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 September 30, 1999
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8594
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PRESIDENTIAL REALTY CORPORATION
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1954619
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 South Broadway, White Plains, New York 10605
------------------------------------------ ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, indicating area code 914-948-1300
------------
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 each of the issuer's classes of common stock
as of the close of business on November 5, 1999 was 478,940 shares of Class A
common and 3,147,053 shares of Class B common.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
For the Nine Months Ended
September 30, 1999
Part I - Financial Information (Unaudited)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
Assets September 30, December 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Mortgage portfolio (Note 2):
Sold properties, accrual $28,503,621 $43,440,675
Related parties, accrual 1,602,601 1,698,982
Sold properties, impaired 17,589,027
------------------ ------------------
Total mortgage portfolio 30,106,222 62,728,684
------------------ ------------------
Less discounts:
Sold properties, accrual 1,944,669 4,049,630
Related parties, accrual 136,114 149,685
Sold properties, impaired 7,597,138
------------------ ------------------
Total discounts 2,080,783 11,796,453
------------------ ------------------
Less deferred gains:
Sold properties, accrual 11,320,373 12,538,907
Related parties, accrual 913,976 930,057
Sold properties, impaired 6,362,838
------------------ ------------------
Total deferred gains 12,234,349 19,831,802
------------------ ------------------
Net mortgage portfolio (of which $127,957 in 1999
and $931,393 in 1998 are due within one year) 15,791,090 31,100,429
------------------ ------------------
Real estate (Note 3) 35,437,238 34,703,657
Less: accumulated depreciation 7,973,669 7,231,639
------------------ ------------------
Net real estate 27,463,569 27,472,018
------------------ ------------------
Minority partners' interest (Note 4) 7,944,444 7,552,743
Prepaid expenses and deposits in escrow 1,783,587 2,130,214
Other receivables (net of valuation allowance of
$128,799 in 1999 and $120,102 in 1998) 697,695 623,521
Securities available for sale (Note 5) 8,304,893 1,274,734
Cash and cash equivalents 1,683,623 1,764,465
Other assets 1,613,698 1,988,121
------------------ ------------------
Total Assets $65,282,599 $73,906,245
================== ==================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
Liabilities and Stockholders' Equity
September 30, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Liabilities:
Mortgage debt (Note 6):
Properties owned $39,494,667 $39,728,031
Wrap mortgage debt on sold properties 4,668,462
----------------- -----------------
Total (of which $1,340,736 in 1999 and $905,305
in 1998 are due within one year) 39,494,667 44,396,493
Note payable to bank (Note 7) 10,395,361
Executive pension plan liability 1,483,986 1,496,357
Accrued liabilities 1,759,388 2,630,564
Accrued taxes payable (Note 8) 1,566,474
Accrued postretirement costs 546,993 562,167
Deferred income 104,430 565,713
Accounts payable 284,420 235,807
Distribution payable on common stock 580,154
Other liabilities 779,211 772,949
----------------- -----------------
Total Liabilities 46,599,723 61,055,411
----------------- -----------------
Stockholders' Equity:
Common stock; par value $.10 per share
Class A, authorized 700,000 shares, issued and
outstanding 478,940 shares 47,894 47,894
Class B September 30, 1999 December 31, 1998 314,828 313,609
----------- --------------------- ----------------------
Authorized: 10,000,000 10,000,000
Issued: 3,148,280 3,136,092
Treasury: 1,258 11,224
Additional paid-in capital 2,187,530 2,172,368
Retained earnings 17,224,354 10,453,253
Net unrealized gain (loss) on securities available for sale (Notes 5 and 9) (1,074,902) 15,677
Class B, treasury stock (at cost) (Note 10) (16,828) (151,967)
----------------- -----------------
Total Stockholders' Equity 18,682,876 12,850,834
----------------- -----------------
Total Liabilities and Stockholders' Equity $65,282,599 $73,906,245
================= =================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------
1999 1998
----------------- -----------------
Income:
<S> <C> <C>
Rental $7,900,449 $7,144,012
Interest on mortgages - sold properties 2,209,995 2,847,079
Interest on wrap mortgages 528,173 960,181
Interest on mortgages - related parties 202,661 372,717
Investment income 542,844 117,733
Other 66,648 34,764
----------------- -----------------
Total 11,450,770 11,476,486
----------------- -----------------
Costs and Expenses:
General and administrative 2,033,085 2,031,474
Interest on note payable and other 227,952 849,400
Interest on wrap mortgage debt 54,586 155,988
Amortization of loan acquisition costs 3,128 24,344
Depreciation on non-rental property 19,085 18,130
Rental property:
Operating expenses 3,491,948 3,108,535
Interest on mortgages 2,222,652 1,889,461
Real estate taxes 689,237 655,258
Depreciation on real estate 750,240 587,410
Amortization of mortgage costs 255,967 174,920
Minority interest share of partnership income 420,975 359,901
----------------- -----------------
Total 10,168,855 9,854,821
----------------- -----------------
Income before net gain from sales of properties, notes and securities 1,281,915 1,621,665
Net gain from sales of properties, notes and securities (includes a provision
for Federal and State taxes of $1,566,474 in 1999) (Notes 2 and 8) 7,804,493 725,107
----------------- -----------------
Net Income $9,086,408 $2,346,772
================= =================
Earnings per Common Share (basic and diluted) (Note 1-C):
Income before net gain from sales of properties, notes and securities $0.35 $0.45
Net gain from sales of properties, notes and securities 2.16 0.20
----------------- -----------------
Net Income per Common Share $2.51 $0.65
================= =================
Cash Distributions Declared per Common Share $0.64 $0.63
================= =================
Weighted Average Number of Shares Outstanding 3,616,119 3,589,889
================= =================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------
1999 1998
----------------- -----------------
Income:
<S> <C> <C>
Rental $2,683,844 $2,434,424
Interest on mortgages - sold properties 786,947 950,661
Interest on wrap mortgages 318,685
Interest on mortgages - related parties 57,674 109,153
Investment income 204,792 51,140
Other 13,180 5,834
----------------- -----------------
Total 3,746,437 3,869,897
----------------- -----------------
Costs and Expenses:
General and administrative 667,735 630,373
Interest on note payable and other 12,862 280,744
Interest on wrap mortgage debt 50,621
Amortization of loan acquisition costs 8,115
Depreciation on non-rental property 6,362 6,353
Rental property:
Operating expenses 1,200,908 1,064,665
Interest on mortgages 739,013 708,341
Real estate taxes 258,511 215,980
Depreciation on real estate 258,618 207,755
Amortization of mortgage costs 15,997 13,561
Minority interest share of partnership income 163,526 145,722
----------------- -----------------
Total 3,323,532 3,332,230
----------------- -----------------
Income before net gain from sales of properties, notes and securities 422,905 537,667
Net gain from sales of properties, notes and securities 5,494 43,889
----------------- -----------------
Net Income $428,399 $581,556
================= =================
Earnings per Common Share (basic and diluted) (Note 1-C):
Income before net gain from sales of properties, notes and securities $0.11 $0.15
Net gain from sales of properties, notes and securities 0.00 0.01
----------------- -----------------
Net Income per Common Share $0.11 $0.16
================= =================
Cash Distributions Declared per Common Share $0.32 $0.32
================= =================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from rental properties $7,962,377 $6,961,116
Interest received 2,900,941 3,434,791
Miscellaneous income 58,740 30,892
Interest paid on rental property mortgages (2,232,799) (1,853,848)
Interest paid on wrap mortgage debt (54,586) (155,988)
Interest paid on note payable and other (201,234) (694,486)
Cash disbursed for rental property operations (3,508,487) (4,436,811)
Cash disbursed for general and administrative costs (1,477,682) (1,363,154)
--------------- ---------------
Net cash provided by operating activities 3,447,270 1,922,512
--------------- ---------------
Cash Flows from Investing Activities:
Payments received on notes receivable 2,141,403 1,226,401
Payments disbursed for investments in notes receivable (60,000)
Payments disbursed for deferred sales commission (1,000,000)
Proceeds from sale of notes receivable (net of a $400,000
deposit on sale received in 1998) 20,331,599
Payments disbursed for additions and improvements (756,906) (355,398)
Proceeds from sale of property 91,452 74,550
Purchase of property (6,549,637)
Proceeds from sales of securities 23,986
Purchases of securities (8,120,738) (853,812)
--------------- ---------------
Net cash provided by (used in) investing activities 12,686,810 (6,493,910)
--------------- ---------------
Cash Flows from Financing Activities:
Principal payments on mortgage debt:
Properties owned (308,674) (331,237)
Wrap mortgage debt on sold properties (156,222) (358,946)
Mortgage debt payment from proceeds of mortgage refinancing (3,120,190) (10,788,825)
Mortgage proceeds 3,195,500 24,675,000
Repayment of wrap mortgage debt (2,300,000)
Mortgage refinancing repairs and replacement escrows (558,730)
Mortgage costs (82,824) (574,612)
Principal payments on note payable (10,395,361) (109,251)
Cash distributions on common stock (2,315,307) (2,263,079)
Proceeds from dividend reinvestment and share purchase plan 80,832 121,599
Distributions to minority partners (812,676) (3,909,108)
--------------- ---------------
Net cash (used in) provided by financing activities (16,214,922) 5,902,811
--------------- ---------------
Net (Decrease) Increase in Cash and Cash Equivalents (80,842) 1,331,413
Cash and Cash Equivalents, Beginning of Period 1,764,465 979,712
--------------- ---------------
Cash and Cash Equivalents, End of Period $1,683,623 $2,311,125
=============== ===============
See notes to consolidated financial statements.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net Income $9,086,408 $2,346,772
---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,028,420 804,804
Gain from sales of properties, notes and securities (includes a provision
for Federal and State taxes of $1,566,474 in 1999) (7,804,493) (725,107)
Issuance of treasury stock 16,133 15,660
Amortization of discounts on notes and fees (590,011) (820,690)
Minority share of partnership income 420,975 359,901
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (74,174) 70,575
Increase in accounts payable and accrued liabilities 388,981 283,203
Decrease in deferred income (61,283) (84,780)
Decrease (increase) in prepaid expenses, deposits in escrow
and deferred charges 454,663 (644,656)
Increase in security deposit restricted funds (378,363)
Increase in security deposit liabilities 9,665 124,196
Distribution payable on common stock 580,154 575,915
Other (8,168) (4,918)
---------------- ----------------
Total adjustments (5,639,138) (424,260)
---------------- ----------------
Net cash provided by operating activities $3,447,270 $1,922,512
================ ================
Supplemental noncash disclosures:
Property received in satisfaction of debt $39,858 $11,569
================ ================
See notes to consolidated financial statements.
</TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General - Presidential Realty Corporation ("Presidential" or the "Company"),
a Real Estate Investment Trust ("REIT"), is engaged principally in the holding
of notes and mortgages secured by real estate and in the ownership of income
producing real estate. Presidential operates in a single business segment,
investments in real estate related assets.
B. Principles of Consolidation - The consolidated financial statements include
the accounts of Presidential Realty Corporation and its wholly owned
subsidiaries. Additionally, the consolidated financial statements include 100%
of the account balances of UTB Associates and PDL, Inc. and Associates Limited
Co-Partnership ("Home Mortgage Partnership"), partnerships in which Presidential
or PDL, Inc., a wholly owned subsidiary of Presidential, is the General Partner.
All significant intercompany balances and transactions have been eliminated.
C. Net Income Per Share - Basic net income per share data is computed by
dividing the net income by the weighted average number of shares of Class A and
Class B common stock outstanding during each period. Basic net income per share
and diluted income per share are the same for the nine months ended September
30, 1999 and 1998. The dilutive effect of stock options is calculated using the
treasury stock method.
D. Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) considered necessary
for a fair presentation of the results for the respective periods have been
reflected. These financial statements and accompanying notes should be read in
conjunction with the Company's Form 10-K for the year ended December 31, 1998.
E. Management Estimates - In preparing the consolidated financial statements in
conformity with generally accepted accounting principles, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the consolidated balance sheets and the reported amounts of income and
expense for the reporting period. Actual results could differ from those
estimates.
2. MORTGAGE PORTFOLIO
The Company's mortgage portfolio includes notes receivable - sold properties and
notes receivable - related parties.
Notes receivable - sold properties consist of:
(1) Long-term purchase money notes from sales of properties previously owned by
the Company or notes purchased by the Company. These purchase money notes have
varying interest rates with balloon payments due at maturity.
(2) Notes receivable from sales of cooperative apartment units. These notes
generally have market interest rates and the majority of these notes amortize
monthly with balloon payments due at maturity.
Notes receivable - related parties are all due from Ivy Properties, Ltd. or its
affiliates (collectively "Ivy") and consist of:
(1) Purchase money notes resulting from sales of property or partnership
interests to Ivy.
(2) Notes receivable relating to loans made by the Company to Ivy in connection
with Ivy's cooperative conversion business.
During the nine months ended September 30, 1999, the Company sold the Fairfield
Towers First Mortgage Note and substantially all of the Fairfield Towers Second
Mortgage Note (the Fairfield Towers Second Mortgage Note had been classified as
an impaired loan). The Company also sold the Grant House wraparound mortgage
note which had been classified as an impaired loan and the Company received a
$317,662 prepayment on its Pinewood mortgage note. In addition, the $13,300,000
Crown Tower and Madison Towers wraparound mortgage notes were modified and
extended. In connection with the modification, Presidential received a
$1,000,000 payment on the mortgage notes, paid a deferred brokerage commission
of $1,000,000 and repaid the $2,300,000 first mortgage debt on the properties.
Fairfield Towers
On February 22, 1999, Presidential consummated the sale of its Fairfield Towers
First and Second Mortgage Notes (excluding a $4,000,000 portion of the Second
Mortgage Note, which it retained). At the date of the sale, the Fairfield Towers
First Mortgage Note had an outstanding principal balance of $17,002,695 and a
net carrying value of $13,957,284 after deducting a discount of $3,045,411. The
Fairfield Towers Second Mortgage Note, which was classified as an impaired loan,
had an outstanding principal balance of $14,206,895 and a net carrying value of
$1,311,908 after deducting discount and deferred gain of $12,894,987.
The aggregate purchase price for the First Mortgage Note and the Second Mortgage
Note (excluding the $4,000,000 interest retained by Presidential) was
$21,350,000.
In connection with this transaction, the $4,000,000 portion of the Second
Mortgage Note retained by Presidential was modified to provide for interest at
the rate of 9.625% per annum for the first three years and at the rate of 10.5%
per annum for the remaining seven years. The $4,000,000 outstanding principal
balance is due at maturity on February 18, 2009. To secure this obligation,
Presidential obtained subordinate security interests in three apartment
properties located in New Jersey as collateral for the Note.
As a result of this transaction, Presidential repaid the $10,195,442 outstanding
principal balance of its note payable to Fleet Bank, which had been secured by
Presidential's interest in the First Mortgage Note. Presidential recognized a
gain on sale (before taxes) of $7,617,214 and a net gain on sale of $6,050,740
after accrued taxes of $1,566,474.
Grant House
On January 28, 1999, the Company sold its equity interest in the $3,235,833
Grant House wraparound mortgage note, which had been classified as an impaired
loan. The Company's underlying second mortgage in the outstanding principal
amount of $1,023,593 was sold to the purchaser for a purchase price of $500,000.
The nonrecourse first mortgage which Presidential's second mortgage wrapped
around was assigned to the purchaser. As a result of this transaction,
Presidential wrote off the $2,212,240 balance on the first mortgage and the
related $2,212,240 mortgage debt, $75,000 of the sales proceeds was applied to
accrued and unpaid interest and the Company recognized a gain on sale of
$425,000.
Pinewood
In January, 1999, the Company received a $317,662 principal prepayment on its
$417,662 mortgage note which is secured by 316 apartment units at Pinewood in
Des Moines, Iowa. As a result of the $317,662 prepayment, the Company recognized
a deferred gain on sale of $218,534.
Crown Tower and Madison Towers
The Crown Tower and Madison Towers wraparound mortgage notes in the outstanding
principal amount of $13,300,000, which were secured by the Crown Tower and
Madison Towers properties in New Haven, Connecticut, were modified in June of
1999. In connection with the modification, the Company repaid the $2,300,000
first mortgage debt on these properties (wrap mortgage debt on sold properties)
and consolidated the $13,300,000 outstanding principal balance of the wraparound
mortgage notes into one consolidated note (the "New Haven note"). The Company
received a $1,000,000 principal payment on the New Haven note and paid a
$1,000,000 deferred brokerage commission (which had been deferred from the sale
of the New Haven properties in 1984). As a result of these transactions, the
Company received a $30,750 loan modification fee and recognized a deferred gain
on sale of $1,000,000.
The New Haven note in the outstanding principal balance of $12,300,000 is due at
maturity on June 29, 2002. The note provides for an interest rate of 10% per
annum, with a 1/2 percent annual rate increase and additional interest of
$369,000 due at maturity. The New Haven note is secured by a second mortgage on
the Encore Apartments and commercial space located in New York, New York and by
a limited guarantee of $2,500,000 from one of the owners of the property.
At September 30, 1999, all of the notes in the Company's mortgage portfolio are
current.
3. REAL ESTATE
Real estate is comprised of the following:
September 30, December 31,
1999 1998
----------- -----------
Land $ 5,461,173 $ 5,454,549
Buildings and leaseholds 29,674,960 29,008,677
Furniture and equipment 301,105 240,431
----------- -----------
Total real estate $35,437,238 $34,703,657
=========== ===========
4. MINORITY PARTNERS' INTEREST
Presidential is the General Partner of UTB Associates and PDL, Inc., a wholly
owned subsidiary of Presidential, is the General Partner of Home Mortgage
Partnership. Presidential has a 66-2/3% interest in UTB Associates, and
Presidential and PDL, Inc. have an aggregate 26% interest in Home Mortgage
Partnership. As the General Partner of these partnerships, Presidential and PDL,
Inc., respectively, exercise effective control over the business of these
partnerships, and, accordingly, Presidential consolidates these partnerships in
the accompanying financial statements. The minority partners' interest reflects
the minority partners' equity in the partnerships.
The minority partners' interest in the Home Mortgage Partnership is a negative
interest and therefore, minority partners' interest is a net asset on the
Company's financial statements. The negative basis for each partner's interest
in the Home Mortgage Partnership is due to the refinancing of the mortgage on
the property and the distribution of the proceeds to the partners. The mortgage
debt, which is included in the Company's financial statements, is substantially
in excess of the net carrying amount of the property, but the estimated fair
value of the property is significantly greater than the mortgage debt. Thus, the
asset recorded as minority partners' interest should be realized upon sale of
the property.
Minority partners' interest is comprised of the following:
September 30, December 31,
1999 1998
---------- ----------
Home Mortgage Partnership $8,137,077 $7,735,342
UTB Associates (192,633) (182,599)
---------- ----------
Total minority partners' interest $7,944,444 $7,552,743
========== ==========
5. SECURITIES AVAILABLE FOR SALE
The cost and fair value of securities available for sale are as follows:
September 30, December 31,
1999 1998
------------ ------------
Cost $9,379,795 $1,259,057
Gross unrealized gains 2,114 23,433
Gross unrealized losses (1,077,016) (7,756)
---------- ----------
Fair value $8,304,893 $1,274,734
========== ==========
During the nine months ended September 30, 1999, there were no sales of
securities available for sale. During the nine months ended September 30, 1998,
the Company sold securities available for sale for gross proceeds of $23,986 and
a gross (and net) gain of $21,438.
6. MORTGAGE DEBT
In January, 1999, the Company refinanced the mortgage on its Cambridge Green
property. The existing mortgage balance of $3,120,190 was paid from the proceeds
of the new $3,195,500 mortgage. The new mortgage bears interest at the rate of
6.65% per annum, requires monthly payments of principal and interest of $20,358,
and matures on October 1, 2029.
As a result of the refinancing of this mortgage, the Company wrote off $166,756
of unamortized mortgage costs and paid a prepayment penalty fee of $31,200
relating to the prior mortgage.
As described in Note 2 above, during the nine months ended September 30, 1999,
the Company sold the Grant House wraparound mortgage and repaid the Crown Tower
and Madison Towers first mortgage debt (the wrap mortgage debt). As a result of
these transactions, wrap mortgage debt was reduced from $4,668,462 at December
31, 1998 to $0 at September 30, 1999.
7. NOTE PAYABLE TO BANK
In connection with the Company's purchase of the Fairfield Towers First Mortgage
in 1996, the Company obtained a bank loan from Fleet Bank, N.A. The note, which
was due to mature on October 30, 2001, was secured by a collateral assignment of
the Fairfield Towers First Mortgage and was nonrecourse to Presidential except
for a limited guarantee.
Presidential sold the Fairfield Towers First Mortgage in February, 1999 and
repaid the outstanding principal balance of the note to Fleet Bank from the
proceeds of the sale. The outstanding principal balance at the date of the
sale was $10,195,442.
The Company has an unsecured $250,000 line of credit from a lending institution.
The interest rate is 1% above the prime rate and the line of credit expires in
February, 2000. Presidential pays a 1% annual fee for the line of credit. At
September 30, 1999, no advances are outstanding on this line of credit.
8. INCOME TAXES
Presidential has elected to qualify as a Real Estate Investment Trust under the
Internal Revenue Code. A REIT which distributes at least 95% of its real estate
investment trust taxable income to its shareholders each year by the end of the
following year and which meets certain other conditions will not be taxed on
that portion of its taxable income which is distributed to its shareholders.
Upon filing the Company's income tax return for the year ended December 31,
1998, Presidential applied its available 1998 stockholders' distributions and
elected to apply (under Section 858 of the Internal Revenue Code) all but
approximately $787,000 of its 1999 stockholders' distributions to reduce its
taxable income for 1998 to $4,831. As a result, Presidential paid Federal income
taxes of $725 for 1998.
Furthermore, the Company had taxable income (before distributions to
stockholders) for the nine months ended September 30, 1999 of approximately
$4,912,000 ($1.35 per share), which included approximately $4,279,000 ($1.18 per
share) of capital gains. This amount will be reduced by the $787,000 ($.22 per
share) of its 1999 distributions that were not utilized in reducing the
Company's 1998 taxable income and by any eligible 2000 distributions that the
Company may elect to utilize as a reduction of its 1999 taxable income.
Presidential intends to continue to maintain its REIT status. The Company
intends to retain the $3,560,000 capital gain from the sale of the Fairfield
Towers Mortgage Notes and, accordingly, has accrued $1,566,474 for Federal and
State income taxes. Retaining this capital gain will not affect Presidential's
REIT status.
Presidential has, for tax purposes, reported the gain from the sale of certain
of its properties using the installment method.
9. COMPREHENSIVE INCOME
The Company's only element of other comprehensive income is the change in the
unrealized gain (loss) on the Company's securities available for sale. Thus,
comprehensive income, which consists of net income plus or minus other
comprehensive income, for the nine months ended September 30, 1999 and 1998 was
$7,995,829 and $2,328,723, respectively.
10. TREASURY STOCK
In March, 1999, three directors of the Company were each given 1,000 shares of
the Company's Class B common stock as partial payment for directors fees for the
1999 year. Such shares had been held in treasury at an average cost of
approximately $13.54 per share. The average market value for the previous month
of the Class B common stock, on which the fees were based, was $7.17 per share.
As a result of this transaction, the Company recorded $21,510 in prepaid
directors fees (to be amortized during 1999) based on the average market value
of the stock. Treasury stock was reduced by a cost of $40,618 and additional
paid-in capital was charged $19,108 for the excess of the cost over the market
value. In addition, on March 24, 1999, an executive of the Company was given
7,000 shares of the Company's Class B common stock at a market price of $7.0625
per share (the closing price of the stock on the date of issuance). The Company
recorded a salary expense of $49,438, reduced treasury stock by a cost of
$94,780 and charged additional paid-in capital $45,342 for the excess of the
cost over the market value.
11. COMMITMENTS AND CONTINGENCIES
Presidential is not a party to any material legal proceedings. The Company may
be a party to routine litigation incidental to the ordinary course of its
business. In the opinion of management, all of the Company's properties are
adequately covered by insurance in accordance with normal insurance practices.
The Company is not aware of any environmental issues at any of its properties,
with the exception of the environmental expenses incurred in prior years at its
Mapletree Industrial Center property in Palmer, Massachusetts. The presence,
with or without the Company's knowledge, of hazardous substances at any of its
properties could have an adverse effect on the Company's operating results and
financial condition.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Results of Operations
Financial Information for the nine months ended September 30, 1999 and 1998:
- ----------------------------------------------------------------------------
Revenue decreased by $25,716 primarily as a result of decreases in interest on
mortgages-sold properties, interest on wrap mortgages and interest on
mortgages-related parties. These decreases were offset by increases in rental
income, investment income and other income.
Interest on mortgages-sold properties decreased by $637,084 primarily due to the
sale of the Fairfield Towers First Mortgage in February of 1999, which decreased
interest income by $1,012,796. In addition, the amortization of discounts on
notes receivable decreased by $249,928. Amortization of discounts on notes
receivable decreases as notes mature or are sold. These decreases were partially
offset by the $235,278 of interest received on the $4,000,000 unsold portion of
the Fairfield Towers Second Mortgage and interest of $393,258 received on the
modified New Haven note (see below).
Interest on wrap mortgages decreased by $432,008 primarily as a result of the
Company's repayment in June, 1999 of the first mortgage debt on the Crown Tower
and Madison Towers properties. The Crown Tower and Madison Towers wraparound
mortgage notes were modified into one consolidated note (the "New Haven note").
As a result of these transactions, wrap mortgage interest decreased by $380,086
because the modified New Haven note is not a wraparound mortgage note. In
addition, the sale of the Grant House wraparound mortgage note in January, 1999
decreased interest by $51,922.
Interest on mortgages-related parties decreased by $170,056 primarily as a
result of decreases in interest on the Consolidated Loans of $94,375 and
decreases in interest on the Overlook loan of $68,371. The decrease in interest
on the Overlook loan is a result of principal prepayments received in 1998.
Rental income increased by $756,437 primarily as a result of increased rental
income of $657,519 at the Sunwood Apartments property, which was purchased in
August of 1998. In addition, rental income increased by $156,972 at the Home
Mortgage Plaza, University Towers Professional Space and Continental Gardens
properties. These increases were offset by decreases of $72,776 at the Fairlawn
Gardens and Cambridge Green properties.
Investment income increased by $425,111 primarily as a result of increased
dividend income on securities available for sale.
Other income increased by $31,884 primarily as a result of a $30,750 fee
received on the modification of the New Haven note.
Costs and expenses increased by $314,034 primarily due to increases in rental
property operating expenses, interest on mortgages, depreciation on real estate,
amortization of mortgage costs, and an increase in minority interest share of
partnership income. These increases were partially offset by a decrease in
interest expense on note payable and a decrease in interest on wrap mortgage
debt.
Rental property operating expenses increased by $383,413 primarily as a result
of increased operating expenses at the Cambridge Green and Sunwood Apartments
properties of $211,149 and $208,939, respectively. These increases were
partially offset by a $50,491 decrease in operating expenses at the Home
Mortgage Plaza property.
Interest on mortgages increased by $333,191 as a result of a $128,335 increase
in mortgage interest expense on the Home Mortgage Plaza property mortgage. In
April, 1998 the Company refinanced the $10,788,825 mortgage for a new
$17,500,000 mortgage. In addition, the acquisition of the Sunwood Apartments
property increased mortgage interest expense by $210,236 and the new mortgage on
the Fairlawn Gardens property which was obtained in March, 1998, increased
mortgage interest expense by $34,129. These increases were offset by a decrease
of $30,055 on the Cambridge Green mortgage which was refinanced in January,
1999.
Depreciation expense on real estate increased by $162,830 primarily as a result
of $111,686 of increased depreciation expense on the Sunwood Apartments property
and increases in depreciation expense on all other properties as a result of
additions and improvements.
Amortization of mortgage costs increased by $81,047 primarily as a result of the
write-off of unamortized mortgage costs of $166,756 and the $31,200 prepayment
penalty fee resulting from the refinancing of the mortgage on the Cambridge
Green property in January, 1999. This increase was offset by a decrease of
$125,091 in amortization of mortgage costs on the Home Mortgage Plaza property.
In 1998, the Company had written off $107,412 of unamortized mortgage costs in
connection with the refinancing of the mortgage on the Home Mortgage Plaza
property.
Minority interest share of partnership income increased by $61,074 as a result
of an increase in partnership income on the Home Mortgage Plaza property.
Interest on note payable and other decreased by $621,448 primarily as a result
of the repayment of the note payable in February, 1999.
Interest on wrap mortgage debt decreased by $101,402 as a result of the
repayment of the first mortgage debt on the Crown Tower and Madison Towers
properties in June of 1999. In addition, in January, 1999, the Company sold the
Grant House wraparound mortgage note and the related first mortgage debt on the
property was assigned to the purchaser.
Net gain from sales of properties, notes and securities are sporadic (as they
depend on the timing of sales or the receipt of installments or prepayments on
purchase money notes). In 1999, the net gain from sales of properties, notes and
securities was $7,804,493 compared with $725,107 in 1998:
Gain from sales recognized at September 30, 1999 1998
---- ----
Sales of mortgage notes:
Fairfield Towers First and Second Mortgages
(net of taxes of $1,566,474) sold in 1999 $6,050,740
Grant House wraparound mortgage note sold in 1999 425,000
Deferred gains recognized upon receipt of
principal payments on notes:
New Haven - $1,000,000 principal payment
received in 1999 1,000,000
Pinewood - $317,662 principal prepayment
received in 1999 218,534
Overlook 16,081 $608,186
Fairfield Towers Second Mortgage 19,466 51,376
Towne House 3,672
Sales of property:
Sherwood House 74,672 40,435
Sales of securities 21,438
---------- --------
$7,804,493 $725,107
========== ========
Financial Information for the three months ended September 30, 1999 and 1998:
- ----------------------------------------------------------------------------
Revenue decreased by $123,460 primarily as a result of decreases in interest on
mortgages-sold properties, interest on wrap mortgages and interest on
mortgages-related parties. These decreases were partially offset by increases in
rental income and investment income.
Interest on mortgages-sold properties decreased by $163,714 primarily due to the
sale of the Fairfield Towers First Mortgage in February of 1999, which decreased
interest income by $417,017. In addition, the amortization of discount on notes
receivable decreased by $161,840. These decreases were partially offset by the
$98,389 of interest received on the $4,000,000 unsold portion of the Fairfield
Towers Second Mortgage and interest of $314,333 received on the New Haven note.
Interest on wrap mortgages decreased by $318,685 primarily as a result of the
modification of the Crown Tower and Madison Towers wraparound mortgage notes in
June of 1999 which decreased interest on wrap mortgages by $301,644. In
addition, the sale of the Grant House wraparound mortgage note decreased
interest by $17,041.
Interest on mortgages-related parties decreased by $51,479 primarily as a result
of decreases in interest on the Consolidated Loans of $45,051.
Rental income increased by $249,420 primarily as a result of increased rental
income of $169,339 at the Sunwood Apartments property and increases of $100,672
at a majority of the rental properties. These increases were offset by a $20,591
decrease in rental income at the Cambridge Green property.
Investment income increased by $153,652 primarily as a result of increased
dividend income on securities available for sale.
Costs and expenses decreased by $8,698 primarily due to decreases in interest
expense on note payable and interest expense on wrap mortgage debt. These
decreases were offset by increases in general and administrative expenses,
rental property operating expenses, interest on mortgages, real estate tax
expense, depreciation expense on real estate and an increase in minority
interest share of partnership income.
Interest on note payable and other decreased by $267,882 as a result of the
repayment of the note payable in February, 1999.
Interest on wrap mortgage debt decreased by $50,621 as a result of the repayment
of the first mortgage debt on the Crown Tower and Madison Towers properties and
the sale of the Grant House wraparound mortgage note.
General and administrative expenses increased by $37,362 primarily as a result
of increases in salary expense of $26,423 (of which $13,156 relates to increases
in executive bonuses), increases in professional and directors fees of $25,627
and an increase in executive pension plan expense of $25,461. These increases
were partially offset by a decrease of $44,524 in franchise tax expense
resulting from the partnership distribution received in 1998 from the proceeds
of the mortgage on Home Mortgage Plaza.
Rental property operating expenses increased by $136,243 primarily as a result
of an increase in operating expenses at the Cambridge Green property of $94,757.
In addition, operating expenses at the Sunwood Apartments and University Towers
Professional Space properties increased by $48,728 and $17,866, respectively.
These increases were partially offset by decreases in operating expenses at the
Home Mortgage Plaza and Fairlawn Gardens properties of $19,863 and $13,235,
respectively.
Interest on mortgages increased by $30,672 primarily as a result of the addition
of the Sunwood Apartments property which increased mortgage interest expense by
$51,524. This increase was partially offset by a decrease in mortgage interest
expense of $13,676 at the Cambridge Green property.
Real estate tax expense increased by $42,531 primarily as a result of increases
in real estate tax expenses at the Sunwood Apartments and Cambridge Green
properties of $34,187 and $13,661, respectively.
Depreciation on real estate increased by $50,863 primarily as a result of the
addition of the Sunwood Apartments property which increased depreciation expense
by $28,414. In addition, additions and improvements to other properties
increased depreciation expense by $22,449.
Minority interest share of partnership income increased by $17,804 as a result
of a $19,266 increase in partnership income on the Home Mortgage Plaza property.
Net gain from sales of properties, notes and securities are sporadic (as they
depend on the timing of sales or the receipt of installments or prepayments on
purchase money notes). In 1999, the net gain from sales of properties, notes and
securities was $5,494 compared with $43,889 in 1998:
Gain from sales recognized at September 30, 1999 1998
---- ----
Deferred gains recognized upon receipt of
principal payments on notes:
Overlook $5,494 $ 4,973
Fairfield Towers Second Mortgage 17,478
Sales of securities 21,438
------- -------
$5,494 $43,889
======= =======
Balance Sheet
Net mortgage portfolio decreased by $15,309,339 primarily as a result of the
sale of the Fairfield Towers First and Second Mortgage Notes, the sale of the
Grant House wraparound mortgage note and the principal prepayment received on
the Pinewood note receivable. The sale of the Fairfield Towers First and Second
Mortgages resulted in a net decrease of $12,961,511, the sale of the Grant House
wraparound mortgage note resulted in a net decrease of $2,224,287 and the
principal prepayment of $317,662 received on the Pinewood note receivable
resulted in a net decrease of $99,128 after recognizing a deferred gain of
$218,534. In addition, although the effect on net mortgage portfolio is zero,
the Company received a $1,000,000 principal payment on the New Haven note and
recognized a deferred gain on sale of $1,000,000.
Prepaid expenses and deposits in escrow decreased by $346,627 primarily due to a
$483,981 decrease in mortgagee replacement reserve deposits as a result of
reimbursements for replacements at rental properties. This decrease was
partially offset by increases of $137,354 in prepaid expenses and mortgagee
escrow deposits.
Securities available for sale increased by $7,030,159 as a result of purchases
of $8,120,738 in marketable equity securities, primarily interest-bearing
corporate preferred stocks, offset by a $1,090,579 decline in the fair value of
securities available for sale.
Other assets decreased by $374,423 primarily as a result of a $286,116 decrease
in mortgage and loan acquisition costs and a $102,659 decrease in deferred
charges. Mortgage costs decreased as a result of the refinancing of the mortgage
on the Cambridge Green property and the write-off of the unamortized costs of
the prior mortgage. In addition, the sale of the Fairfield Towers First and
Second Mortgage Notes resulted in the write-off of unamortized loan acquisition
costs. Deferred charges decreased as a result of the write-off of deferred
expenses incurred in connection with the sale of the Fairfield Towers First and
Second Mortgage Notes.
Wrap mortgage debt on sold properties decreased by $4,668,462 primarily due to
the repayment of the $2,300,000 Crown Tower and Madison Towers wrap mortgage
debt by the Company in June, 1999 and the sale of the Grant House wraparound
mortgage note in January, 1999.
Note payable to bank decreased by $10,395,361 primarily as a result of the sale
of the Fairfield Towers First and Second Mortgages. The note payable, which had
been secured by Presidential's interest in the First Mortgage Note, was repaid
from the proceeds of the sale of the Fairfield Towers First and Second
Mortgages.
Accrued liabilities decreased by $871,176 primarily as a result of the payment
of a $1,000,000 deferred brokerage commission, which arose from the sale of the
New Haven properties in 1984.
Net unrealized gain (loss) on securities available for sale decreased by
$1,090,579 as a result of the decrease in the fair value of securities available
for sale.
Treasury stock decreased by $135,139. In March, 1999, three directors of the
Company were each given 1,000 shares of the Company's Class B common stock as
partial payment for 1999 directors fees. In addition, an officer of the Company
was given 7,000 shares of the Company's Class B common stock as additional
compensation. Such shares had been held in treasury at an average cost of $13.54
per share.
Year 2000 Compliance
The Company has completed its assessments of its information technology systems
("IT") and its non-information technology systems ("NIT") for Year 2000
compliance. All Year 2000 sensitive systems have been updated and date
sensitivity testing has been completd. Requests have been sent and responses
have been received for Year 2000 compliance confirmations from tenants,
mortgagors, third party vendors and the Company's property management company.
All responses that have been received by the Company have verified Year 2000
compliance or completion of compliance in a timely manner.
At September 30, 1999, there were no additional costs to be incurred in relation
to the Year 2000 compliance. At December 31, 1998, the Company had capitalized
$32,393 for replacement of equipment and had expensed $4,789 for the upgrading
of its systems. The costs to complete date sensitivity testing and assessments
of third party vendors were minimal.
The Company has tested its IT systems and all systems are operational and are
Year 2000 compliant. The responses that the Company has received indicate that
the financial institutions, utility companies and major suppliers of services
which are utilized by the Company are or will be Year 2000 compliant. However,
the Company's business operations could be affected if these third party vendors
fail to become Year 2000 compliant. The effect of non-compliance by these third
party vendors is not determinable at this time. If a supplier of goods or
services were to fail to become Year 2000 compliant, the Company would obtain
these goods or services from another source. However, the failure of utility
companies (electric, gas, water and telephone) to become Year 2000 compliant
could have an adverse effect on the operations of the Company's properties.
These services are not readily available from other sources but should be
available in some form. The Company does not anticipate that the Year 2000 issue
will have an adverse effect on the ability of its mortgagors or tenants to make
payments due to the Company in a timely fashion.
As a result of the Company's evaluation of its systems and third party vendor
systems, no formal contingency plan is required.
Forward-Looking Statements
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things affect the demand for apartments or commercial space, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing; adverse changes in the real estate markets including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives; and
environment/safety requirements.
Liquidity and Capital Resources
Management believes that the Company has sufficient liquidity and capital
resources to carry on its existing business and, barring any unforeseen
circumstances, to pay the dividends required to maintain REIT status in the
foreseeable future. The Company is seeking to expand its portfolio of real
estate equities and plans to utilize for this purpose a portion of its available
funds, funds received from sales of securities and additional funds that the
Company may receive from balloon payments due on the Company's notes receivable
as they mature, as well as funds that may be available from external sources.
However, the Company's plans to expand its portfolio of real estate equities may
be adversely affected by limitations on its ability to obtain funds for
investment on satisfactory terms from external sources. Except as discussed
herein, management is not aware of any other trends, events, commitments or
uncertainties that will have a significant effect on liquidity.
Presidential obtains funds for working capital and investment from its
available cash and cash equivalents, from securities available for sale, from
operating activities, from refinancing of mortgage loans on its real estate
equities, and from the sales of or repayments on its mortgage portfolio. The
Company also has at its disposal a $250,000 unsecured line of credit from a
lending institution.
At September 30, 1999, Presidential had $1,683,623 in available cash and cash
equivalents, a decrease of $80,842 from the $1,764,465 at December 31, 1998.
This decrease in cash and cash equivalents was due to cash used in financing
activities of $16,214,922, offset by cash provided by operating activities of
$3,447,270 and investing activities of $12,686,810.
Operating Activities
Presidential's principal source of cash from operating activities is from
interest on its mortgage portfolio, which was $2,645,121 in 1999, net of
interest payments on wrap mortgage debt and note payable. In 1999, net cash
received from rental property operations was $1,852,415, which is net of
distributions from partnership operations to minority partners but before
additions and improvements and mortgage amortization.
Investing Activities
Presidential holds a portfolio of mortgage notes receivable, which consist
primarily of notes arising from sales of real properties previously owned by the
Company. Some of these notes wrap around underlying mortgage debt (the
"Underlying Debt") which is paid by Presidential only out of funds received on
its mortgage portfolio relating to the Underlying Debt. During 1999, the Company
received principal payments of $1,985,181 on its mortgage portfolio (net of any
principal payments attributable to the Underlying Debt), of which $1,880,241
represented prepayments, which are sporadic and cannot be relied upon as a
regular source of liquidity.
On February 22, 1999, Presidential consummated the sale of its Fairfield Towers
First and Second Mortgage Notes (excluding a $4,000,000 portion of the Second
Mortgage Note, which it retained).
The First Mortgage Note, which had an outstanding principal balance at the date
of sale of $17,002,695, was acquired by Presidential in October, 1996 at a
discount of $3,500,000. The Second Mortgage Note, which had an outstanding
principal balance at the date of sale of $14,206,895, was obtained by
Presidential when it sold the Fairfield Towers apartment property in 1984.
The aggregate purchase price for the First Mortgage Note and the Second Mortgage
Note (excluding the $4,000,000 interest retained by Presidential) was
$21,350,000. In connection with this transaction, the $4,000,000 portion of the
Second Mortgage Note retained by Presidential was modified to provide for
interest payments at the rate of 9.625% ($385,000) per annum for the first three
years and at 10.5% ($420,000) per annum for the remaining seven years. The
outstanding principal balance of $4,000,000 is due at maturity in 2009. To
secure this obligation, Presidential obtained subordinate security interests in
three apartment properties located in New Jersey as collateral for the Note.
Presidential repaid the $10,195,442 outstanding principal balance of its bank
note payable, which had been secured by Presidential's interest in the First
Mortgage Note. After payment of the bank loan and expenses related to the
transaction, but before payment of any income tax on the capital gain,
Presidential retained approximately $10,111,000 from the sale. Presidential
expects to pay approximately $1,567,000 of taxes on the retained capital gain
and invest the balance of approximately $8,544,000 in rental apartment
properties. Presidential recognized a gain on sale of $7,617,214 (before accrued
taxes of $1,566,474).
In January, 1999, the Company sold its equity portion in the $3,235,833
wraparound mortgage note secured by the Grant House apartment building located
in White Plains, New York. Presidential assigned the $2,212,240 nonrecourse
first mortgage note to the purchaser and received $500,000 for the sale of its
$1,023,593 equity portion of the wraparound mortgage note. As a result of this
transaction, the Company wrote off the $2,212,240 outstanding balance on the
first mortgage and the related $2,212,240 mortgage debt, and recognized a gain
on sale of $425,000.
In June, 1999, the Company modified its $13,300,000 wraparound mortgage notes
secured by the Crown Tower and Madison Towers properties in New Haven,
Connecticut. In connection with the modification, the Company repaid the
$2,300,000 first mortgage debt on these properties (wrap mortgage debt on sold
properties) and consolidated the $13,300,000 outstanding principal balance of
the wraparound mortgage notes into the New Haven note. The Company received a
$1,000,000 principal payment on the New Haven note and paid a $1,000,000
deferred brokerage commission (which had been deferred from the original sale of
the New Haven properties). In connection with the modification Presidential also
received a fee of $30,750.
The note matures on June 29, 2002, provides for an interest rate of 10% per
annum with a 1/2 percent rate increase annually and a $369,000 payment of
additional interest due at maturity. The New Haven note is secured by a second
mortgage on the Encore Apartments and commercial space located in New York, New
York and by a limited guarantee of $2,500,000 from one of the owners of the
property.
During 1999, the Company invested $756,906 in additions and improvements to its
properties.
The Company also holds a portfolio of marketable equitable securities which
increased by $7,030,159, primarily as a result of the $8,120,738 purchase of
interest-bearing corporate preferred stocks, offset by a decrease in the fair
value of securities of $1,090,579.
Financing Activities
The Company's indebtedness at September 30, 1999, consisted of $39,494,667 of
mortgages. The mortgage debt, which is secured by individual properties, is
nonrecourse to the Company with the exception of the $262,533 Mapletree
Industrial Center mortgage, which is secured by the property and a guarantee of
repayment by Presidential. In addition, some of the Company's mortgages provide
for personal liability for damages resulting from specified acts or
circumstances, such as for environmental liabilities and fraud. Generally,
mortgage debt repayment is serviced with cash flow from the operations of the
individual properties. During 1999, the Company made $308,674 of principal
payments on mortgage debt on properties which it owns.
In January, 1999, Presidential refinanced the mortgage on its Cambridge Green
property. The existing $3,120,190 mortgage was paid from the proceeds of the new
$3,195,500 mortgage. The new mortgage bears interest at the rate of 6.65% per
annum, requires monthly payments of principal and interest of $20,358, and
matures on October 1, 2029.
The mortgages on the Company's properties are self-liquidating at fixed rates of
interest with the exception of the mortgages on Fairlawn Gardens, Home Mortgage
Plaza, Building Industries Center, Sunwood Apartments and Continental Gardens.
During 1999, Presidential declared cash distributions of $2,315,307 (including
$580,154 payable in the fourth quarter) to its shareholders and received
proceeds from its dividend reinvestment and share purchase plan of $80,832.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1999.
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.
PRESIDENTIAL REALTY CORPORATION
(Registrant)
DATE: November 8, 1999 By: /s/ Jeffrey F. Joseph
---------------------
Jeffrey F. Joseph
President
DATE: November 8, 1999 By: /s/ Elizabeth Delgado
---------------------
Elizabeth Delgado
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,683,623
<SECURITIES> 8,304,893
<RECEIVABLES> 16,617,584
<ALLOWANCES> 128,799
<INVENTORY> 0
<CURRENT-ASSETS> 12,597,755
<PP&E> 35,437,238
<DEPRECIATION> 7,973,669
<TOTAL-ASSETS> 65,282,599
<CURRENT-LIABILITIES> 5,635,602
<BONDS> 38,153,931
0
0
<COMMON> 362,722
<OTHER-SE> 18,320,154
<TOTAL-LIABILITY-AND-EQUITY> 65,282,599
<SALES> 0
<TOTAL-REVENUES> 11,450,770
<CGS> 0
<TOTAL-COSTS> 5,608,367
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<INTEREST-EXPENSE> 2,505,190
<INCOME-PRETAX> 10,652,882
<INCOME-TAX> 1,566,474
<INCOME-CONTINUING> 9,086,408
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