UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K SB
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
Commission File Number 0-179
PALMETTO REAL ESTATE TRUST
(Name of small business issuer in its charter)
South Carolina 57-0405064
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation of organization)
45 Liberty Lane, Greenville, South Carolina 29607
(Address of principal executive offices) (Zip Code)
Issuers's telephone number, including area code: (864) 233-6007
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Shares of Beneficial Interest
(Title of class)
Check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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 _____
<PAGE>
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB [x]
State issuer's revenues for its most recent fiscal year: $1,143,629
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of
a specified date within the past 60 days: Not available
The number of shares outstanding of each of the registrant's
classes of common stock, as of March 16, 1996:
Shares of Beneficial Interest 1,770,006
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) or definitive information statement (to
be filed pursuant to Regulation 14C) for registrant's 1995 annual
meeting are incorporated by reference in Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
The registrant, Palmetto Real Estate Trust, has been organized as
a qualified real estate investment trust under the Internal Revenue
Code, Section 856, as amended, and the applicable state laws.
The principal office of the Trust is located in Greenville, South
Carolina, and the managing agent of the Trust is B. A. Franks.
Prior to its formation in 1972, the Trust was known as Palmetto
Industrial Corporation. The ownership of the equitable interest in
the Trust is evidenced by shares of beneficial interest. At
December 31, 1995, there are 1,770,006 shares of beneficial
interest issued and outstanding.
The primary business of the Trust is the ownership, development and
rental of restaurants, dry cleaning establishments, department
stores, convenience food stores, grocery stores, post offices, and
various other retail establishments. It is the intention of the
Trust to continue to invest in profitable commercial properties for
suitable tenants.
The Trust derives more than 90 percent of its gross income from
rents received through leases with terms ranging up to 20 years
with many including renewal options ranging from two to five years.
The leases do not require the Trust to furnish any services to
tenants. The Trust has no full-time employees. The Trust is
engaged in no lines of business other than real estate investments.
The Trust does not at present, nor in the future, intend to
purchase property primarily for resale. The Trust is not involved
in any type of research or development activities. The Trust is
not affiliated with any foreign corporation.
ITEM 2. PROPERTIES
All of the buildings are suitable and adequate for the purposes for
which they were designed and are in a good state of repair. The
managing agent makes every effort to ensure that the rent is timely
paid by all the tenants, that the taxes and insurance are up-to-
date on all properties, and that all buildings are being properly
maintained and repaired. In management's opinion, all properties
are adequately covered by insurance. The following briefly
describes each of the properties:
A. 1307 Richland Avenue, Aiken, South Carolina; masonry, brick and
block building; 2,344 square feet; adequate parking; construction
date--1966; no mortgages or liens; vacant; property taxes for 1995-
-$1,937.
<PAGE>
B. Ace TV Rentals, 405 South Pleasantburg Drive, Greenville, South
Carolina; block and masonry building; 3,600 square feet--acquired
in 1992; adequate parking; no mortgage or liens; annual base rent
of $32,270; three-year lease expires April 16, 1998; property taxes
for 1995--$3,799.
C. Cateran Family Restaurant, Wade Hampton Boulevard, Greenville,
South Carolina; brick and concrete building; 3,280 square feet;
adequate parking; construction date--1966; no mortgages or liens;
annual base rent $16,200 (in effect during renegotiation period);
five-year option expired September 30, 1987, and is presently a
month-to-month rental; property taxes for 1995--$4,210.
D. Dove Cleaners, Reidville Road, Spartanburg, South Carolina;
masonry and block building; 1,632 square feet; adequate parking;
construction date--1970; no mortgages or liens; annual base rent of
$5,400; five-year lease expired June 30, 1990, and is presently a
month-to-month rental; property taxes for 1995--$1,835.
E. Enigma Spinx (retail convenience store and service station),
Haywood--Pelham Road, Greenville, South Carolina; two masonry and
block buildings; 8,500 square feet; acquired 1993; mortgage balance
at December 31, 1995--$735,000; fifteen-year lease expires May 31,
2008; annual lease payments $112,000 for the first five years,
$123,200 for the second five years, and $134,400 for the third five
years; property taxes are paid by tenant.
F. Venture Park, Rutherford Road, Greenville, South Carolina; three
concrete block warehouses; acquired November 14, 1979; 9,200 square
feet; no mortgages or liens; property taxes for 1995--$2,249.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
Andy Oxy Company, Inc. Month-to-month rental. Annual
base rent $13,800.
Jaguar South Month-to-month rental. Annual
base rent $9,000.
<PAGE>
G. Pleasantburg Shopping Center, Laurens Road, Greenville, South
Carolina; brick masonry and concrete building; 162,000 square
feet; acquired in 1976; mortgage balance at December 31, 1995--
$1,532,380; collateral for line of credit balance of $280,000;
property taxes for 1995--$82,972.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
Belk-Simpson Company Carpet and furniture sales.
Five-year lease expires January
31, 1999; 48,000 square feet.
Annual base rent $77,700 plus
1% of sales over $2,122,504.
Book Rack Three-year lease expires
December 31, 1996. Annual base
rent $6,900.
The Open Book Bookstore. Five-year lease
expires September 30, 1997;
16,000 square feet. Annual base
rent $72,000.
Colonial Diner Two-year lease expires June 30,
1996. Annual base rent $18,000.
American General Five-year lease expires June
30, 1999. Annual base rent
$7,854.
Dollar Depot Three-year lease expires April
30, 1998. Annual base rent
$13,800.
Joey's Inc. Three-year lease expires April
30, 1998. Annual base rent
$14,400.
Mother's Love Lease under negotiation. Annual
base rent $3,600.
Olan Mills Studio Two-year lease expires April
30, 1996. Annual base rent
$6,000.
Pleasantburg Shoe Service Three-year lease expires
December 31, 1998. Annual base
rent $4,800.
Rogers Jewelers Month-to-month rental. Annual
base rent $3,600.
<PAGE>
G. Pleasantburg Shopping Center (continued)
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
Reid Printing Co. Lease under negotiation. Annual
base rent $12,000.
Fred A. Fuller Appliances Three-year lease expires
February 28, 1997. Annual base
rent $11,616.
Wilson's 5 cents to $1.00 Five-year lease expires January
31, 2000. Annual base rent
$24,600 plus 4% of gross sales
over $450,000.
Southern National Twenty-year lease expires
December 31, 1997. Annual base
rent $7,830.
Nichole's One-year lease expires May 31,
1996. Annual base rent $4,500.
Novelty Shop Three-year lease
expires November 30, 1997.
Annual base rent $30,120.
A & E Enterprises Three-year lease expires August
31, 1998. Annual base rent
$54,000.
The Great Escape Bicycle sales. Five-year lease
expires January 31, 2000;
16,000 square feet. Annual base
rent $40,000.
Kutting Room Three-year lease expires
September 30, 1997. Annual base
rent $4,956.
Kathy's Boutique Three-year lease expires
February 28, 1998. Annual base
rent $3,300.
Houser Shoes Five-year option expires
November 30, 1997. Annual base
rent $22,500.
Beti Nails Six-month lease expires May 31,
1996. Semi-annual base rent
$4,740.
Genfinity's Three-year lease expires
September 30, 1996. Annual base
rent $5,100.
Clyde David Co. Lease under negotiation. Annual
base rent $12,000.
<PAGE>
G. Pleasantburg Shopping Center (continued)
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
King David Three-year lease expires June
30, 1996. Annual base rent
$4,080.
C.C. Hair & Co. Three-year lease expires July
31, 1996. Annual base rent
$6,636.
Sleepers & More Three-year lease expires
October 11, 1998. Annual base
rent $52,500.
Alpha Greenville Beauty School Three-year option expires
August 31, 1997. Annual base
rent $12,780.
India Palace Restaurant Five-year lease expires June
30, 1998. Annual base rent
$12,000.
H. Wade Hampton Property, Wade Hampton Boulevard, Greenville, South
Carolina; brick and masonry building divided into seven office
spaces; 7,730 square feet; no mortgages or liens; property taxes
for 1995--$6,257.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
Mr. Curtis Hair Design Three-year option expires
August 31, 1998. Annual base
rent $6,600.
Filter Queen Three-year lease expires May
31, 1996; 1,000 square feet.
Annual base rent $5,100.
Check World Three-year lease expires May
31, 1997. Annual base rent
$6,600.
J. Michael's Three-year lease expires August
31, 1996. Annual base rent
$6,171.
Southeastern Portrait Gallery Three-year lease expires August
31, 1998; 1,900 square feet.
Annual base rent $6,534.
Jay-Mac Photography Three-year lease expires August
31, 1998; 1,900 square feet.
Annual base rent is $4,026.
Beltone Hearing Aid Center Three-year lease expires June
30, 1998; 900 square feet.
Annual base rent is $5,700.
<PAGE>
I. Willard Oil property, I-85, Spartanburg, South Carolina; block
and masonry building; 4,000 square feet; adequate parking;
originally constructed and acquired in 1986; no mortgages or
liens; annual base rent $22,440; ten-year lease expires May 16,
1996. Property taxes on this property are paid by the tenant.
J. BP Oil Station, I-385 and Roper Mountain Road, Greenville, South
Carolina; block and masonry building; 2,000 square feet;
adequate parking; constructed in 1985 and acquired in 1986; no
mortgages or liens; annual base rent $56,100; fifteen-year lease
expires June 30, 2001; property taxes for 1995--$7,364, paid by
tenant.
K. Laurens Road Property, Laurens Road, Greenville, South Carolina;
block and masonry building; 3,000 square feet; adequate parking;
constructed in 1973 and acquired in 1987; no mortgages or liens;
property taxes for 1994--$2,012.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
Discount Bridal Warehouse Three-year lease expires June
30, 1998. Annual base rent
$9,900.
Borderlands Month-to-month rental. Annual
base rent $5,760.
Family Alteration Shop Three-year lease expires
April 30, 1998. Annual base
rent $5,808.
L. Transit Drive Property, 216 Transit Drive, Greenville, South
Carolina; brick building containing approximately 6,700 square
feet on 200 x 250 feet tract of land; acquired in 1991; no
mortgages or liens; annual base rent $29,700; three-year lease
expires July 14, 1997; property taxes for 1995--$3,337, paid by
tenant.
M. Lesco, Inc., Northway Court, Greer, South Carolina; block and
masonry building; approximately 6,000 square feet; constructed and
acquired in 1994; no mortgages or liens; seven-year lease expires
April 30, 2001; annual base rent $27,000 for the first four years
and $30,000 for the last three years.
N. Tireama, Inc., 544 North Church Street, Spartanburg, South
Carolina; block and masonry building; approximately 3,500 square
feet; acquired in 1994; no mortgages or liens, annual base rent
$25,200, five-year lease expires February 28, 1998; property taxes
paid by tenant.
O. Tireama, Inc., 236 East Blackstock Road, Spartanburg, South
Carolina; block and masonry building; approximately 3,000 square
feet; acquired in 1994; no mortgages or liens; annual base rent
$34,800; six-year lease expires April 14, 2000; property taxes paid
by tenant.
P. Atlas Services, Inc., 90 Sunbelt Boulevard, Columbia, South
Carolina; metal building containing approximately 20,000 square
feet located on 2 acres; acquired in 1995; mortgage balance at
December 31, 1995 - $442,049; annual base rent $81,600; ten-year
lease expires January 12, 2005; property taxes paid by tenant.
<PAGE>
Q. Taylors Point Shopping Center - Wade Hampton Boulevard,
Greenville, South Carolina; 45,922 square feet; located on 5.4
acres; brick and masonry building; acquired in 1995; mortgage
balance at December 31, 1995--$2,299,998; property taxes for 1995--
$34,780.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
------------------ -------------------
All Tune & Lube Automobile repair and services.
Five-year lease expires January
17, 1999; 7,500 square feet.
Annual base rent $38,400.
American General Finance Three-year lease expires May 31,
1998. Annual base rent $21,000.
Blockbuster Video Video rental. Seven-year lease
expires December 31, 1997; 6,400
square feet. Annual base rent
$75,200.
Brenda's Boutique One-year lease expires October
31, 1996. Annual base rent
$9,600.
Foremost Insurance Three-year lease expires August
31, 1996. Annual base rent is
$6,475.
Greenville Garden & Pet Retail garden and pet supplies
sales. Month-to-month rental;
10,000 square feet. Annual base
rent is $48,000.
Hardee's Restaurant Fifteen-year lease expires
December 30, 2004. Annual base
rent $22,176.
Harvey's Family Restaurant Month-to-month rental; 4,788
square feet. Annual base rent
$14,400.
Little Caesars Pizza Five-year lease expires May 14,
2000. Annul base rent $17,100.
Mae's Flowers & Gifts One-year lease expires October
31, 1996. Annual base rent
$6,900.
On Deck Circle Three-year lease expires May 14,
1998. Annual base rent $8,100.
<PAGE>
Q. Taylors Point Shopping Center (continued)
Peak Performance One-year lease expires March 31,
1996. Annual base rent $24,000.
TCBY Yogurt Five-year lease expires January
31, 2000. Annual base rent
$21,564.
Willis ChiroMed Three-year lease expires January
31, 1998. Annual base rent
$10,500.
ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings by the Trust or
against the Trust or its properties at December 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the
fourth quarter of 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR THE TRUST'S SHARES OF BENEFICIAL INTEREST AND
RELATED SECURITY HOLDER MATTERS
The Trust's shares of beneficial interest are not traded on an
exchange. The approximate number of holders of shares of
beneficial interest at December 31, 1995, was 1,275.
Dividend data and price range for the years 1995 and 1994 follows:
DIVIDENDS - The dividends declared quarterly in 1995 and 1994 are
as follows:
PER
1995 TOTAL SHARE
------------- ------- -----
First Quarter $ 78,551 .05
Second Quarter 62,840 .04
Third Quarter 62,636 .04
Fourth Quarter 185,850 .105
$389,877 .235
PER
1995 TOTAL SHARE
------------- ------- -----
First Quarter $ 62,884 .04
Second Quarter 62,884 .04
Third Quarter 62,716 .04
Fourth Quarter 117,826 .08
$306,310 .20
MARKET - There is no active market for the trading of the Trust's
shares of beneficial interest besides the trading between
shareholders and repurchase of shares by the Trust.
The Trust expects to continue its policy of paying regular
quarterly cash dividends, although there is no assurance as to
future dividend amounts since they are dependent on future earnings
and financial condition.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis that follows addresses the financial
condition, results of operations, liquidity and capital resources
of the Trust.
<PAGE>
FINANCIAL CONDITION
For the year ended December 31, 1995, the Trust purchased property
located on Wade Hampton Boulevard in Taylors, South Carolina for
$2,800,000 by financing a note payable with a bank of $2,300,000
and issuing 200,000 shares of common stock for $500,000. The Trust
also sold property in Valdosta, Georgia for $332,500 and recorded
a gain of $41,940 for financial reporting purposes. For income tax
purposes, the sale of the Georgia property was included as part of
a tax-free exchange and subject to neither Federal nor state taxes.
The Trust acquired property in Columbia, South Carolina as part of
this exchange and recorded the property at a cost of $745,000.
This exchange was partially financed by a bank loan of $445,000.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994 - Rental income has increased by
approximately 17% as a result of the Trust acquiring new rental
properties in 1995 and 1994, and a number of the lease renewal
options being exercised at an increased base annual rent. Gain on
sale of real estate increased as a result of the sale described
above. The Trust intends to continue to invest in profitable
income-producing properties which will command long-term leases.
Interest expense has increased approximately 43% due to the Trust
financing a portion of the rental properties acquired in 1995 and
1994. Repairs and maintenance have decreased approximately 37% as
a result of less maintenance needed on properties. Property taxes
increased 7% related to the properties purchased during 1995.
General and administrative expenses have increased approximately
17% due to an increase in professional fees and commissions.
LIQUIDITY, SOURCES OF CAPITAL AND THE EFFECTS OF INFLATION - The
primary liquid asset of the Trust is cash. Cash provided by
operating activities was $614,517 in 1995 and $475,138 in 1994.
These funds were used for general operating expenses, capital
expenditures, repayment of debt and payment of dividends. The
Trust showed a net increase in cash during 1995 of $15,629.
Because it holds noncancelable leases with most of its tenants, the
Trust is reasonably assured of receiving the minimum funds
necessary to operate effectively. The Trust obtained two bank
loans during the year to finance the purchase of the Taylors, South
Carolina property and the Columbia, South Carolina property. The
loan of $2,300,000 bears interest at a rate of 8.2% with monthly
payments of $20,600 through September 2000 and final balloon
payment in October 2000. The loan of $445,000 bears interest at a
rate of 8.55% with monthly payments of $4,395 through September
2000 and a final balloon payment in October 2000. Known future
commitments of the Trust include the repayment of its debt and
certain noncancelable operating leases, both of which are described
in the financial statements filed as part of this report. Past
capital acquisitions and improvements have been financed through
funds provided from operations and the incurrence of long-term debt
with the exception of the acquisition of the Transit Drive property
acquired in 1991 and the acquisition of the East Blackstock Road
<PAGE>
and North Church Street properties acquired in 1994, which were
financed through borrowings under a short-term line of credit.
Future capital expenditures are contingent upon the availability of
funds as determined by the board of trustees. Dividend payments to
shareholders are discretionary and require the board of trustees'
approval. Future dividend payments are contingent upon the
available funds and may be increased or decreased as is necessary.
As with all businesses, inflation has an effect on the operations
of the Trust, particularly with maintenance costs and property
taxes. The Trust is attempting to offset the effects of inflation
by requiring tenants to pay for any increases in costs over their
base year rentals.
ITEM 7. FINANCIAL STATEMENTS
The financial statements listed in Item 13(a) are filed as part of
this annual report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE - None.
PART III
ITEM 9. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Items 9, 10, 11 and 12 has been
omitted because the registrant will file with the SEC not later
than 120 days after the close of its fiscal year a definitive proxy
statement pursuant to Regulation 14A. Such information is hereby
incorporated by reference from registrant's definitive proxy
statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. (1) FINANCIAL STATEMENTS - The financial statements listed in
the accompanying index to financial statements are filed as part of
this annual report.
(2) EXHIBITS - None.
B. REPORTS ON FORM 8-K - None.
C. EXHIBITS - None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PALMETTO REAL ESTATE TRUST
(Registrant)
March 28, 1996 /s/ James A. Boling
- ------------------------ ----------------------------
Date James A. Boling
Chairman of the Board of
Trustees
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
/s/ Melvin K. Younts /s/ William J. Ables
- -------------------------------- ---------------------------
Melvin K. Younts William J. Ables
Secretary/Treasurer President
/s/ John A. Hagins /s/ C. Laney Younts
- -------------------------------- ---------------------------
John A. Hagins C. Laney Younts
Trustee Trustee
/s/ Hunter Howard, Jr. /s/ Gary S. Thompson, Jr.
- -------------------------------- ---------------------------
Hunter Howard, Jr. Gary S. Thompson, Jr.
Trustee Trustee
/s/ R. Riggie Ridgeway
- --------------------------------
R. Riggie Ridgeway
Trustee
March 28, 1996
- --------------------------------
Date
<PAGE>
ANNUAL REPORT ON FORM 10-K SB
ITEM 7 AND ITEM 13(A)(1)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
PALMETTO REAL ESTATE TRUST
GREENVILLE, SOUTH CAROLINA
<PAGE>
PALMETTO REAL ESTATE TRUST
Form 10-K SB--Item 7 and Item 13(A)(1)
List of Financial Statements
The following financial statements of Palmetto Real Estate Trust
are included in response to Item 7:
Balance Sheet--December 31, 1995
Statements of Income--Years Ended December 31, 1995 and 1994
Statements of Shareholders' Equity--Years Ended December 31,
1995 and 1994
Statements of Cash Flows--Years Ended December 31, 1995 and 1994
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Palmetto Real Estate Trust
We have audited the accompanying balance sheet of Palmetto Real
Estate Trust as of December 31, 1995, and the related statements of
income, shareholders' equity and cash flows for the two years ended
December 31, 1995. These financial statements are the responsi-
bility of the Trust's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Palmetto Real Estate Trust at December 31, 1995, and the results of
its operations and its cash flows for the two years ended December
31, 1995 in conformity with generally accepted accounting
principles.
/s/ CRISP HUGHES & CO., L.L.P.
-------------------------------
Crisp Hughes & Co., L.L.P.
January 31, 1996
<PAGE>
PALMETTO REAL ESTATE TRUST
Balance Sheet
December 31, 1995
ASSETS
Real estate investments, at cost:
Rental property, net of accumulated
depreciation $ 8,053,658
Timberlands 24,864
----------
8,078,522
Other assets:
Cash 84,066
Rent receivable 47,700
Notes receivable 290,179
Prepaid expenses 868
Deferred loan expense, net of
accumulated amortization 28,342
----------
451,155
----------
Total assets $ 8,529,677
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 5,009,427
Demand notes payable 280,000
Accounts payable and accrued expenses 143,461
Dividends payable 185,850
Deferred revenue 170,876
----------
5,789,614
Shareholders' equity:
Shares of beneficial interest, $1 par value;
5,000,000 shares authorized; 1,770,006 shares
issued and outstanding 1,770,006
Capital surplus 498,734
Undistributed earnings 471,323
----------
2,740,063
----------
Total liabilities and shareholders' equity $ 8,529,677
See accompanying notes to financial statements.
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Income
Years Ended December 31, 1995 and 1994
1995 1994
Income: ---- ----
Rental income $ 1,107,784 $ 946,944
Other income 35,845 19,641
--------- --------
1,143,629 966,585
Expenses:
Depreciation and amortization 203,040 198,150
Interest 249,897 175,008
Repairs and maintenance 16,426 26,162
Property taxes 120,550 112,330
General and administrative 152,804 130,699
-------- --------
742,717 642,349
Income from operations before
income taxes 400,912 324,236
Provision for Federal and state
income taxes 4,300 5,381
-------- --------
Income from operations 396,612 318,855
Gain on sale of real estate 51,989 10,148
--------- --------
Net income $ 448,601 $ 329,003
Earnings per share of beneficial
interest:
Income from operations $ .253 $ .203
Gain on sale of real estate .033 .006
--------- ---------
Net income $ .286 $ .209
See accompanying notes to financial statements.
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Shareholders' Equity
Years Ended December 31, 1995 and 1994
<TABLE>
SHARES OF
BENEFICIAL INTEREST
$1 PAR VALUE CAPITAL UNDISTRIBUTED
----------------------- SURPLUS EARNINGS TOTAL
SHARES AMOUNT ------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 1,572,102 $1,572,102 $199,258 $389,906 $2,161,266
Net income - - - 329,003 329,003
Distribution to shareholders - - - (306,310) (306,310)
Purchase and retirement
of 2,096 shares of
outstanding beneficial
interest (2,096) (2,096) (524) - (2,620)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1994 1,570,006 1,570,006 198,734 412,599 2,181,339
Issuance of 200,000 shares
of beneficial interest 200,000 200,000 300,000 - 500,000
Net income - - - 448,601 448,601
Distribution to
shareholders - - - (389,877) (389,877)
--------- --------- -------- ---------
Balance at December 31, 1995 1,770,006 $1,770,006 $ 498,734 $ 471,323 $2,740,063
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Cash Flows
Years Ended December 31, 1995 and 1994
1995 1994
Cash from operating activities: ------- -------
Net income $ 448,601 $ 329,003
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 197,008 194,610
Amortization of deferred expenses 6,032 3,540
Gain on disposal of real estate (51,989) (10,148)
(Increase) decrease in:
Rent receivable (19,470) (9,289)
Prepaid expense (868) -
Deferred loan expense (8,931) (16,032)
Increase (decrease) in:
Accounts payable and accrued
expenses 44,134 (16,546)
Net cash provided by ------- -------
operating activities 614,517 475,138
Cash from investing activities:
Property additions and improvements (358,653) (698,500)
Proceeds from disposal of real estate 316,051 10,000
Collections of mortgage notes receivable 13,436 5,720
Net cash used in investing ------- -------
activities (29,166) (682,780)
Cash from financing activities:
Net borrowings (payments) on demand note
payable (120,000) 663,378
Net borrowings (payments) on mortgage
notes payable (127,870) (120,859)
Purchase of shares of beneficial
interest - (2,620)
Payment of dividends (321,852) (341,763)
Net cash provided by financing ------- -------
activities (569,722) 198,136
Net increase in cash 15,629 (9,506)
Cash at beginning of year 68,437 77,943
------- -------
Cash at end of year $ 84,066 $ 68,437
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest $ 249,897 $ 178,601
Income taxes $ 5,172 $ 6,630
See accompanying notes to financial statements.
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Cash Flows (continued)
Year Ended December 31, 1995
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
1995
- -----
The purchase of the Columbia, South Carolina property for $745,000
was partially financed by obtaining a mortgage in the amount of
$445,000, payable in monthly installments of $4,395 at an interest
rate of 8.55% through September 2000.
The Trust purchased property on Wade Hampton Boulevard in
Greenville, South Carolina for $2,800,000 through an issuance of
common stock of $200,000 and paid-in capital of $300,000 and by
obtaining a mortgage for the remainder of the purchase price of
$2,300,000, payable in monthly installments of $20,660 at an
interest rate of 8.2% through September 2000.
1994
- -----
The Trust financed the sale of the Summerville, South Carolina
property by issuing a note receivable to the buyer in the amount of
$262,944, payable in monthly installments of $2,725, beginning
October 1994 through January 2009. The sale has been accounted for
under the installment method and the gain of $178,972 will be
realized over the term of the note receivable.
During November 1994, the Trust refinanced $463,286 of the demand
note obligation as long-term debt.
<PAGE>
PALMETTO REAL ESTATE TRUST
Notes to Financial Statements
December 31, 1995
1. Summary of Significant Accounting Policies
ORGANIZATION - Palmetto Real Estate Trust ("the Trust") has been
organized as a qualified real estate investment trust under the
Internal Revenue Code and the applicable state laws. The primary
business of the Trust is the ownership, development and rental of
various properties in South Carolina and Georgia. A substantial
percentage of revenue is derived from tenants in one shopping
center. The Trust generally does not require collateral for its
receivables.
INVESTMENTS IN RENTAL PROPERTY - Investments in rental property
are recorded at cost. Depreciation is computed using the straight-
line method for financial reporting and the straight-line and
accelerated methods for income tax purposes. Estimated useful
lives of assets under the straight-line method range from five to
forty years.
DEFERRED LOAN EXPENSE - Costs associated with obtaining
financing are amortized over the lives of the respective loans.
Deferred loan costs at December 31, 1995, amounted to:
Deferred loan costs $ 50,290
Accumulated amortization 21,948
-------
$ 28,342
EARNINGS PER SHARE - Earnings per share were computed on the
basis of 1,586,673 shares for 1995 and 1,571,054 shares for 1994,
which was the weighted average number of shares outstanding during
each year.
INCOME TAXES - The Trust files its tax returns under Sections
856-858 of the Internal Revenue Code and the applicable state laws
as a real estate investment trust, and makes distributions to its
shareholders of its real estate trust taxable income. As a
qualified real estate investment trust, distribution of the Trust's
taxable income and capital gains are taxed at the shareholder
level. The Trust is required to distribute at least 95% of its
taxable income other than capital gains to maintain its tax status.
To avoid additional excise tax, an amount equal to the sum of 85%
of ordinary income and 95% of capital gains must be distributed in
the year it is earned. Differences in income for financial
reporting and tax reporting result from utilization of different
methods of calculating depreciation and differences in reporting
gains on the sale of real estate.
<PAGE>
ESTIMATES - The presentation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
2. INVESTMENT IN RENTAL PROPERTY AND GAIN ON SALE OF REAL ESTATE
<TABLE>
INITIAL COSTS CAPITALIZED
COST TO COMPANY SUBSEQUENT TO ACQUISITION
BUILDING AND CARRYING
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COST
---------------- ------------ ---- ------------ ------------ ----
<S> <C> <C> <C> <C> <C>
Aiken, SC $ - $ 24,500 $ 33,123 $ 1,350 $ 1,350
Cateran Family Restaurant--
Greenville, SC - 20,000 90,004 - -
Dove Cleaners--Spartanburg, SC - 10,000 39,820 - -
Enigma Spinx--Greenville, SC 735,000 350,000 670,000 - -
Venture Park--Greenville, SC - 11,000 59,080 1,375 1,375
Pleasantburg Shopping Center--
Greenville, SC 1,532,380 977,759 1,728,462 1,231,403 1,231,403
Wade Hampton Property--
Greenville, SC - 40,000 200,000 18,282 18,282
Willard Oil Property--
Spartanburg, SC - 55,984 79,140 - -
BP Oil--Greenville, SC - 100,000 328,736 - -
Laurens Road Property--
Greenville, SC - 16,235 82,261 - -
Transit Drive--Greenville, SC - 50,000 175,000 19,213 19,213
Ace TV Rentals--Greenville, SC - 50,000 160,000 - -
Lesco--Greer, SC - 30,000 200,000 - -
Tireama--Spartanburg, SC - 26,000 234,000 - -
Tireama--Spartanburg, SC - 18,000 162,000 - -
Atlas Services--Columbia, SC 442,049 75,000 670,000 - -
Taylors Point Shopping Center--
Greenville, SC 2,299,998 500,000 2,300,000 - -
Other - - - 108,415 108,415
--------- --------- --------- --------- ---------
$5,009,427 $2,354,478 $7,211,626 $1,380,038 $1,380,038
(1) Construction date unavailable
</TABLE>
<PAGE>
<TABLE>
LIFE ON WHICH
GROSS AMOUNT AT WHICH DEPRECIATION IN
CARRIED AT CLOSE OF PERIOD LATEST INCOME
BUILDING AND ACCUMULATED DATE OF DATE STATEMENT IS
LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
---- ------------ ----- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aiken, SC $ 24,500 $ 34,473 $ 58,973 $ 30,921 1966 1965 33
Cateran Family Restaurant--
Greenville, SC 20,000 90,004 110,004 77,403 1966 1974 25
Dove Cleaners--Spartanburg,SC 10,000 39,820 49,820 39,820 1970 1970 25
Enigma Spinx--Greenville, SC 350,000 670,000 1,020,000 106,368 (1) 1993 31/15
Venture Park--Greenville, SC 11,000 60,455 71,455 38,205 1977 1979 25
Pleasantburg Shopping Center--
Greenville, SC 977,759 2,959,865 3,937,624 2,086,359 1965 1976 31
Wade Hampton Property--
Greenville, SC 40,000 218,282 258,282 100,331 1982 1983 25
Willard Oil Property--
Spartanburg, SC 55,984 79,140 135,124 13,630 193 1993 15
BP Oil--Greenville, SC 100,000 328,736 428,736 257,538 1985 1986 25
Laurens Road Property--
Greenville, SC 16,235 82,261 98,496 20,892 1973 1988 31
Transit Drive--Greenville, SC 50,000 194,213 244,213 28,531 (1) 1991 31
Ace TV Rentals--Greenville, SC 50,000 160,000 210,000 18,624 - 1992 31
Lesco--Greer, SC 30,000 200,000 230,000 7,917 1994 1994 39
Tireama--Spartanburg, SC 26,000 234,000 260,000 7,312 (1) 1994 39
Tireama--Spartanburg, SC 18,000 162,000 180,000 5,062 (1) 1994 39
Atlas Services--Columbia, SC 75,000 670,000 745,000 4,188 1995 1995 40
Taylors Point Shopping Center--
Greenville, SC 500,000 2,300,000 2,800,000 4,804 1990 1995 40
Other - 108,415 108,415 44,579 - Various 7
--------- --------- ---------- ---------
$2,354,478 $8,591,664 $10,946,142 $2,892,484
</TABLE>
<PAGE>
The aggregate cost and accumulated depreciation for federal
income tax purposes is $10,431,487 and $2,964,047 at December 31,
1995, respectively.
Activity in the Trust's investment in real estate for the two
years in the period ended December 31, 1995, is summarized as
follows:
Year Ended December 31,
1995 1994
INVESTMENT IN REAL ESTATE ---- ----
Balance at beginning of year $ 7,831,662 $ 7,437,141
Acquisitions 3,603,653 698,500
Cost of property sold (489,173) (303,979)
---------- ---------
Balance at end of year $10,946,142 $ 7,831,662
ACCUMULATED DEPRECIATION
Balance at beginning of year $ 2,914,039 $ 2,938,693
Depreciation expense 197,008 194,610
Accumulated depreciation on property
disposed (218,563) (219,264)
--------- ---------
Balance at end of year $ 2,892,484 $ 2,914,039
In September 1995, the Trust sold property in Valdosta, Georgia
for $332,500 and recorded a gain of $41,940 for financial reporting
purposes. For income tax purposes, the sale of the property was
included as part of a tax-free exchange and is not subject to
either Federal or state income taxes. The Trust acquired property
in Columbia, South Carolina as part of this exchange at a cost of
$745,000. In November 1995, the Trust purchased property in
Taylors, South Carolina for $2,800,000.
In September 1994, the Trust sold property located at 201 North
Cedar Street in Summerville, South Carolina (Piggly Wiggly) with a
net book value of $83,972 for $262,944. The entire sale was
financed by the Company (See Note 3). The buyer's initial
investment does not meet the criteria specified in FASB 66 for
recognition of the gain by the full accrual method, accordingly,
the Trust recorded a deferred gain under the installment method of
$178,972 for financial reporting purposes. Gain in the amount of
$6,459 and $1,548 was recognized for 1995 and 1994, respectively,
based on payments received on the note receivable. For income tax
purposes, the sale of the property was included as a part of a tax-
free exchange and is not subject to either federal or state income
taxes. The Trust acquired property on East Blackstock Road and
North Church Street (Tireama, Inc.) in Spartanburg, South Carolina,
as part of this exchange.
<PAGE>
3. MORTGAGE NOTE RECEIVABLE
The Trust received a $50,000 mortgage note receivable in
connection with the sale of its Charlotte property (J.R. Auto
Sales) in 1992, which bears interest at 10% and is payable in
monthly installments of $661, including interest through October
2002. The carrying amount of the mortgage note receivable was
$39,141 at December 31, 1995.
In addition, the Trust received a $262,944 mortgage note
receivable in connection with the sale of its Summerville property
(Piggly Wiggly) in 1994, which bears interest at 9% and is payable
in monthly installments of $2,725, including interest through
January 2009. The carrying amount of the mortgage note receivable
was $251,038 at December 31, 1995.
4. MORTGAGE NOTES PAYABLE
Long-term debt at December 31, 1995, consists of the following:
Term note payable in monthly payments of
$12,771 including interest through February,
1998, at 2.25% above the London Interbank
Offered Rate (5.8125% at December 31, 1995);
final balloon payment due March 1998;
collateralized by a first mortgage on the
rental property known as South Pleasantburg
Shopping Center. $1,090,971
Term note payable in monthly payments of
$3,500 plus interest through June 1998, at the prime
rate (8.5% at December 31, 1995), final balloon
payment due July 1998; collateralized by the rental
property located at the corner of Haywood Road and
Pelham Road, Greenville, South Carolina. 735,000
Term note payable in monthly payments of
$4,630 including interest through September
1999, at 2.25% above the London Interbank
Offered Rate (5.8125% at December 31, 1995),
final balloon payment due October 1999,
collateralized by a second mortgage on the
rental property know as Pleasantburg Shopping
Center. 441,409
<PAGE>
Term note payable in monthly payments of
$20,660 including interest through September
2000, at a fixed rate of 8.2%, final balloon
payment due October 2000, collateralized by
the rental property located on Wade Hampton
Boulevard, Greenville, South Carolina. $2,299,998
Term note payable to bank in monthly payments of
$4,395 including interest through September
2000, at a fixed rate of 8.55%, final balloon
payment due October 2000, collateralized by
the rental property located at the intersection
of Windhill Drive and Sunbelt Boulevard,
Columbia, South Carolina. 442,049
---------
$5,009,427
Future maturities of debt are as follows:
YEAR
1996 $ 210,061
1997 224,114
1998 1,715,471
1999 470,144
2000 2,389,637
---------
$5,009,427
5. DEMAND NOTE PAYABLE
The Company has an agreement with a bank that permits the
Company to borrow a maximum of $1,000,000 under a revolving line of
credit. Amounts outstanding under the line of credit are due on
demand, bear interest at 2.25% above the London Interbank Offered
Rate (5.8125% at December 31, 1995) and are collateralized by
rental property known as South Pleasantburg Shopping Center, which
is also pledged as collateral for the mortgage notes payable
described in Note 4. At December 31, 1995, $280,000 was
outstanding under the line of credit. During 1995, the maximum
borrowing outstanding on the line of credit was approximately
$465,000.
<PAGE>
6. Financial Instruments
Generally accepted accounting principles require disclosure of
fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate fair value. Instruments such as rent receivable, accounts
payable, accrued expenses, notes receivable or payable that are
currently due, and cash equivalents are of a short-term nature and
carrying value approximates fair value. The estimated fair value
of long-term notes receivable and payable is based on discounting
amounts at contractual rates using current market rates for similar
instruments. The Company estimates the fair value of these items
to be the same as their carrying value.
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- ----------
Notes receivable $ 290,179 $ 290,179
Notes payable $5,009,427 $5,009,427
7. Long-Term Rental Leases
The Trust holds noncancelable long-term leases on certain of its
rental properties. The minimum long-term rentals are summarized
below:
YEAR ANNUAL BASE
1996 $1,197,643
1997 1,070,839
1998 721,722
1999 462,206
2000 338,137
Thereafter 1,398,354
---------
$5,188,901
Certain of the leases contain rentals contingent upon annual
sales of the tenants and have renewal options for periods from one
to five years. Contingent rentals recorded were approximately
$20,000 and $14,000 for 1995 and 1994, respectively. Leases with
renewal options generally contain escalation clauses.
<PAGE>
8. DISTRIBUTIONS TO SHAREHOLDERS
Cash dividends of $321,852 and $341,763 were paid during the
years ended December 31, 1995 and 1994, respectively.
9. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1995 and 1994, the Trust
participated in transactions with several related parties including
primarily expenditures for legal services, management services,
maintenance on the Trust's rental properties and rental of real
estate.
The following summarizes transactions with affiliates for the
years ending December 31:
1995 1994
Rental income $ 81,900 $ 81,900
Repairs and maintenance expenses 5,400 5,400
General and administrative expenses 31,414 27,700
The Trust leases one property to a company affiliated with one
of its largest shareholders for a base rental of $6,475 per month,
under the terms of two separate lease agreements which expire in
January 1999.
10. LEASES
At December 31, 1995, the Trust was obligated under
noncancelable operating leases for the following future minimum
lease payments:
1996 $11,022
1997 11,022
1998 11,022
------
$33,066
Lease expense for each of the years ended December 31, 1995 and
1994 was $11,022.
<PAGE>
11. INCOME TAXES
The difference between income from operations before income
taxes and taxable income is as follows:
1995 1994
Income before income taxes $ 452,901 $ 334,384
Differences:
Gain on sale of real estate (48,489) (1,548)
Depreciation 5,724 (7,454)
Dividends paid deduction (387,404) (306,635)
Other (2,332) (2,608)
-------- -------
Taxable income $ 20,400 $ 16,139
The following is a reconciliation between the Trust's
undistributed earnings for financial reporting purposes and income
tax purposes:
1995 1994
Undistributed earnings, as reported $ 471,323 $ 412,599
Difference in carrying amount of
real estate investments (463,854) (383,739)
-------- --------
Undistributed earnings for income
tax purposes $ 7,469 $ 28,860
Reconciliation between actual income taxes and income taxes at
the statutory rate of 15% is as follows:
1995 1994
Income taxes at the statutory rate $ 3,100 $ 2,500
State taxes net of federal benefit 1,200 1,000
Other - 1,881
----- -----
Provision for income taxes $ 4,300 $ 5,381
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 84066
<SECURITIES> 0
<RECEIVABLES> 337879
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 131766
<PP&E> 10946142
<DEPRECIATION> 2892484
<TOTAL-ASSETS> 8529677
<CURRENT-LIABILITIES> 609311
<BONDS> 5009427
0
0
<COMMON> 1770006
<OTHER-SE> 970057
<TOTAL-LIABILITY-AND-EQUITY> 8529677
<SALES> 0
<TOTAL-REVENUES> 1143629
<CGS> 0
<TOTAL-COSTS> 492820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 249897
<INCOME-PRETAX> 400912
<INCOME-TAX> 4300
<INCOME-CONTINUING> 396612
<DISCONTINUED> 51989
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 448601
<EPS-PRIMARY> .286
<EPS-DILUTED> .286
</TABLE>
