<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________
Commission File Number 0-5641
CLEVETRUST REALTY INVESTORS
(Exact name of registrant as specified in its charter)
Massachusetts 34-1085584
(State or other jurisdiction of (I. R. S. Employer Identification No.)
incorporation or organization)
2001 Crocker Road, Suite 400
Westlake, Ohio 44145
(Address of Principal Executive Offices) (Zip Code)
(216) 899-0909
(Registrant's telephone number, including area code)
Not Applicable
Former name, former address and former fiscal year if changed since last report
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________
Shares of Beneficial Interest Outstanding at February 9, 1995: 5,470,696
The sequential page in this report where the Exhibit Index is located is page
11.
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<TABLE>
CLEVETRUST REALTY INVESTORS
INDEX
<CAPTION>
Sequential
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Condition
-- December 31,1994 and September 30, 1994 3
Statement of Operations
-- Three Months ended December 31, 1994 and 1993 4
Statement of Cash Flows
-- Three Months ended December 31, 1994 and 1993 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
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<PAGE> 3
<TABLE>
CLEVETRUST REALTY INVESTORS
STATEMENT OF FINANCIAL CONDITION
<CAPTION>
DECEMBER 31, 1994 SEPTEMBER 30, 1994
------------------- --------------------
(in thousands)
<S> <C> <C>
ASSETS
- - - ---------------------------------------------
Invested assets:
Investments in real estate:
Improved properties $70,836 $70,715
Less: Depreciation 26,140 25,648
------------------- --------------------
44,696 45,067
Land held for sale or development 313 313
------------------- --------------------
45,009 45,380
Real estate mortgage loans 193 236
------------------- --------------------
45,202 45,616
Cash and cash equivalents 670 251
Certificates of deposit 0 500
Insurance settlement proceeds - NOTE B 309 3,341
Other assets 1,318 1,296
------------------- --------------------
TOTAL ASSETS $47,499 $51,004
=================== ====================
LIABILITIES
- - - ---------------------------------------------
Mortgage notes payable $10,987 $11,111
Bank notes payable - NOTE C 9,172 11,180
Accrued interest on notes payable 51 27
Accrued fire repairs - NOTE B 2,298 3,341
Accrued expenses and other liabilities 1,992 2,195
------------------- --------------------
TOTAL LIABILITIES 24,500 27,854
SHAREHOLDERS' EQUITY
- - - ---------------------------------------------
Shares of Beneficial Interest, par value
$1 per Share:
Authorized - - Unlimited
Issued and outstanding shares - 5,470,696 5,471 5,471
Additional paid-in capital 39,794 39,794
Accumulated deficit (22,266) (22,115)
------------------- --------------------
TOTAL SHAREHOLDERS' EQUITY 22,999 23,150
------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $47,499 $51,004
=================== ====================
<FN>
See notes to financial statements
</TABLE>
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<PAGE> 4
<TABLE>
CLEVETRUST REALTY INVESTORS
STATEMENT OF OPERATIONS
The following statement of operations of CleveTrust Realty Investors for the
three-month periods ended December 31, 1994 and 1993, respectively, are
unaudited, but in the opinion of management include all adjustments necessary
to present fairly the results of operations. All such adjustments were of a
normal recurring nature. The results of operations of the three-month period
ended December 31, 1994 are not necessarily indicative of the results of
operations for succeeding periods.
<CAPTION>
Three Months Ended
----------------------
12/31/94 12/31/93
---------- ----------
(in thousands, except per share data)
<S> <C> <C>
INCOME
- - - ----------------------------------------
Real estate operations:
Rental Income $2,615 $2,391
Less: Real estate operating expenses 1,371 1,168
Less: Depreciation expense 492 490
---------- ----------
1,863 1,658
---------- ----------
Income from real estate operations 752 733
Interest income 35 11
Other 16 7
---------- ----------
803 751
EXPENSES
- - - ----------------------------------------
Interest:
Mortgage notes payable 269 419
Bank notes payable - NOTE C 243 185
---------- ----------
512 604
General and administrative 224 258
---------- ----------
736 862
---------- ----------
NET INCOME (LOSS) $67 ($111)
========== ==========
Per Share of Beneficial Interest - NOTE E:
NET INCOME (LOSS) PER SHARE $0.01 ($0.03)
========== ==========
Weighted Average Number of Shares of
Beneficial Interest Outstanding 5,471 3,722
========== ==========
<FN>
See notes to financial statements.
</TABLE>
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<PAGE> 5
<TABLE>
CLEVETRUST REALTY INVESTORS
STATEMENT OF CASH FLOWS
<CAPTION>
Three Months Ended
----------------------
12/31/94 12/31/93
---------- ----------
(in thousands)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $67 ($111)
Non-cash revenues and expenses included in income:
Depreciation expense 492 490
(Increase) in other assets (22) (3)
Increase in accrued interest on notes payable 24 1
(Decrease) increase in accrued expenses and
other liabilities (203) 144
---------- ----------
Cash Flow From Operating Activities 358 521
CASH FLOW FROM INVESTING ACTIVITIES:
Equity investments:
Improvements to existing properties (121) (63)
Net insurance proceeds 1,989 0
Real estate mortgage loan repayments 43 77
---------- ----------
Cash Flow From Investing Activities 1,911 14
CASH FLOW FROM FINANCING ACTIVITIES:
Mortgage notes payable - principal amortization payments (124) (119)
Bank notes payable:
Repayments (1,989) 0
Principal amortization payments (19) (63)
Certificates of deposit 500 0
Distributions to shareholders (218) (111)
---------- ----------
Cash Flow (Used In) From Financing Activities (1,850) (293)
---------- ----------
Increase in cash and short-term investments 419 242
Balance at beginning of year 251 315
---------- ----------
Balance at end of period $670 $557
========== ==========
<FN>
See notes to financial statements
</TABLE>
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<PAGE> 6
CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A - INCOME TAXES
Commencing with fiscal 1993 the Trust no longer qualified as a REIT with the
change in status to a taxable entity retroactive to October 1, 1992. As of
October 1, 1992 the Trust adopted, Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109
had no effect on net income.
The Trust had no income tax expense for the three month period ended December
31, 1993 or for the fiscal year ended September 30, 1994. The Trust had no
income tax expense for the three month period ended December 31, 1994 and it
expects to have no income tax expense for the fiscal year ended September 30,
1995.
The Trust had a net deferred tax asset position at December 31, 1994 and
September 30, 1994 of approximately $4,043,000 and $4,066,000, respectively.
The Trust maintains a valuation reserve equal to its net deferred tax asset as
there is doubt as to whether the net deferred tax will be realized.
NOTE B - INSURANCE SETTLEMENT
On January 18, 1994 the Trust's Petroleum Club Building, located in Tulsa,
Oklahoma, sustained a major fire. In July, 1994 the Trust and its insurance
company agreed on a settlement. Of the total settlement, $525,000 is payable
to the Trust contingent upon the Trust's completion of certain repairs and
additions to the building within a set time frame. The insurance company has
remitted $5,500,000 to the Trust. Building repairs and other costs associated
with the fire are currently estimated to be adequately covered by the
settlement. At December 31, 1994 the Trust had $2,298,000 accrued for
repairs and other costs related to the fire. The Trust used $1,989,000 of the
settlement proceeds to make a paydown on its 1994 Credit (see Note C). The
Trust has the ability, subject to the conditions of the loan agreement, to
borrow these funds back, when needed, to make payments for the fire repair work
and other costs associated with the fire.
NOTE C - BANK NOTES PAYABLE
On September 30, 1994 the Trust borrowed $7,689,000 under the terms of a demand
note from National City Bank of Cleveland, Ohio ("NCB"). The funds were used
to repay a maturing mortgage loan. This demand note had an interest rate of
prime. This demand note was converted to a revolving line of credit ("1994
Credit") issued by NCB and M & T Bank of Buffalo, New York ("M&T"), which was
signed effective November 30, 1994. The 1994 Credit is for up to $25,000,000
(but is limited by the value of the collateral provided). Of this amount a
maximum of $15,000,000 is currently available and $10,000,000 will be available
upon payment of an activation fee of 3/4 of 1% on the $10,000,000. Interest
will be at either i) 1/4 of 1% over the prime rate; ii) 250 basis points
over the LIBOR rate; or iii) NCB's fixed interest rate available from time to
time. Additionally, a commitment fee of 3/8 of 1% is due on any funds
available but not borrowed. Each year the lenders will review the 1994 Credit
with the
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CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE C - BANK NOTES PAYABLE - (Continued)
right to extend it for one additional year. At December 31, 1994 the
outstanding balance was $5,700,000. The 1994 Credit is secured by certain of
the Trust's real estate and contains certain covenants including a covenant for
a minimum shareholders' equity. At December 31, 1994 the amount of
Shareholders' equity free from such restrictions was approximately $2,999,000.
The Trust also has a loan with another bank which has a maturity date of
December 25, 1997. The interest rate is prime plus 1% with a minimum rate of
7.5%. The Trust is required to make monthly amortization payments based on a
twenty year amortization schedule. Additionally, the Trust was required to
make three principal lump sum payments totaling $1,388,000. All three required
payments were previously made. At December 31, 1994 the outstanding balance
was $3,472,000. The loan, which is prepayable at any time in whole or in part,
is secured by certain of the Trust's real estate investments.
Effective December 31, 1994 the Trust terminated the December 31, 1990 Credit
Agreement ("1990 Credit") it had with Society National Bank. Effective January
1, 1994 the Trust and the lender had amended the 1990 Credit, by converting the
loan to a revolving line of credit. During January and February, 1994 the
Trust paid down the $4,508,000 balance of the 1990 Credit. There were no
borrowings outstanding when the 1990 Credit was terminated.
NOTE D - DISTRIBUTIONS
The Trustees, at their October 25, 1994 meeting declared a quarterly cash
distribution of $.04 per share payable January 20, 1995 to shareholders of
record as of January 6, 1995.
NOTE E - NET INCOME PER SHARE
Net income per Share of Beneficial Interest has been computed using the
weighted average number of Shares of Beneficial Interest outstanding each
period.
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<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FINANCIAL CONDITION
At December 31, 1994 the Trust owned $71,149,000 in real estate investments at
cost and had one real estate mortgage loan with a balance of $193,000. These
investments, net of accumulated depreciation totaled $45,202,000. This
compared with total real estate investments at cost of $71,028,000, one real
estate mortgage loan with a balance of $236,000 and a carrying value after
accumulated depreciation of $45,616,000 at September 30, 1994. The change
since year end was the net result of the Trust receiving $43,000 in real estate
loan repayments, spending $121,000 on improvements to existing properties and
recording depreciation expense of $492,000.
In December, 1994 the Trust made a $1,989,000 paydown on its new revolving line
of credit (see Note C to the Financial Statements) with a portion of the
Insurance Settlement Proceeds which the Trust had received as a part of the
July, 1994 settlement between the Trust and its insurance company in connection
with the January 18, 1994 fire at the Petroleum Club Building located in Tulsa,
Oklahoma (see Note B to the Financial Statements). The Trust can reborrow
these funds at any time (to pay for the fire repairs and other costs associated
with the fire).
The $151,000 reduction in shareholders' equity at December 31, 1994 from
September 30, 1994 was the net effect of the Trust's recording net income of
$67,000 and making distributions to shareholders of $218,000 during the three
months ended December 31, 1994. At December 31, 1994 the Trust's debt to
equity ratio was .88 to 1.00 compared to .96 to 1.00 at September 30, 1994.
RESULTS OF OPERATIONS
Income from real estate operations during the quarter ended December 31, 1994
increased $19,000 (3%) when compared to the quarter ended December 31, 1993.
Rental income for the quarter ended December 31, 1994 increased $224,000 (9%)
compared to the quarter ended December 31, 1993. Real estate operating
expenses increased $203,000 (17%) in the three months ended December 31, 1994
versus 1993. These increases were primarily due to the Trust's purchase in
August, 1994 of a 104,000 square foot office building located in Dallas, Texas.
The $92,000 (15%) decrease in interest expense for the three month period ended
December 31, 1994 when compared to the same period one year ago was primarily
due to less borrowings outstanding. During the three months ended December 31,
1994 the average daily outstanding borrowings were $21,871,000 compared to an
average daily outstanding balance of $25,825,000 for the three months ended
December 31, 1993.
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<PAGE> 9
P A R T I I
Item 1. Legal Proceedings
There are no items or events requiring reporting with respect to
this item.
Item 2. Changes in Securities
There are no items or events requiring reporting with respect to
this item.
Item 3. Defaults upon Senior Securities
There are no items or events requiring reporting with respect to
this item.
Item 4. Submission of Matters to a Vote of Security Holders
There are no items or events requiring reporting with respect to
this item.
Item 5. Other Information
There are no items or events requiring reporting with respect to
this item.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27: Financial Data Schedule
b) There were no Reports on Form 8-K filed during the quarter for
which this report is filed.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEVETRUST REALTY INVESTORS
(Registrant)
Date: February 9, 1995 By: /s/ John C. Kikol
---------------------------
John C. Kikol, President
Date: February 9, 1995 By: /s/ Michael R. Thoms
----------------------------
Michael R. Thoms, Vice President
and Treasurer
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<PAGE> 11
CLEVETRUST REALTY INVESTORS
QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 1994
EXHIBIT INDEX
"Assigned" "Sequential"
Exhibit No. Description Page No.
- - - ----------- ----------- ---------
(27) Financial Data Schedule 12
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE PERIOD ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 979
<SECURITIES> 0
<RECEIVABLES> 604
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 907
<PP&E> 71,149
<DEPRECIATION> 26,140
<TOTAL-ASSETS> 47,499
<CURRENT-LIABILITIES> 4,290
<BONDS> 20,210
<COMMON> 5,471
0
0
<OTHER-SE> 17,528
<TOTAL-LIABILITY-AND-EQUITY> 47,499
<SALES> 0
<TOTAL-REVENUES> 2,666
<CGS> 0
<TOTAL-COSTS> 1,863
<OTHER-EXPENSES> 224
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 512
<INCOME-PRETAX> 67
<INCOME-TAX> 0
<INCOME-CONTINUING> 67
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
