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, 1999
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Commission File Number 0-179
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Palmetto Real Estate Trust
(Name of small business issuer in its charter)
South Carolina 57-0405064
- -------------- ----------
State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
45 Liberty Lane, Greenville, South Carolina 29607
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (864) 233-6007
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Securities registered pursuant to Section 12(b) of the Exchange Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
Shares of Beneficial Interest - $1 Par Value
--------------------------------------------
(Title of class)
Check whether the issuer (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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(continued)
<PAGE>
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not 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 or any amendment to
the Form 10-KSB [x]
The issuer's revenues for its most recent fiscal year: $1,822,765
The aggregate market value of the voting stock held by non-affiliates of the
issuer 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, 2000: Shares of Beneficial Interest 1,770,006
Documents Incorporated by Reference
1. Portions of Annual Report to Stockholders for the year ended December 31,
1999 ("Annual Report") in Part II.
2. Portions of Registrant's Definitive Proxy Statement for the 1999 Annual
Meeting of Stockholders in Part III.
2
<PAGE>
Part I
Item 1. Business
Palmetto Real Estate Trust (the "Trust"), was organized as a qualified real
estate investment trust under the Internal Revenue Code, Section 856, as
amended, and the applicable state laws of the State of South Carolina.
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, 1999, 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 98 percent of its gross income from rents received
on leases with terms ranging up to twenty years with many including renewal
options ranging from one 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 leased 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 current 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. Speedy Cash of SC - 1307 Richland Avenue, Aiken, South Carolina; masonry,
brick and block building; 2,344 square feet; adequate parking;
construction date--1966; no mortgages or liens; two-year lease expires
December 31, 2000. Annual base rent $9,600; property taxes for
1999--$2,088.
3
<PAGE>
B. Rent Smart, Inc., 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 $34,458; three-year lease
expires October 31, 2002; property taxes for 1999--$4,056.
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); a month-to-month rental;
property taxes for 1999--$4,493.
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
1999--$1,756.
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, 1999--$654,500; fifteen-year lease expires May 31, 2008; annual lease
payments of $112,000; 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 1999--$2,451.
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, 2000.
Annual base rent $9,900.
4
<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, 1999--$2,435,500; collateral for
line of credit balance of $-0-; property taxes for 1999--$94,240.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
Belk-Simpson Company Carpet and furniture sales.
Five-year lease expires January 31, 2004;
48,000 square feet. Annual base rent
$159,072.
Book Rack Three-year lease expires December 31, 1999.
Annual base rent $9,180.
The Open Book Five-year lease expires September 30, 2002;
16,000 square feet. Annual base rent
$72,000.
American General Five-year lease expires June 30, 2004.
Annual base rent $8,640.
Alpha Beauty School Five-year lease expires May 31, 2004.
Annual base rent $15,180.
Joey's Inc. Three-year lease expires April 30, 2001.
Annual base rent $15,480.
Mother's Love Annual base rent $3,960. Month-to-month
rental.
Olan Mills Studio Five-year lease expires April 30, 2001.
Annual base rent $6,900.
Pleasantburg Shoe Service Three-year lease expires December 31, 1999.
Annual base rent $4,800.
Rogers Jewelers Month-to-month rental. Annual base rent
$3,600.
SharMari Hair Extraordinaire Two-year lease expires January 31, 2000.
Annual base rent $4,740.
5
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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 Two-year lease expires March 31, 2001.
Annual base rent $10,800.
Fred A. Fuller Appliances Three-year lease expires February 28, 2000.
Annual base rent $12,778.
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. Five-year lease expires December 31, 2003.
Annual base rent $10,800.
Nichole's Two-year lease expires May 31, 2000.
Annual base rent $4,950.
Novelty Shop Three-year lease expires March 31, 2000.
Annual base rent $30,120.
A & E Enterprises Three-year lease expires August 31, 2000.
Annual base rent $54,000.
The Great Escape Five-year lease expires January 31, 2000;
16,000 square feet. Annual base rent
$40,000.
Kutting Room Three-year lease expires September 30,2000.
Annual base rent $5,452.
Jilbril's Boutique Month-to-month rental. Annual base rent
$4,800.
6
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G. Pleasantburg Shopping Center (continued)
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
Act II One year lease expires December 31, 1999.
Annual base rent $5,100.
King David Salon Two-year lease expires June 30, 2000.
Annual base rent $4,992.
Best Upholstering Three-year lease expires November 30, 2002.
Annual base rent $8,100.
Manifest Discs & Tapes Five-year lease expires January 31, 2002.
Annual base rent $52,500.
Today's Beauty Supply Five-year lease expires February 28, 2003.
Annual base rent $21,600.
Half Moon Outfitters Two-year lease expires May 31, 2000.
Annual base rent $30,000.
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 1999--$6,676.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
Mr. Curtis Hair Design Three-year option expires August 31, 2001.
Annual base rent $7,200.
Filter Queen Three-year lease expires May 31, 2002.
Annual base rent $6,171.
Check World Three-year lease expires May 31, 2000.
Annual base rent $7,392.
J. Michael's Three-year lease expires March 31, 2000.
Annual base rent $6,744.
Jay Mac Photography Three-year lease expires August 31, 2001.
Annual base rent $6,600.
7
<PAGE>
H. Wade Hampton Property (continued)
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
ABC Title Loans, Inc. Two-year lease expires October 31, 2000.
Annual base rent $5,700.
Beltone Hearing Aid Center Three-year lease expires June 30, 2001.
Annual base rent is $10,560.
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 $24,680;
five-year lease expires May 15, 2001. Property taxes 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 $61,710; fifteen-year lease expires June 30, 2001; property
taxes 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 1999-$2,051.
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, 2001.
Annual base rent $6,384.
Before-N-After Salon Three-year lease expires May 31, 2000.
Annual base rent $6,600.
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 $32,664; three-year lease expires July 14, 2000; property taxes 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 $30,000.
8
<PAGE>
N. CV Dynamics/CV Master, 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 $19,800,
ten-year lease expires May 31, 2007; 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 $42,830; 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; no mortgages or liens; 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; no mortgages or liens; annual base rent $73,800; ten-year lease
expires July 31, 2006; property taxes paid by tenant.
R. TruGreen Chemlawn, 255 Echelon Road, Greenville, South Carolina; brick and
metal building containing approximately 17,500 square feet; acquired in
1999; mortgage balance at December 31, 1999 - $766,000; annual base rent -
$89,700; eight-year lease expires November 14, 2007; property taxes paid
by tenant.
S. Taylors Point Shopping Center - Wade Hampton Boulevard, Greenville, South
Carolina; brick and masonry building containing 45,922 square feet located
on 5.4 acres; acquired in 1995; mortgage balance at December 31, 1999 -
$2,060,000; property taxes for 1999--$40,899.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
Truett Automotive Eighteen-month lease expires January 31,
2000; 7,500 square feet. Annual base rent
$41,448.
American General Finance Three-year lease expires May 31, 2001.
Annual base rent $23,352.
Partyland Five-year lease expires July 31, 2004;
6,400 square feet. Annual base rent
$66,000.
Brenda's Boutique Three-year lease expires October 31, 1999.
Annual base rent $10,200.
Foremost Insurance Two-year lease expires August 31, 2000.
Annual base rent is $7,003.
9
<PAGE>
S. Taylors Point Shopping Center (continued)
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
Hardee's Restaurant Fifteen-year lease expires December 30,
2004. Annual base rent $22,200.
Harvey's Family Restaurant Three-year lease expires April 30, 2002.
Annual base rent $20,400.
Little Caesar's Pizza Five-year lease expires May 14, 2000.
Annual base rent $17,100.
Impressions Three-year lease expires April 30, 2002.
Annual base rent $8,760.
On Deck Circle Lease under negotiation. Month-to-month
rental. Annual base rent $8,100.
Grand Computers Three-year lease expires April 30, 2000.
Annual base rent $8,100.
Great Wall Five-year lease expires October 31, 2001.
Annual base rent $16,800.
TCBY Yogurt Five-year lease expires January 31, 2000.
Annual base rent $21,600.
All In a Basket One-year lease expires February 28, 2000.
Annual base rent $10,500.
Kyrus Three-year lease expires March 31, 2000.
Annual base rent $50,000.
10
<PAGE>
T. Potomac Place Shopping Center - 3214 Augusta Road, Greenville, South
Carolina; brick and masonry building containing 23,486 square feet located
on 2.3 acres; acquired in 1998, mortgage balance at December 31,
1999--$972,000; property taxes for 1999--$19,388.
PRINCIPAL TENANTS LEASE ARRANGEMENTS
----------------- ------------------
Advance Auto Five-year lease expires December 31, 2004;
6,574 square feet; annual base rent
$39,444.
Cozy Corner Pub Three-year lease expires June 30, 2001.
1,700 square feet; annual base rent
$15,711.
Generation Gap Three-year lease expires February 15, 2002;
1,700 square feet; annual base rent
$11,025.
Goodwill Industries Five-year lease expires November 30, 2002;
3,500 square feet; annual base rent
$20,700.
Rainbow Rental Five-year lease expires May 31, 2003;
7,512 square feet; annual base rent
$31,926.
Sarah's Kitchen Five-year lease expires November 30, 2003;
2,500 square feet; annual base rent
$20,755.
Bell South Year-to-year rental; annual base rent $900.
Item 3. Legal Proceedings
There were no material pending legal proceedings by the Trust or against the
Trust or its properties at December 31, 1999.
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
1999.
11
<PAGE>
Part II
Item 5. Market for Common Equity and Related Security Holder Matters
The information under the caption "Common Stock Information" in the
Annual Report is incorporated herein by reference.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report is incorporated herein by reference.
Item 7. Financial Statements
--------------------
The report of the independent auditors and financial statements
contained in the Annual Report which are listed under Item 13 herein
are incorporated herein by reference.
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 is hereby
incorporated by reference from registrant's definitive proxy
statement.
Item 13. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
13 Annual report to stockholders
27.1 Financial Data Schedule
b. Report on Form 8-K - none
12
<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
Date: March 17, 2000 by: /s/ James A. Boling
--------------------
James A. Boling
Chairman of the Board of Trustees
Pursuant to 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 dates indicated.
SIGNATURES TITLE DATE
/s/ William J. Ables President March 17, 2000
- --------------------- --------------
William J. Ables
/s/ Hunter Howard, Sr. Vice-President March 17, 2000
- ---------------------- --------------
Hunter Howard, Sr.
/s/ Melvin K. Younts Secretary/Treasurer March 17, 2000
- --------------------- --------------
Melvin K. Younts
/s/ C. Laney Younts Trustee March 17, 2000
- -------------------- --------------
Laney Younts
/s/ Billy B. Huskey Trustee March 17, 2000
- ------------------- --------------
Billy B. Huskey
/s/ Hunter Howard, Jr. Trustee March 17, 2000
- ---------------------- --------------
Hunter Howard, Jr.
/s/ R. Riggie Ridgeway Trustee March 17, 2000
- ---------------------- --------------
R. Riggie Ridgeway
<PAGE>
Palmetto Real Estate Trust
45 Liberty Lane
Greenville, South Carolina 29607
(864) 233-6007
PALMETTO REAL ESTATE TRUST
Annual Report
December 31, 1999
<PAGE>
PALMETTO REAL ESTATE TRUST
Annual Report
December 31, 1999
Contents
Independent Auditors' Report ................................................1
Audited Financial Statements
Balance Sheet ..........................................................2
Statements of Income ...................................................3
Statements of Shareholders' Equity .....................................4
Statements of Cash Flow ................................................5
Notes to Financial Statements .......................................6 - 13
Common Stock Information ...................................................14
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................15 - 16
Directors and Officers .....................................................17
<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, 1999, and the related statements of income, shareholders' equity
and cash flows for the two years ended December 31, 1999. 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 audit 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 as
of December 31, 1999, and the results of its operations and its cash flows for
the two years ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ CRISP HUGHES EVANS LLP
Greenville, South Carolina
January 7, 2000
1
<PAGE>
PALMETTO REAL ESTATE TRUST
Balance Sheet
December 31, 1999
Assets
------
Real estate investments, at cost:
Rental property, net of accumulated depreciation $ 9,689,917
Timberlands 24,864
---------
Total real estate investments 9,714,781
---------
Other assets:
Cash 269,689
Rent receivable 6,446
Note receivable 201,703
Deferred loan expense, net of
accumulated amortization 24,798
---------
Total other assets 502,638
---------
Total assets $ 10,217,417
==========
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Mortgage notes payable $ 6,888,000
Accounts payable and accrued expenses 146,070
Dividends payable 297,088
Deferred revenue 137,926
---------
Total liabilities 7,469,084
---------
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 479,593
---------
Total shareholders' equity 2,748,333
---------
Total liabilities and shareholders' equity $ 10,217,417
==========
See accompanying notes to financial statements.
2
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PALMETTO REAL ESTATE TRUST
Statements of Income
Years Ended December 31, 1999 and 1998
1999 1998
Income: ------- -------
Rental income $ 1,781,988 $ 1,605,881
Other income 40,777 21,622
--------- ---------
Total income 1,822,765 1,627,503
--------- ---------
Expenses:
Depreciation and amortization 287,120 286,381
Interest 500,465 468,628
Repairs and maintenance 77,527 55,346
Property taxes 169,849 156,887
General and administrative 210,693 190,688
--------- ---------
Total expenses 1,245,654 1,157,930
--------- ---------
Income from operations before income taxes 577,111 469,573
Gains on sale of real estate 19,333 8,570
--------- ---------
Income before income taxes 596,444 478,143
Income tax expense 6,300 5,000
--------- ---------
Net income $ 590,144 $ 473,143
========= =========
Basic earnings per share of beneficial interest $ 0.33 $ 0.27
========= =========
See accompanying notes to financial statements.
3
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Shareholders' Equity
Years Ended December 31, 1999 and 1998
Shares of
Beneficial Interest
$1 Par Value Capital Undistributed
Shares Amount Surplus Earnings Total
------ ------ ------- -------- -------
Balance at December 31,
1997 1,770,006 $1,770,006 $498,734 $478,152 $2,746,892
Net income - - 473,143 473,143
Distributions to
shareholders - - - (463,858) (463,858)
------ ------ ------- -------- -------
Balance at December 31,
1998 1,770,006 1,770,006 498,734 487,437 2,756,177
Net income - - 590,144 590,144
Distributions to
shareholders - - - (597,988) (597,988)
------ ------ ------- -------- -------
Balance at December 31,
1999 1,770,006 $1,770,006 $498,734 $479,593 $2,748,333
========= ========= ======= ======= =========
See accompanying notes to financial statements.
4
<PAGE>
PALMETTO REAL ESTATE TRUST
Statements of Cash Flows
Years Ended December 31, 1999 and 1998
1999 1998
Cash from operating activities: ------ ------
Net income $ 590,144 $ 473,143
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 282,104 263,766
Amortization of deferred expenses 5,016 22,615
Gain on sale of real estate (19,333) (8,570)
(Increase) decrease in:
Rent receivable 25,840 10,721
Increase (decrease) in:
Accounts payable and accrued expenses 6,874 15,800
------- -------
Net cash provided by operating activities 890,645 777,475
------- -------
Cash from investing activities:
Property additions and improvements (951,523) (1,000,350)
Proceeds from sale of property 9,959 -
Collections on mortgage notes receivable 13,785 42,896
------- -------
Net cash used in investing activities (927,779) (957,454)
------- -------
Cash from financing activities:
Deferred loan costs (8,322) (22,940)
Principal payments on long-term debt (238,000) (4,644,000)
Proceeds from long-term debt 770,000 5,548,530
Payment of dividends (517,733) (469,257)
------- -------
Net cash provided by financing activities 5,945 412,333
------- -------
Net increase (decrease) in cash (31,189) 232,354
Cash at beginning of year 300,878 68,524
------- -------
Cash at end of year $ 269,689 $ 300,878
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest $ 501,198 $ 461,854
======= =======
Income taxes $ 6,004 $ 5,364
======= =======
Noncash transactions:
Accrued dividends $ 80,262 $ 5,399
======= =======
See accompanying notes to financial statements.
5
<PAGE>
PALMETTO REAL ESTATE TRUST
Notes to Financial Statements
December 31, 1999
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 upstate South Carolina. 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 straight-line methods
for financial reporting and straight-line and accelerated methods for
income tax purposes. Estimated useful lives of assets range from five to
forty years.
The Trust reviews the carrying value of long-lived assets if the facts and
circumstances suggest that its recoverability may have been impaired. The
Trust believes that no impairment of rental property exists at December
31, 1999.
Deferred Loan Expense - Costs associated with obtaining financing are
amortized over the lives of the respective loans. Net deferred loan costs
at December 31, 1999 amounted to:
Deferred loan costs $ 42,249
Accumulated amortization 17,451
-------
$ 24,798
=======
Basic Earnings Per Share - Basic earnings per share were computed by
dividing earnings available to shareholders by the weighted average number
of shares outstanding during each year, or 1,770,006 shares for 1999 and
1998.
6
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<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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.
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. At times, cash balances may exceed
federally insured amounts. The Trust has not experienced any losses on such
accounts and management does not believe the Trust is exposed to any
significant credit risk on cash and cash equivalents.
Revenue Recognition - Minimum rental income is recognized on a straight-line
basis over the term of each lease. Unpaid rents are included in accounts
receivable. Certain lease agreements contain provisions which provide
reimbursement of real estate taxes and insurance. All rent and other
receivables from tenants are due from commercial building tenants located in
the properties.
7
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Investment in Rental Property and Gain on Sale of Real Estate
Costs
Capitalized
Subsequent
Initial Cost to Company Acquisition
----------------------- -----------
Building and
Description Encumbrances Land Improvements Improvements
- --------------------- ------------ ------ ------------ ------------
Aiken, SC $ - $24,500 $ 33,123 $ 1,350
Cateran Family Restaurant--
Greenville, SC - 20,000 90,004 -
Reidville Road Brake and Car
Wash--Spartanburg, SC - 10,000 39,820 -
Enigma Spinx--Greenville, SC 654,500 350,000 670,000 -
Venture Park--Greenville, SC - 11,000 81,017 3,125
Pleasantburg Shopping Center--
Greenville, SC 2,435,500 977,759 1,739,570 1,250,171
Wade Hampton Property--
Greenville, SC - 40,000 200,000 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
Transit Drive--Greenville, SC - 50,000 175,000 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 -
CV Master--Spartanburg, SC - 18,000 162,000 20,485
Atlas Services--Columbia, SC 75,000 670,000 -
Taylors Point Shopping Center--
Greenville, SC 2,060,000 500,000 2,300,000 1,398
Atlas Services--Mauldin, SC 50,000 621,000 -
Potomac Place Shopping
Center--Greenville, SC 972,000 150,000 850,350
Truegreen-Chemlawn--
Greenville, SC 766,000 100,000 845,000 -
Other - - - 104,443
-------- -------- -------- --------
$6,888,000 $2,654,478 $9,561,021 $1,422,123
========= ========= ========= =========
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period Latest Income
- ------------------------------------------------------------------- Statement
Building and Accumulated Date of Date is
Land Improvements Total Depreciation Construction Acquired Computed
- -------- ------------ ------- ------------ ------------ -------- --------
$24,500 $34,473 $58,973 $33,791 1966 1965 33
20,000 90,004 110,004 90,004 1966 1974 25
10,000 39,820 49,820 39,820 1970 1970 25
350,000 670,000 1,020,000 271,066 (1) 1993 31/15
11,000 84,142 95,142 52,108 1977 1979 25
977,759 2,989,741 3,967,500 2,312,987 1965 1976 31
40,000 218,282 258,282 136,354 1982 1983 25
55,984 79,140 135,124 34,734 1993 1986 15
100,000 328,736 428,736 283,069 1985 1986 25
16,235 85,917 102,152 32,292 1973 1988 31
50,000 194,213 244,213 54,175 (1) 1991 31
50,000 160,000 210,000 38,942 (1) 1992 31
30,000 200,000 230,000 27,917 1994 1994 39
26,000 234,000 260,000 30,713 (1) 1994 39
18,000 182,485 200,485 23,908 (1) 1994 39/20
75,000 670,000 745,000 71,188 1995 1995 40
500,000 2,301,398 2,801,398 234,792 1990 1995 40
50,000 621,000 671,000 51,750 1996 1996 40
150,000 850,350 1,000,350 26,590 - 1998 40
100,000 845,000 945,000 3,521 1999 1999 40
- 104,443 104,443 97,984 - Various 7
--------- ---------- ---------- ---------
$2,654,478 $10,983,144 $13,637,622 $3,947,705
========= ========== ========== =========
(1) Construction date unavailable
8
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The aggregate cost and accumulated depreciation for federal income tax
purposes is $13,149,628 and $3,922,372 at December 31, 1999, respectively.
Activity in the Trust's investment in real estate for the two years in the
period ended December 31, 1999, is summarized as follows:
Years Ended December 31
1999 1998
Investment in Real Estate ------ ------
-------------------------
Balance at beginning of year $12,686,096 $11,685,746
Acquisitions 951,526 1,000,350
---------- ----------
Balance at end of year $13,637,622 $12,686,096
========== ==========
Accumulated Depreciation
------------------------
Balance at beginning of year $ 3,665,601 $ 3,401,835
Depreciation expense 282,104 263,766
--------- ---------
Balance at end of year $ 3,947,705 $ 3,665,601
========= =========
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 Trust (See Note
3). The buyer's initial investment did not meet the criteria specified in
Statement of Financial Accounting Standards 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 $9,374 and $8,570 was recognized for 1999 and 1998,
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.
3. Mortgage Note Receivable
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 $201,703 at December 31, 1999.
9
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
4. Mortgage Notes Payable
Long-term debt at December 31, 1999 consists of the following:
Term note payable in monthly payments of $2,000
plus interest through November 2004, at 8.00%;
final balloon payment due December 2004:
collateralized by rental property located on
Echelon Road in Greenville, SC. $ 766,000
Term note payable in monthly payments of $2,000
plus interest through September 2003, at 7.75%;
final balloon payment due October 2003;
collateralized by rental property located on
Augusta Road in Greenville, SC. 972,000
Term note payable in monthly payments of $2,275
plus interest through March 2003, at 7.75%;
final balloon payment due April 2003;
collateralized by rental property located on
Haywood Road in Greenville, SC. 654,500
Term note payable in monthly payments of $8,225
plus interest through March 2003, at 7.75%;
final balloon payment due April 2003;
collateralized by rental property located on
Pleasantburg Drive in Greenville, SC. 2,435,500
Term note payable in monthly payments of $7,000
plus interest through March 2003, at 7.75%;
final balloon payment due April 2003;
collateralized by rental property located on
Wade Hampton Boulevard in Greenville, SC. 2,060,000
---------
Total mortgage notes payable $ 6,888,000
=========
Future maturities of debt at December 31, 1999 are as follows:
2000 $ 258,000
2001 258,000
2002 258,000
2003 5,444,000
2004 670,000
---------
$6,888,000
=========
10
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
5. Demand Note Payable
The Trust has an agreement with a bank that permits the Trust 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 8.5% 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, 1999, there was no outstanding balance under the
line of credit. During 1999, the maximum borrowing outstanding on the line
of credit was approximately $165,000. The line expires in April 2000.
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
carrying value for note receivable and notes payable approximates fair value.
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
---- -----------
2000 $1,495,854
2001 1,216,042
2002 951,879
2003 734,183
2004 500,921
Thereafter 815,791
---------
$5,714,670
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 $3,000 for 1999 and $12,000 for
1998. Leases with renewal options generally contain escalation clauses.
11
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. Distributions to Shareholders
Cash dividends of $517,733 and $469,257 were paid during the years ended
December 31, 1999 and 1998, respectively. All dividends are distributions of
earnings and not a return of capital.
9. Related Party Transactions
During the years ended December 31, 1999 and 1998, 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:
1999 1998
------ ------
Rental income $ 4,200 $ 4,200
Repairs and maintenance 7,200 6,150
General and administrative expenses 34,375 30,000
10. Income Taxes
A summary of income tax expenses for the years ending December 31, 1999 and
1998 follows:
Federal State Total
1999 ------- ----- -----
Current $ 4,700 $ 1,600 $ 6,300
1998
Current $ 3,700 $ 1,300 $ 5,000
The difference between income before income taxes and taxable income is as
follows:
1999 1998
------ ------
Income before income taxes $596,444 $478,143
Differences:
Gain on sale of real estate (9,374) (8,570)
Depreciation 35,017 25,100
Dividends paid deduction (580,145) (468,850)
Capital gain distribution (9,959) -
Other (1,449) (1,147)
------ ------
Taxable income $ 30,534 $ 24,676
====== ======
12
<PAGE>
<PAGE>
PALMETTO REAL ESTATE TRUST Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The differences between actual income tax expense and the amount computed by
applying the federal statutory income tax rate of 34% to income before income
taxes are reconciled as follows:
1999 1998
------ ------
Income taxes at the statutory rate $202,000 $162,000
State taxes net of federal benefits 1,000 1,000
Surtax exemption (12,000) (12,000)
Dividend paid deduction (184,700) (146,000)
------- -------
$ 6,300 $ 5,000
======= =======
13
<PAGE>
Common Stock Information
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,
1999 was 1,092.
Dividends - The dividends declared quarterly in 1999 and 1998 are as follows:
- ---------
Per
1999 Total Share
------ ----- -----
First Quarter $ 88,500 .05
Second Quarter 106,200 .06
Third Quarter 106,200 .06
Fourth Quarter 297,088 .168
------- ----
$597,988 .338
======= ====
Per
1998 Total Share
------ ----- -----
First Quarter $ 70,032 .04
Second Quarter 88,500 .05
Third Quarter 88,500 .05
Fourth Quarter 216,826 .1225
------- ----
$463,858 .2625
======= ====
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 the financial condition of the Trust.
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.
14
<PAGE>
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 fourth quarter of 1999, the Trust purchased property in Greenville,
South Carolina for $945,000. This purchase was partially financed by obtaining a
mortgage in the amount of $770,000, payable in monthly installments of $2,000
plus interest at 8.00% through November 2004, with a final balloon payment of
$650,000 due on that date.
Results of Operations
- ---------------------
Rental income has increased by approximately 11% in 1999 as a result of the
acquisition of an additional property acquired in 1998 which produced additional
rental income of approximately $163,000. The Trust intends to continue to invest
in profitable income-producing properties that will command long-term leases.
Depreciation expense and property taxes increased for 1999 due to the purchase
of new property. Repairs and maintenance increased in 1999 due to roof repairs,
HVAC and glass replacement, and painting that were not required in 1998.
The gain of $19,333 recognized during 1999 includes $9,374 of deferred gain on
sale of property being recognized on the installment method and $9,959
recognized from the sale of property in 1999.
15
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The primary liquid asset of the Trust is cash. Cash provided by operating
activities was $890,645 in 1999 and $777,475 in 1998. The cash provided was used
for the repayment of debt and payment of dividends. The Trust showed net cash
used during 1999 of $31,189 as compared to net cash provided in 1998 of
$232,354.
Because it holds noncancelable leases with most of its tenants, the Trust is
reasonably assured of receiving the minimum funds necessary to operate
effectively. Leases that are expiring within the next year are being negotiated
and management does not expect a significant negative impact on liquidity. At
this time, there are no significant vacant properties. Known future commitments
of the Trust include the repayment of its debt and certain noncancelable tenant
leases, both of which are described in the financial statements filed as part of
this annual report. Past capital acquisitions and improvements have been
financed through funds provided from operations and proceeds from long-term
debt. 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.
During 1999, the Trust established a plan to address Year 2000 issues by
purchasing software updates from its sole data processing vendor which are Year
2000 compliant. No adverse effects of the Year 2000 have been noted by
the Trust as of date of this filing. The Trust has a reasonable basis to
conclude that the Year 2000 issues will not materially affect future financial
results, or cause reported financial information not to be necessarily
indicative of future operating results or future financial condition.
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.
16
<PAGE>
PALMETTO REAL ESTATE TRUST
BOARD OF TRUSTEES
December 31, 1999
OFFICERS
James A. Boling
Chairman of the Board of Trustees
William J. Ables
President
Hunter Howard, Sr.
Vice President
Melvin K. Younts
Secretary/Treasurer
C. Laney Younts
Trustee
Billy B. Huskey
Trustee
Hunter Howard, Jr.
Trustee
R. Riggie Ridgeway
Trustee
INDEPENDENT AUDITORS
Crisp Hughes Evans LLP
GENERAL COUNSEL
Younts, Alford, Brown & Goodson
17
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 269689
<SECURITIES> 0
<RECEIVABLES> 208149
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 13637622
<DEPRECIATION> 3947705
<TOTAL-ASSETS> 10217417
<CURRENT-LIABILITIES> 0
<BONDS> 6888000
0
0
<COMMON> 1770006
<OTHER-SE> 978327
<TOTAL-LIABILITY-AND-EQUITY> 10217417
<SALES> 0
<TOTAL-REVENUES> 1822765
<CGS> 0
<TOTAL-COSTS> 1245654
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 500465
<INCOME-PRETAX> 596444
<INCOME-TAX> 6300
<INCOME-CONTINUING> 590144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 590144
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
</TABLE>
