES AND SECURITY DOCUMENTS
This Second Amendment to Loan Agreement, Security Agreement
and Collateral Assignment of Loans, Notes, Mortgages and Security
Documents ("Second Amendment") is executed and delivered as of the
31st day of October, 1996 by and between CV REIT, INC., f/k/a
Cenvill Investors, Inc., a Delaware corporation, Administration
Building, 19146 Lyons Road, Boca Raton, Florida 33434 (the
"Assignor") and OHIO SAVINGS BANK, a federal savings bank, f/k/a
Ohio Savings Bank, an Ohio corporation, 200 Ohio Savings Plaza,
1801 East Ninth Street, Cleveland, Ohio 44114 ("Lender");
W I T N E S S E T H :
WHEREAS, in consideration for a loan from Lender to Assignor
in the amount of Seven Million Five Hundred Thousand and no/100
Dollars ($7,500,000.00) made on October 26, 1993 (the "Term Loan"),
Assignor has executed and delivered to Lender its Secured
Promissory Note dated October 26, 1993 in the original amount of
Seven Million Five Hundred Thousand and no/100 Dollars
($7,500,000.00) U.S. (the "Term Note");
WHEREAS, the Term Note is evidenced and secured by, among
other things, a Loan Agreement, Security Agreement and Collateral
Assignment of Loans, Notes, Mortgages and Security Documents
("Assignment") executed and delivered as of the 26th day of
October, 1993 by Assignor to Lender and recorded on October 27,
1993 in Official Records Book 21318, Page 648, of the Public
Records of Broward County, Florida, and on November 1, 1993 in
Official Records Book 3870, Page 3743, of the Public Records of
Volusia County, Florida; and
WHEREAS, Assignor and Lender have heretofore agreed that
Lender shall make available to Assignor a revolving line of credit
not to exceed Four Million and no/100 Dollars ($4,000,000.00)
(U.S.) (the "Revolving Loan"), which is evidenced by a Secured
Revolving Promissory Note dated February 25, 1994 (the "Original
Revolving Note") and secured by the Assignment as modified by First
Amendment to Loan Agreement, Security Agreement and Collateral
Assignment of Loans, Notes, Mortgages and Security Documents
("First Amendment") executed and delivered as of the 25th day of
February, 1994 by Assignor to Lender and recorded on March 1, 1994
in Official Records Book 21811, Page 785, of the Public Records of
Broward County, Florida; and
WHEREAS, Assignor and Lender have agreed that the Revolving
Loan shall be renewed and reduced to a revolving line of credit not
to exceed Two Million Five Hundred Thousand and no/100 Dollars
($2,500,000.00) (U.S.) which renewed and reduced Revolving Loan is
evidenced by a Secured Revolving Promissory Note of even date
herewith (the "Renewal Revolving Note") which renews, replaces and
supercedes the Original Revolving Note and is secured by the
Assignment as modified by the First Amendment and this Second
Amendment.
NOW THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound, the Assignor and Lender hereby covenant and agree as
follows:
1. Recitals. The aforementioned recitals are true and
correct and are hereby incorporated by this reference.
2. Term Loan. The Term Note has heretofore been paid in full
by Assignor.
3. Modification of Assignment as Modified by First Amendment.
The Assignment, as heretofore modified by the First Amendment, is
hereby amended and modified as follows:
(a) The indebtedness evidenced by the Renewal Revolving
Note is and shall be secured by the Assignment. From and after the
date of this Second Amendment, the aggregate principal amount
secured by the Assignment, as hereby amended and modified, shall
never exceed Two Million Five Hundred Thousand and no/100 Dollars
($2,500,000.00).
(b) Definitions. The definitions of the terms listed
below, as added to Section 1 of the Assignment by the First
Amendment, are hereby replaced and superseded by the following:
(s) Maturity date. May 1, 1998.
(t) Maximum Revolving Loan Amount. Two
Million Five Hundred Thousand Dollars
($2,500,000.00).
(u) Maximum Revolving Sublimit. One Million
Dollars ($1,000,000.00).
(w) Revolving Loan. The Revolving Loan in
the maximum amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) provided in
Sections 2(d) through (k) hereof, and
evidenced by the Revolving Note and secured by
this Assignment.
(y) Revolving Note. The Secured Revolving
Promissory Note of even date herewith executed
and delivered to Lender by Assignor in the
maximum principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000.00),
including any partial or total extension,
restatement, renewal, amendment, modification
or substitution thereof or therefor.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings prescribed therefor in the Assignment to
the extent defined therein.
(c) Section 2 (h). Paragraph (h) of Section 2 is hereby
superseded, restated and replaced by the following:
(h) Unused Commitment Fee. On the first day of each
quarter (meaning a period of three (3) consecutive calendar months)
during the term of the Revolving Note, commencing on August 1,
1996, Assignor shall pay to Lender an "Unused Commitment Fee" equal
to one-quarter of one percent (0.25%) per annum (based on a 360 day
year and calculated for the actual number of days elapsed) of the
daily unused portion during the preceding quarter of the difference
between the Maximum Revolving Loan Amount minus the aggregate
amount of outstanding Letters of Credit issued pursuant hereto.
4. Representations and Warranties. Assignor represents
and warrants that it has full power, authority and legal right to
execute, deliver and perform the Renewal Revolving Note and this
Second Amendment, and that, as of the date hereof (i) the
warranties and representations of Assignor contained in the
Assignment are true, correct and complete in all material respects;
(ii) all the material covenants, terms and conditions of the
Assignment remain satisfied; and (iii) no Event of Default, or
event which upon the lapse of time, the giving of notice, or both,
could become an Event of Default, has occurred under the
Assignment.
5. Ratification of Loan Documents. Assignor
acknowledges that the Assignment, as amended hereby, the UCC-1 and
UCC-3 Financing Statements delivered in conjunction therewith, and
any other document or instrument related thereto are valid and
binding; that there are no defenses, set offs or counterclaims
thereto; nothing herein or in the Renewal Revolving Note
invalidates or shall impair or release any covenant, condition,
agreement or stipulation in the Loan Documents; and Assignor shall
perform and comply with and abide by each of the covenants,
agreements, conditions and stipulations of the Loan Documents as
amended hereby.
6. Expenses and Other Payments. At the time of
execution and delivery of this Second Amendment, Assignor shall pay
to Lender all reasonable costs, fees and expenses incurred by
Lender in connection with this Second Amendment.
7. Miscellaneous.
(a) Recording. Assignor shall promptly cause this
Second Amendment to be filed or recorded in such manner and in such
places as may be required by any present or future law in order to
publish notice of and fully to protect the lien of the Assignment
upon and the interest of Lender in, the Assigned Loan Documents.
Assignor will pay all filing and recording fees, and all expenses
incident to the preparation, execution and acknowledgement of this
Second Amendment, and all Federal, state, county and municipal
taxes, duties, assessments and charges now or hereafter arising out
of or in connection with the filing, recording, execution and
delivery of this Second Amendment, including without limitation any
and all documentary stamps and/or intangible taxes. If at any time
any agency of the State of Florida shall determine that the
documentary stamps affixed to the Renewal Revolving Note or the
intangible personal property taxes affixed to this Second Amendment
are insufficient or if no documentary stamps or intangible personal
property taxes have been affixed and that such stamps and taxes
should thereafter be affixed, the Assignor shall pay for the same,
together with any interest or penalties imposed in connection with
such determination. Assignor may, at its expense and after prior
notice to Lender, by appropriate proceedings diligently prosecuted,
contest in good faith the validity or amount of any such taxes,
assessments and other charges and, during the period of such
contest, permit the items so contested to remain unpaid, however,
if at any time Lender shall notify Assignor that, in its opinion,
by nonpayment of any such items that the lien of any Assigned
Mortgage, as to any part of the Mortgaged Property or the validity
or operation of the Assignment, as amended by this Second
Amendment, will be adversely affected, or the nonpayment of any
such items will result in the creation of a lien of equal or
superior priority to any of the Assigned Mortgages upon any of the
Mortgaged Property or of equal or superior priority to the lien and
security interest of the Assignment on any Assigned Loan Document,
Assignor shall promptly pay such taxes, assessments or charges.
(b) Severability. If any one or more of the
provisions of this Second Amendment is held to be invalid, illegal
or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision or provisions in
every other respect and of the remaining provisions of this Second
Amendment shall not be in any way impaired, and each term or
provision shall be construed to be legal, valid, binding and
enforceable to the maximum extent permitted by law.
(c) Survival of Covenants, Agreements,
Representations and Warranties. All warranties, representations
and covenants made by Assignor herein or in any certificate or
other instrument delivered by it or on its behalf under this Second
Amendment shall be considered to have been relied upon by Lender
and shall survive regardless of any investigation made by Lender or
on its behalf. All such statements and any such certificate or
other instrument shall constitute warranties and representations by
Assignor hereunder.
(d) Headings. Paragraph headings have been
inserted in this Second Amendment as a matter of convenience of
reference only; such paragraph headings are not part of this Second
Amendment and shall not be used in the interpretation of this
Second Amendment.
(e) Time of the Essence. Time is hereby expressly
made of the essence with respect to the performance and/or
satisfaction of each of the provisions and conditions of this
Second Amendment.
(f) Governing Law/Jurisdiction/Venue. This Second
Amendment is made and entered into in the County of Cuyahoga, State
of Ohio and shall, in all respects, be interpreted, enforced and
governed by and under the laws of Ohio, and all parties consent to
jurisdiction and venue in any State or Federal Court in said County
and State with respect to any claim, cause of action or proceeding
relating to this Second Amendment, the Renewal Revolving Note or
any transaction contemplated hereby.
(g) Waiver of Trial by Jury. Each party hereby
voluntarily and knowingly waives its right to trial by jury in
connection with any dispute, claim, action, cause of action or
proceeding between the parties hereto relating in any way to the
Renewal Revolving Note, this Second Amendment or any transaction
contemplated hereby.
(h) Limited Modification/Conflicts. Except to the
limited extent expressly provided herein, the Assignment and all
other Loan Documents, as modified by the First Amendment and by
this Second Amendment, including without limitation the addition of
Section 2(j) to the Assignment [which said Section 2(j) is hereby
reaffirmed by Assignor and Lender], shall remain in full force and
effect. In the event of any inconsistency between the terms and
conditions of the Assignment and this Second Amendment, the terms
and provisions of this Second Amendment shall govern and control.
Signed, acknowledged and delivered ASSIGNOR:
in the presence of: CV REIT, INC.,
a Delaware corporation
/s/ Barbara Barzyk By:/s/ Elaine Kahant
- -------------------- -------------------------
Name printed: Barbara Barzyk Name Printed: Elaine Kahant
Its: Vice President
/s/ Marie Lamazza
- ------------------
Name Printed: Marie Lamazza
Witness as to Assignor
LENDER:
OHIO SAVINGS BANK,
a federal savings bank,
f/k/a Ohio Savings Bank,
an Ohio corporation
By: /s/ Robert Goldberg
-------------------------
Name Printed: Robert Goldberg
Its: President
By: /s/ Frank J. Bolognia
--------------------------
Name Printed: Frank J. Bolognia
Its: Senior Vice Presiden
STATE OF FLORIDA )
)ss:
COUNTY OF PALM BEACH )
Before me, a Notary Public in and for said County and State,
on this 20th day of November, 1996 personally appeared the above-named Elaine
Kahant the Vice President of CV Reit, Inc., a Delaware
corporation, who acknowledged to me that he did sign the foregoing
instrument, and that such signing was the free act and deed of said
CV Reit, Inc. and his free act and deed as such officer. She is
personally known to me.
/s/ Marie Lamazza
---------------------
Printed Name: Marie Lamazza
Notary Public, State of Florida
My Commission Expires: September 24, 2000
(SEAL)
STATE OF OHIO )
)ss:
COUNTY OF CUYAHOGA )
I hereby certify that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to
take acknowledgements, the foregoing instrument was acknowledged
before me by Robert Goldberg and Frank J. Bolognia, President and
Sr. Vice President, respectively, of Ohio Savings Bank, a federal
savings bank, f/k/a Ohio Savings Bank, an Ohio corporation, freely
and voluntarily under the authority duly vested in them by said
corporation. They are personally known to me.
WITNESS my hand and official seal in the County and State last
aforesaid this 31st day of October, 1996.
/s/ R. L. Lugibihl
----------------------------
Notary Public, State of Ohio
(SEAL)
R. L. Lugibihl
----------------------------
Typed, printed or stamped name of
Notary Public
My Commission Expires: September 8, 1999
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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,564<F1>
<SECURITIES> 6,436
<RECEIVABLES> 84,808
<ALLOWANCES> 2,401
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 23,520
<DEPRECIATION> 2,425
<TOTAL-ASSETS> 118,930
<CURRENT-LIABILITIES> 0
<BONDS> 35,064
0
0
<COMMON> 80
<OTHER-SE> 73,594
<TOTAL-LIABILITY-AND-EQUITY> 118,930
<SALES> 0
<TOTAL-REVENUES> 13,242
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,244
<LOSS-PROVISION> (906)
<INTEREST-EXPENSE> 3,232
<INCOME-PRETAX> 9,449
<INCOME-TAX> (121)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,570
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
<FN>
<F1>Includes $898 restricted.
</FN>
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