<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
-------------
Commission file number 0-8902
------
REAL ESTATE FUND INVESTMENT TRUST
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0402813
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
304 South Main Street 29644
P. O. Box 396, Fountain Inn, SC -------------------
- ------------------------------- (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 862-3765
- -------------------------------------------------- -------------------
<TABLE>
<S> <C>
Former name, former address and former fiscal year, if changed since last report: N/A
- --------------------------------------------------------------------------------- ---
</TABLE>
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
--- ---
The number of shares outstanding of the Registrant's Shares of Beneficial
Interest, as of August 14, 1996: 2,090,108
---------
<PAGE> 2
Real Estate Fund Investment Trust
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheet--June 30, 1996
Condensed statements of income--Three months ended June 30,
1996 and 1995; Six months ended June 30, 1996 and 1995.
Condensed statements of cash flows--Six months ended June 30, 1996
and 1995.
Note to condensed financial statements--June 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
Part I. Financial Information
Real Estate Fund Investment Trust
Condensed Balance Sheet
<TABLE>
<CAPTION>
JUNE 30,
1996
(Unaudited)
<S> <C>
ASSETS
Real estate investments:
Equity investments in real estate, less allowances for
depreciation:
Earning $1,868,472
Non-earning 216,030
----------
2,084,502
Net investment in direct financing leases 231,676
Mortgage notes receivable 223,208
----------
454,884
Other assets:
Cash and cash equivalents 320,285
Rents and tenant charges receivable, net of allowance for
uncollectible accounts of $45,000 95,105
Prepaid expenses and other 28,980
----------
444,370
$2,983,756
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accrued property taxes $74,410
Other accrued expenses 43,908
Deferred income taxes 2,000
----------
120,318
Shareholders' equity:
Shares of Beneficial Interest, par value $1.00 per
share--unlimited authorization, issued and
outstanding 2,090,108 shares 2,090,108
Additional paid-in capital 759,110
Undistributed net income 14,220
----------
2,863,438
$2,983,756
==========
</TABLE>
<PAGE> 4
Real Estate Fund Investment Trust
Condensed Statements of Income (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- ----------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 197,358 $ 218,110 $ 400,925 $ 436,838
Earned income from direct financing leases 8,882 11,153 18,375 22,805
Interest on mortgage notes and money
market accounts 6,539 8,407 14,702 15,325
--------- --------- ---------- ----------
212,779 237,670 434,002 474,968
Expenses:
Provision for depreciation 43,159 43,008 85,680 85,840
Property and miscellaneous taxes 40,029 41,393 76,348 82,921
Maintenance and repairs, including payments
of $32,537 (1996), $20,349 (1995),
$45,486 (1996) and $29,349 (1995) to a
company in which the Trust's manager
is a principal owner 41,684 39,842 59,606 64,775
Provision for bad debts - - 3,300 3,600
Administrative and other expenses 57,648 52,996 123,114 117,328
--------- --------- ---------- ----------
182,520 177,239 348,048 354,464
--------- --------- ---------- ----------
Income from operations before income taxes 30,259 60,431 85,954 120,504
Provision for federal and state income taxes 200 800 1,100 1,900
--------- --------- ---------- ----------
Income from operations 30,059 59,631 84,854 118,604
Gain on sale of equity investment in real estate,
net of taxes - 64,696 55,385 203,897
--------- --------- ---------- ----------
Net income $ 30,059 $ 124,327 $ 140,239 $ 322,501
========= ========= ========== ==========
Net income per Share of Beneficial Interest:
Income from operations $ .01 $ .03 $ .04 .05
Gain on sale of real estate - .03 .03 .10
--------- --------- ---------- ----------
$ .01 $ .06 $ .07 $ .15
========= ========= ========== ==========
Number of shares used in computation 2,090,108 2,090,108 2,090,108 2,090,108
========= ========= ========== ==========
Cash distributions paid per Share of
Beneficial Interest $ .03 $ .05 $ .06 $ .10
========= ========= ========== ==========
</TABLE>
<PAGE> 5
Real Estate Fund Investment Trust
Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 140,239 $ 322,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of equity investments in real estate 85,680 85,556
Gain on sale of equity investments in real estate (55,485) (203,997)
Recovery of investment in direct financing leases 26,175 21,745
Decrease in rents and tenant charges receivable,
prepaid expenses, escrow deposits and other assets 14,098 82,539
Decrease in accrued property taxes, other accrued
expenses and federal and state income taxes payable (7,402) (88,675)
--------- ---------
Net cash provided by operating activities 203,305 219,669
INVESTING ACTIVITIES
Proceeds from sale of equity investment in real estate,
net of selling expenses of $384 (1996) and $7,542 (1995) 69,616 224,958
Additional costs of equity investments in real estate,
including $162,122 (1996) and $16,391 (1995) paid
to a company in which the Trust's manager is a
principal owner (414,834) (38,631)
Collections of mortgage notes receivable 22,358 12,047
--------- ---------
Net cash (used) provided by investing activities (322,860) 198,374
DIVIDENDS PAID (125,407) (209,011)
--------- ---------
(Decrease) increase in cash and cash equivalents (244,962) 209,032
Cash and cash equivalents at beginning of period 565,247 542,081
--------- ---------
Cash and cash equivalents at end of period $ 320,285 $ 751,113
========= =========
</TABLE>
<PAGE> 6
Management's Discussion and Analysis
There has been no significant change in the Trust's financial condition since
December 31, 1995. The Trust spent approximately $415,000 on capital
improvements during the six-month period which ended June 30, 1996. These
expenditures were paid for in cash, but they have not caused a liquidity
problem. At present there are no large capital expenditures planned that would
present a liquidity problem. In the Trust's Form 10-KSB for the year ended
December 31, 1995, disclosure was made of the shareholders' vote in May, 1989
to direct the Board of Trustees to develop a plan of liquidation of the Trust's
assets. Although negotiations, related to purchase offers received, are
continuing, no formal agreements to sell the Trust's assets have been executed
at this time. The plan of liquidation must also be approved by the
shareholders. The Trust intends to continue to distribute as dividends at
least 95% of its taxable income other than capital gains until such time as the
plan of liquidation is approved.
Rental income decreased by approximately 10% during the three-month period
ended June 30, 1996, as compared to the three-month period ended June 30, 1995.
This decrease is primarily due to the sale of several pieces of rental
property in the latter part of 1995, and due to the bankruptcy of a major
tenant. The bankruptcy of this tenant caused a decrease in rental income of
approximately $12,000 during the three-month period ending June 30, 1996. The
Trust was able to partially offset these decreases in rental income by securing
a tenant for a previously unoccupied location. As of June 30, 1996, the Trust
had approximately 72,000 square feet of vacant space as compared to
approximately 109,000 square feet of vacant space at June 30, 1995.
Total expenses increased by approximately 3% during the three-month period
ended June 30, 1996, as compared to the three-month period ended June 30, 1995.
The increase in total expenses is mainly due to an increase in management
expenses and legal and professional expenses. These expenses have increased
due to additional meetings and assistance in analyzing various offers for the
sale of real estate, as discussed in the final paragraph of this discussion and
analysis.
For 1996 and 1995, the Trust has provided for federal and state income taxes,
assuming a consistent flow of revenue and expenses for the year. The taxes are
based on estimated taxable income after the 95% dividend distribution required
by IRS code provisions pertaining to real estate investments trusts.
In January of 1996, the Trust sold the St. Stephen Post Office located in St.
Stephen, South Carolina for $70,000. A gain of $55,485 and $53,566 was
recognized for financial reporting and income tax purposes, respectively. In
the Form 10-KSB for the year ended December 31, 1995, disclosure was made
concerning two separate offers received by the Trust to purchase the total
assets (each in excess of the total carrying value) of the Trust. One of the
parties, which had made an offer, has withdrawn the offer and has no further
interest in acquiring any real estate. The other party still has an active
interest in acquiring the total assets of the Trust. In addition, another
group has recently made an offer to purchase the total assets of the Trust.
This additional offer is in excess of the total carrying value of the Trust's
assets. The Board of Trustees is in the process of evaluating these offers.
<PAGE> 7
Real Estate Fund Investment Trust
Note to Condensed Financial Statements (Unaudited)
June 30, 1996
Note - Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principals for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month and
six-month periods ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. For
further information, refer to the financial statements and footnotes thereto
included in the Trust's annual report on Form 10-KSB for the year ended
December 31, 1995.
<PAGE> 8
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule (for SEC use only)
The Trust did not file any reports on Form 8-K during the three
months ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Real Estate Fund Investment Trust
---------------------------------
(Registrant)
Date August 14, 1996 /s/ Werner B. McDannald
--------------- ----------------------------------
Werner B. McDannald, Manager
Date August 14, 1996 /s/ Stewart H. Garrett
--------------- -----------------------------------
Stewart H. Garrett, Sec./Treas.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AND CONDENSED STATEMENTS OF INCOME AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.<F1>
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 320,285
<SECURITIES> 0
<RECEIVABLES> 363,313
<ALLOWANCES> 45,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,983,756
<CURRENT-LIABILITIES> 0
<BONDS> 0
2,090,108
0
<COMMON> 0
<OTHER-SE> 773,330
<TOTAL-LIABILITY-AND-EQUITY> 2,983,756
<SALES> 0
<TOTAL-REVENUES> 434,002
<CGS> 0
<TOTAL-COSTS> 348,048
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,300
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 85,954
<INCOME-TAX> 1,100
<INCOME-CONTINUING> 84,854
<DISCONTINUED> 0
<EXTRAORDINARY> 55,385
<CHANGES> 0
<NET-INCOME> 140,239
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<FN>
<F1>THIS COMPANY IS A REAL ESTATE INVESTMENT TRUST. THEREFORE, SEVERAL OF THE ITEMS
REQUESTED ARE NOT SPECIFICALLY IDENTIFIED ON THE 10-QSB.
</FN>
</TABLE>
