UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
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 [ ]
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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: $1,466,280
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 equity, as of March 15, 1997:
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 1996 annual meeting are incorporated by
reference in Part III.
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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, 1996, 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 1996--$1,987.
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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 1996--$3,818.
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 1996--$4,213.
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; and is vacant; property taxes for
1996--$1,843.
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,
1996--$709,877; 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 1996--$2,278.
Principal Tenants Lease Arrangements
----------------- ------------------
Andy Oxy Company, Inc. Month-to-month rental. Annual base rent $15,300.
Jaguar South One-year lease expires April 30, 1997.
Annual base rent $9,000.
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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, 1996--$1,860,464; collateral for
line of credit balance of $160,372; property taxes for 1996--$83,354.
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
$2,800,000.
Book Rack Three-year lease expires December 31, 1996.
Annual base rent $6,900.
The Open Book Book store. Five-year lease expires September 30,
1997; 16,000 square feet. Annual base rent
$72,000.
Colonial Diner Two-year lease with a one-year renewal option
expires June 30, 1997. 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
$3,960.
Olan Mills Studio Five-year lease expires April 30, 2001. Annual
base rent $6,900.
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.
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G. Pleasantburg Shopping Center (continued)
Principal Tenants Lease Arrangements
----------------- ------------------
First State Mortgage Bankers Month-to-month rental. Annual base rent
$4,200.
Gregory's Boutique One-year lease expires March 31, 1997.
Annual base rent $10,800.
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(cent)to $1.00 Five-year lease expires January 31, 2000. Annual
base rent $24,600 plus 4% of gross sales over
$450,000.
Branch Banking & Trust Co. Twenty-year lease expires December 31, 1997.
Annual base rent $7,830.
Nichole's Two-year lease expires May 31, 1998. 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, 1997.
Annual base rent $3,300.
Houser Shoes Five-year option expires November 30, 1997.
Annual base rent $22,500.
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G. Pleasantburg Shopping Center (continued)
Principal Tenants Lease Arrangements
----------------- ------------------
Genfinity's Three-year lease expires September 30, 1996.
Annual base rent $5,100.
Clyde Davis Co. Lease under negotiation. Annual base rent
$12,000.
King David Salon Two-year lease expires June 30, 1998. Annual
base rent $4,488.
C.C. Hair & Co. Three-year lease expires July 31, 1999. Annual
base rent $7,332.
Manifest Discs & Tapes Five-year lease expires January 31, 2002.
Annual base rent $52,500.
Alpha Greenville Beauty Three-year option expires August 31, 1997.
School 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 1996--$6,288.
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, 1999; 1,000
square feet. Annual base rent $5,610.
Check World Three-year lease expires May 31, 1997. Annual
base rent $6,600.
J. Michael's Three-year lease expires August 31, 1999. Annual
base rent $6,744.
Southeastern Portrait Three-year lease expires August 31, 1998; 1,900
Gallery square feet. Annual base rent $6,534.
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H. Wade Hampton Property (continued)
Jay-Mac Photography Three-year lease expires August 31, 1998;
Annual base rent is $4,026.
Beltone Hearing Aid Center Three-year lease expires June 30, 1998; 900
square feet. Annual base rent is $9,600.
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;
five-year lease expires May 15, 2001. 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
1996--$1,933.
Principal Tenants Lease Arrangements
----------------- ------------------
Borderlands Three-year lease expires December 31, 1999.
Annual base rent $9,900.
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
1996--$3,792, 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.
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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, 1996 -
$433,307; annual base rent $81,600; ten-year lease expires January 12, 2005;
property taxes paid by tenant.
Q. Atlas Services, Inc., Old Mill Road, Mauldin, South Carolina;
brick and metal building containing approximately 17,500 square feet; acquired
in 1996; mortgage balance as of December 1996 - $485,845; annual base rent
$73,800; ten-year lease expires July 31, 2006; property taxes paid by tenant.
R. Taylors Point Shopping Center - Wade Hampton Boulevard,
Greenville, South Carolina; 45,922 square feet; 10,000 square feet vacant;
located on 5.4 acres; brick and masonry building; acquired in 1995; mortgage
balance at December 31, 1996--$2,241,994; property taxes for 1996--$35,220.
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 Two-year lease expires October 31, 1997. Annual
base rent $10,200.
Foremost Insurance Three-year lease expires August 31, 1998. Annual
base rent is $6,825.
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.
Impressions One-year lease expires April 30, 1997. Annual
base rent $8,100.
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R. Taylors Point Shopping Center (continued)
On Deck Circle Three-year lease expires May 14, 1998. Annual
base rent $8,100.
Peak Performance Lease under negotiation. Annual base rent
$24,000.
Grand Computers Liquidators Three-year lease expires March 31, 1999.
Annual base rent $8,100.
Great Wall Five-year lease expiring October 31, 2001.
Annual base rent $19,200.
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, 1996.
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 1996.
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Part II
Item 5. Market for Common Equity 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,
1996, was 1,275.
Dividend data and price range for the years 1996 and 1995 follows:
Dividends - The dividends declared quarterly in 1996 and 1995 are as follows:
Per
1996 Total Share
------- ----
First Quarter $ 70,801 .04
Second Quarter 70,801 .04
Third Quarter 70,800 .04
Fourth Quarter 154,500 .087
------- ----
$366,902 .207
======= ====
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
======= ====
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.
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Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion and analysis that follows addresses the financial condition,
changes in financial condition, and results of operations.
Financial Condition
During the third quarter of 1996, the Trust purchased property in Mauldin,
South Carolina for $671,000. This purchase was partially financed by
obtaining a mortgage in the amount of $437,000, payable in monthly
installments based on a variable interest rate through October 2001. During
the fourth quarter of 1996, the Trust refinanced four loans totaling
$4,015,000 to obtain a more favorable interest rate. Repayments will be
payable in monthly installments based on a variable rate through October
2001, with a final balloon payment due on that date.
Results of Operations
Rental income has increased by approximately 30% as a result of the
Trust acquiring new rental properties in 1996 and 1995, and a number of
the lease renewal options being exercised at an increased base annual
rent. The Trust intends to continue to invest in profitable income-producing
properties which will command long-term leases.
Depreciation, interest expense and property taxes increased 39%, 83%, and 22%,
respectively, in relation to the purchase and financing of new properties
during the fourth quarter of 1995 and during 1996. Also, administrative
expenses, which include utilities and insurance, increased 17% in relation to
the properties acquired during 1995. Repairs and maintenance increased $17
thousand due primarily to roof repairs on various properties during 1996.
Gain on sale of real estate decreased $45 thousand as a result of the sale
of property during 1995. The gain of $7 thousand recognized during 1996
relates to the deferred gain on sale of property in prior years.
The primary liquid asset of the Trust is cash. Cash provided by operating
activities was $599,271 in 1996 and $614,517 in 1995. 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 1996 of
$108,738.
Because it holds noncancelable leases with most of its tenants, the Trust
is reasonably assured of receiving the minimum funds necessary to
operate effectively. 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 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
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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.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PALMETTO REAL ESTATE TRUST
(Registrant)
/s/JAMES A. BOLING
- -------------------
James A. Boling
Chairman of the Board of Trustees
Date
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates 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
Date
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ANNUAL REPORT ON FORM 10-K SB
ITEM 7 AND ITEM 13(A)(1)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
PALMETTO REAL ESTATE TRUST
GREENVILLE, SOUTH CAROLINA
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PALMETTO REAL ESTATE TRUST
Form 10-KSB--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, 1996
Statements of Income--Years Ended December 31, 1996 and 1995
Statements of Shareholders' Equity--Years Ended December 31, 1996 and 1995
Statements of Cash Flows--Years Ended December 31, 1996 and 1995
Notes to Financial Statements
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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, 1996, and the related statements of income, shareholders'
equity and cash flows for the two years ended December 31, 1996. These
financial statements are the responsibility 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, 1996, and the results of its operations and its cash
flows for the two years ended December 31, 1996 in conformity with
generally accepted accounting principles.
January 29, 1997
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PALMETTO REAL ESTATE TRUST
Balance Sheet
December 31, 1996
Assets
Real estate investments, at cost:
Rental property, net of accumulated depreciation $ 8,507,779
Timberlands 24,864
---------
8,532,643
Other assets:
Cash 192,804
Rent receivable 37,356
Notes receivable 275,440
Prepaid expenses 4,034
Deferred loan expense, net of
accumulated amortization 26,672
536,306
---------
Total assets $ 9,068,949
=========
Liabilities and Shareholders' Equity
Liabilities:
Mortgage notes payable $ 5,731,487
Demand notes payable 160,372
Accounts payable and accrued expenses 113,742
Dividends payable 154,500
Deferred revenue 163,712
---------
6,323,813
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 476,396
---------
2,745,136
---------
Total liabilities and shareholders' equity $ 9,068,949
=========
See accompanying notes to financial statements.
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PALMETTO REAL ESTATE TRUST
Statements of Income
Years Ended December 31, 1996 and 1995
1996 1995
-------- --------
Income:
Rental income $ 1,435,868 $ 1,107,784
Other income 30,412 35,845
------ ------
Total income 1,466,280 1,143,629
--------- ---------
Expenses:
Depreciation and amortization 281,689 203,040
Interest 457,123 249,897
Repairs and maintenance 33,825 16,426
Property taxes 146,211 120,550
General and administrative 178,520 152,804
------- -------
Total expenses 1,097,368 742,717
--------- -------
Income from operations before income taxes 368,912 400,912
Provision for Federal and state income taxes 4,100 4,300
----- -----
Income from operations 364,812 396,612
Gain on sale of real estate 7,163 51,989
----- ------
Net income $ 371,975 $ 448,601
======= =======
Earnings per share of beneficial interest:
Income from operations $ 0.206 $ 0.253
Gain on sale of real estate 0.004 0.033
----- -----
Net income $ 0.210 $ 0.286
===== =====
See accompanying notes to financial statements.
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<TABLE>
PALMETTO REAL ESTATE TRUST
Statements of Shareholders' Equity
Years Ended December 31, 1996 and 1995
Shares of
Beneficial Interest
$1 Par Value Capital Undistributed
Shares Amount Surplus Earnings Total
------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
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
Net income - - - 371,975 371,975
Distribution to shareholders - - - (366,902) (366,902)
------ ------ ------- -------- --------
Balance at December 31, 1996 1,770,006 $1,770,006 $498,734 $ 476,396 $2,745,136
========= ========= ======= ======== =========
See accompanying notes to financial statements.
</TABLE>
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PALMETTO REAL ESTATE TRUST
Statements of Cash Flows
Years Ended December 31, 1996 and 1995
1996 1995
-------- --------
Cash from operating activities:
Net income $ 371,975 $ 448,601
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 255,330 197,008
Amortization of deferred expenses 26,359 6,032
Gain on disposal of real estate (7,163) (51,989)
(Increase) decrease in:
Rent receivable 10,344 (19,470)
Prepaid expense (3,166) (868)
Deferred loan expense (24,689) (8,931)
Increase (decrease) in:
Accounts payable and accrued expenses (29,719) 44,134
------- ------
Net cash provided by operating activities 599,271 614,517
------- -------
Cash from investing activities:
Property additions and improvements (709,451) (358,653)
Proceeds from disposal of real estate - 316,051
Collections of mortgage notes payable 14,739 13,436
------ ------
Net cash used in investing activities (694,712) (29,166)
-------- -------
Cash from financing activities:
Net borrowings (payments) on demand note payable (119,628) (120,000)
Net borrowings (payments) on mortgage notes
payable 722,059 (127,870)
Payment of dividends (398,252) (321,852)
-------- --------
Net cash provided by (used in) financing activities 204,179 (569,722)
------- --------
Net increase in cash 108,738 15,629
Cash at beginning of year 84,066 68,437
------ ------
Cash at end of year $ 192,804 $ 84,066
======= ======
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest $ 457,123 $ 249,897
======= =======
Income taxes $ 8,134 $ 5,172
===== =====
See accompanying notes to financial statements.
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Cash Flows (continued)
Year Ended December 31, 1996
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
1996
During November 1996, the Trust refinanced four loans totaling $4,015,000.
Repayments will be payable in monthly installments based on a variable
interest rate through October 2001.
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 2000.
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST
Notes to Financial Statements
December 31, 1996
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, 1996, amounted to:
Deferred loan costs $ 70,885
Accumulated amortization 44,213
------
$ 26,672
======
Earnings Per Share - Earnings per share were computed on the basis of
1,770,006 shares for 1996 and 1,586,673 shares for 1995, 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>
<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.
Cash and Cash Equivalents - The Trust includes cash equivalents, defined
as all highly liquid instruments purchased with a maturity of three months or
less, when reporting cash and cash flows for the years. Cash and cash
equivalents include $83,980 at December 31, 1996 of funds not covered by the
Federal Deposit Insurance Corporation at year end. Deposit balances in excess
of $100,000 at one financial institution are not guaranteed by the Federal
Deposit Insurance Corporation.
<PAGE>
<PAGE>
<TABLE>
2. Investment in Rental Property and Gain on Sale of Real Estate
Costs Capitalized
Initial 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 709,877 350,000 670,000 - -
Venture Park--Greenville, SC - 11,000 81,017 3,125 3,125
Pleasantburg Shopping Center--
Greenville, SC 2,020,836 977,759 1,739,570 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 3,656 3,656
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 485,845 75,000 670,000 - -
Taylors Point Shopping Center--
Greenville, SC 2,241,994 500,000 2,300,000 - -
Atlas Services--Mauldin, SC 433,307 50,000 621,000 - -
Other - - - 108,415 108,415
------------ --------- ---------- ------------ ---------
$5,891,859 $2,404,478 $7,865,671 $1,385,444 $1,385,444
========= ========= ========= ========= =========
(1) Construction date unavailable
</TABLE>
<PAGE>
<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
------ ------------ -------- ------------ ------------ -------- ------------
<C> <C> <C> <C> <C> <C> <C>
$ 24,500 $ 34,473 $ 58,973 $ 32,015 1966 1965 33
20,000 90,004 110,004 81,004 1966 1974 25
10,000 39,820 49,820 39,820 1970 1970 25
350,000 670,000 1,020,000 147,542 (1) 1993 31/15
11,000 84,142 95,142 41,378 1977 1979 25
977,759 2,970,973 3,948,732 2,141,873 1965 1976 31
40,000 218,282 258,282 109,337 1982 1983 25
55,984 79,140 135,124 18,906 193 1993 15
100,000 328,736 428,736 271,069 1985 1986 25
16,235 85,917 102,152 23,727 1973 1988 31
50,000 194,213 244,213 34,942 (1) 1991 31
50,000 160,000 210,000 23,704 (1) 1992 31
30,000 200,000 230,000 12,917 1994 1994 39
26,000 234,000 260,000 13,163 (1) 1994 39
18,000 162,000 180,000 9,113 (1) 1994 39
75,000 670,000 745,000 20,938 1995 1995 40
500,000 2,300,000 2,800,000 62,292 1990 1995 40
50,000 621,000 671,000 5,209 1996 1996 40
- 108,415 108,415 58,865 - Various 7
------ ------------ -------- ------------ ------------ -------- ------------
$2,404,478 $9,251,115 $11,655,593 $3,147,814
========= ========= ========== =========
</TABLE>
<PAGE>
<PAGE>
The aggregate cost and accumulated depreciation for federal income tax
purposes is $11,142,208 and $3,204,207 at December 31, 1996, respectively.
Activity in the Trust's investment in real estate for the two years in
the period ended December 31, 1996, is summarized as follows:
Year Ended December 31
1996 1995
---- ----
Investment in Real Estate
-------------------------
Balance at beginning of year $ 10,946,142 $ 7,831,662
Acquisitions 709,451 3,603,653
Cost of property sold - (489,173)
-------- --------
Balance at end of year $ 11,655,593 $ 10,946,142
========== ==========
Accumulated Depreciation
------------------------
Balance at beginning of year $ 2,892,484 $ 2,914,039
Depreciation expense 255,330 197,008
Accumulated depreciation on
property disposed - (218,563)
------- --------
Balance at end of year $ 3,147,814 $ 2,892,484
========= =========
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 $7,163 and $6,459 was
recognized for 1996 and 1995, 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>
<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 $34,937 at December 31, 1996.
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 $240,503 at December 31,
1996.
4. Mortgage Notes Payable
Long-term debt at December 31, 1996, consists of the following:
Term note payable in monthly payments based on a variable interest
rate through October 2001, at 2.50% above the London Interbank
Offered Rate (7.9565% at December 31, 1996); final balloon payment
due October 2001; collateralized by four rental properties located
in South Carolina. $ 1,860,464
Term note payable in monthly payments based on a variable interest
rate through October 2001, at 2.50% above the London Interbank
Offered Rate (7.9565% at December 31, 1996); final balloon
payment due October 2001; collateralized by four rental
properties located in South Carolina. 709,877
Term note payable in monthly payments based on a variable interest
rate through October 2001, at 2.50% above the London Interbank
Offered Rate (7.9565% at December 31, 1996); final balloon
payment due October 2001; collateralized by four rental
properties located in South Carolina. 433,307
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. $ 2,241,994
Term note payable in monthly payments based on a variable
interest rate through October 2001, at 2.50% above the
London Interbank Offered Rate (7.9565% at December 31, 1996);
final balloon payment due October 2001; collateralized by
four rental properties located in South Carolina. 485,845
---------
$ 5,731,487
<PAGE>
<PAGE>
Future maturities of debt are as follows:
Year
1997 $ 292,163
1998 316,451
1999 342,759
2000 2,307,637
2001 2,472,477
---------
$5,731,487
5. Demand Note Payable
The Company has an agreement with a bank that permits the Company to
borrow a maximum of $500,000 under a revolving line of credit. Amounts
outstanding under the line of credit are due on demand, bear interest at 2.50%
above the London Interbank Offered Rate (7.9565% at December 31, 1996) 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, 1996, $160,372 was outstanding under the line of
credit. During 1996, the maximum borrowing outstanding on the line of credit
was approximately $160,372.
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 $ 275,440 $ 275,440
======= =======
Notes payable $5,731,487 $ 5,731,487
========= =========
<PAGE>
<PAGE>
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
------ -----------
1997 $ 1,345,302
1998 951,517
1999 783,506
2000 627,221
2001 531,911
Thereafter 2,225,953
---------
$ 6,465,410
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 $17,000 and $20,000 for 1996
and 1995, respectively. Leases with renewal options generally contain
escalation clauses.
8. Distributions to Shareholders
Cash dividends of $398,252 and $321,852 were paid during the years ended
December 31, 1996 and 1995, respectively.
9. Related Party Transactions
During the years ended December 31, 1996 and 1995, 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:
1996 1995
---- ----
Rental income $ 81,900 $ 81,900
Repairs and maintenance 5,400 5,400
General and administrative expenses 30,525 30,414
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.
<PAGE>
<PAGE>
10. Leases
At December 31, 1996, the Trust was obligated under noncancelable
operating leases for the following future minimum lease payments:
1997 $ 11,022
1998 11,022
------
$ 22,044
Lease expense for each of the years ended December 31, 1996 and 1995 was
$11,022.
11. Income Taxes
The difference between income from operations before income taxes and
taxable income is as follows:
1996 1995
---- ----
Income before income taxes $ 376,075 $ 452,901
Differences:
Gain on sale of real estate (7,163) (48,489)
Depreciation 15,003 5,724
Dividends paid deduction (366,902) (387,404)
Other 2,152 (2,332)
------ ------
Taxable income $ 19,165 $ 20,400
====== ======
The following is a reconciliation between the Trust's undistributed
earnings for financial reporting purposes and income tax purposes:
1996 1995
---- ----
Undistributed earnings, as reported $476,396 $471,323
Difference in carrying amount of real
estate investments (449,762) (463,854)
-------- --------
Undistributed earnings for income tax purposes $ 26,634 $ 7,469
====== =====
Reconciliation between actual income taxes and income taxes at the
statutory rate of 15% is as follows:
1996 1995
---- ----
Income taxes at the statutory rate $ 3,000 $ 3,100
State taxes net of federal benefits 1,100 1,200
----- -----
$ 4,100 $ 4,300
===== =====
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 192804
<SECURITIES> 0
<RECEIVABLES> 312796
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 536306
<PP&E> 8532643
<DEPRECIATION> 0
<TOTAL-ASSETS> 9068949
<CURRENT-LIABILITIES> 428614
<BONDS> 5731487
0
0
<COMMON> 1770006
<OTHER-SE> 975130
<TOTAL-LIABILITY-AND-EQUITY> 9068949
<SALES> 0
<TOTAL-REVENUES> 1466280
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 640245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 457123
<INCOME-PRETAX> 368912
<INCOME-TAX> 4100
<INCOME-CONTINUING> 364812
<DISCONTINUED> 7163
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 371975
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
