<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 March 31, 1996
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Commission file number 0-8902
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REAL ESTATE FUND INVESTMENT TRUST
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(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0402813
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
304 South Main Street
P.O. Box 396, Fountain Inn, S.C. 29644
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 862-3765
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Former name, former address and former fiscal year, if changed since last
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report: N/A
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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
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The number of shares outstanding of the Registrant's Shares of
Beneficial Interest, as of May 13, 1996: 2,090,108
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<PAGE> 2
Real Estate Fund Investment Trust
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheet--March 31, 1996
Condensed statements of income--Three months ended March 31,
1996 and 1995
Condensed statements of cash flows--Three months ended March
31, 1996 and 1995
Note to condensed financial statements--March 31, 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>
MARCH 31,
1996
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(Unaudited)
<S> <C>
ASSETS
Real estate investments:
Equity investments in real estate, less allowances for depreciation:
Earning $ 1,849,838
Non-earning 213,045
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2,062,883
Net investment in direct financing leases 245,069
Mortgage notes receivable 235,210
-----------
480,279
Other assets:
Cash and cash equivalents 317,851
Rents and tenant charges receivable, net of allowance for
uncollectible accounts of $45,000 in 1996. 79,112
Prepaid expenses and other 50,540
-----------
447,503
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$ 2,990,665
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accrued property taxes $ 35,377
Other accrued expenses 57,205
Deferred income taxes 2,000
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94,582
Shareholders' equity:
Shares of Beneficial Interest, par value $1.00 per share--unlimited
authorization, issued and outstanding 2,090,108 shares 2,090,108
Additional paid-in capital 759,110
Undistributed net income 46,865
-----------
2,896,083
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$ 2,990,665
===========
</TABLE>
See note to unaudited condensed financial statements.
<PAGE> 4
Real Estate Fund Investment Trust
Condensed Statements of Income (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1996 1995
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<S> <C> <C>
Revenues:
Rental income $ 203,567 $ 218,644
Earned income from direct financing leases 9,493 11,652
Interest on mortgage notes and money market accounts 8,163 6,918
Miscellaneous
- 84
--------- ---------
221,223 237,298
Expenses:
Provision for depreciation 42,521 42,670
Property and miscellaneous taxes 36,319 41,528
Maintenance and repairs, including payments of
$12,949 (1996) and $9,000 (1995) to a company
in which the independent contractor is a principal owner 17,922 24,933
Provision for bad debts 3,300 3,600
Other expenses 65,466 64,494
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165,528 177,225
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Income before income taxes 55,695 60,073
Provision for federal and state income taxes 900 1,100
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Income from operations $ 54,795 $ 58,973
Gain on sale of equity investment in real estate,
net of taxes of $100 (1996) and $100 (1995) 55,385 139,201
--------- ---------
Net income $ 110,180 $ 198,174
========= =========
Net income per Share of Beneficial Interest:
Income from operations $ .025 $ .03
Gain on sale of real estate .025 .07
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$ .05 $ .10
========= =========
Number of shares used in computation 2,090,108 2,090,108
========= =========
Cash distributions declared per Share of
Beneficial Interest $ .03 $ .05
========= =========
</TABLE>
See note to unaudited condensed financial statements.
<PAGE> 5
Real Estate Fund Investment Trust
Condensed Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $110,180 $198,174
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of equity investments in real estate 42,521 42,670
Gain on sale of equity investment in real estate (55,485) (139,301)
Recovery of investment in direct financing leases 12,782 10,623
Decrease (increase) in rents and tenant charges receivable,
prepaid expenses, escrow deposits and other assets 8,530 (94,232)
(Decrease) in accrued property taxes, other accrued expenses
and federal and state income taxes payable (33,138) (109,101)
-------- --------
Net cash provided (used) by operating activities 85,390 (91,167)
INVESTING ACTIVITIES
Proceed from sale of equity investment in real estate,
net of selling expense of $384 (1996) and $1,271 (1995) 69,616 146,229
Additional costs of equity investments in real estate,
including $113,723 (1996) and $22,437 (1995) paid to a company
in which the Trust's manager is a principal owner (350,055) (30,511)
Collections of mortgage notes receivable 10,356 4,774
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Net cash used in investing activities (270,083) 120,492
DIVIDENDS PAID (62,703) (104,505)
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Decrease in cash and cash equivalents (247,396) (75,180)
Cash and cash equivalents at beginning of period 565,247 542,081
-------- --------
Cash and cash equivalents at end of period $317,851 $446,901
======== ========
</TABLE>
See note to unaudited condensed financial statements.
<PAGE> 6
Real Estate Fund Investment Trust
Note to Condensed Financial Statements (Unaudited)
March 31, 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 period ended March 31,
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> 7
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 $350,000 on capital
improvements during the three-month period which ended March 31, 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 to direct the
Board of Trustees to develop a plan of liquidation of the Trust's assets.
Although negotiations are continuing, no formal sales 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 7% during the three-month period ended
March 31, 1996, as compared to the three-month period ended March 31, 1995.
This decrease is primarily due to the sale of several pieces of rental property
in the latter part of 1995. The Trust was able to partially offset the
decrease in rental property held by securing a tenant for a previously
unoccupied location. As of March 31, 1996, the Trust had approximately 68,000
square feet of vacant space as compared to approximately 109,000 square feet of
vacant space at March 31, 1995.
Total expenses have decreased by approximately 7% during the three-month period
ended March 31, 1996, as compared to the three-month period ended March 31,
1995. This decrease is largely due to a decrease in overall expenses,
including depreciation, property taxes, and repair and maintenance expenses.
Overall expenses have decreased due to the above mentioned sale of rental
property in 1995, which has resulted in a smaller amount of rental property
held and a smaller amount of operating expenses.
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 $55,385 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. The Board of
Trustees is in the process of evaluating such offers.
<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 March 31, 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 May 13, 1996 /s/ Werner B. McDannald
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Werner B. McDannald, Manager
Date May 13, 1996 /s/ Stewart H. Garrett
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Stewart H. Garrett, Sec./Treas.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET, CONDENSED STATEMENT OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FIRST QUARTER 10-QSB FOR 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 317,851<F1>
<SECURITIES> 0
<RECEIVABLES> 359,322
<ALLOWANCES> 45,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,990,665
<CURRENT-LIABILITIES> 0
<BONDS> 0
2,090,108
0
<COMMON> 0
<OTHER-SE> 805,975
<TOTAL-LIABILITY-AND-EQUITY> 2,990,665
<SALES> 0
<TOTAL-REVENUES> 221,223
<CGS> 0
<TOTAL-COSTS> 165,528
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,300
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 55,695
<INCOME-TAX> 900
<INCOME-CONTINUING> 54,795
<DISCONTINUED> 0
<EXTRAORDINARY> 55,385
<CHANGES> 0
<NET-INCOME> 110,180
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<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>
