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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
Commission File Number 0-13647*
GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
California (94-6649376)
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
433 California Street
Suite 610
San Francisco, California 94104
(Address of Principal Executive Offices) (Zip Code)
(415) 391-9800
Registrant's Telephone Number, including Area Code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of units outstanding of the registrant's units of beneficial interest
August 1, 1995 was 2,803,169 units.
GRUBB & ELLIS REALTY COMPANY TRUST LIQUIDATING TRUST IS THE DISTRIBUTEE OF THE
ASSETS OF GRUBB & ELLIS REALTY INCOME TRUST, AND FILES REPORTS UNDER GRUBB &
ELLIS REALTY INCOME TRUST'S FORMER COMMISSION FILE NUMBER
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
FORM 10-Q
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I N D E X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Condensed Statements of Assets and Liabilities as of September 30, 1997
and June 30, 1997 3
Statements of Income and Expense for the quarters ended September 30, 1997 and
1996 4
Statements of Cash Flows for the three-month periods ended
September 30, 1997 and 1996 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 10
Item 2: Change of Securities 10
Item 3: Defaults Upon Senior Securities 10
Item 4: Submission of Matters to a Vote of Security Holders 10
Item 5: Exhibits and Reports on Form 8-K 10
Signatures 11
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
CONDENSED STATEMENTS OF ASSETS AND LIABILITIES
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<CAPTION>
September 30, June 30,
1997 1997
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(unaudited)
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ASSETS
Cash and cash equivalents 11,000 727,000
Restricted Cash 32,000 242,000
Prepaid expense and other assets 43,000 0
------------ ------------
Total assets $ 86,000 $ 969,000
============ ============
LIABILITIES AND
BENEFICIARIES' EQUITY
Liabilities:
Other liabilities 68,000 26,000
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Total liabilities 68,000 26,000
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Beneficiaries' equity:
Units of beneficial interest 12,737,000 12,737,000
Notes receivable from beneficiaries (204,000)
(251,000)
Reserve for beneficiaries notes receivable 186,000 186,000
Distributions in excess of accumulated earnings (12,701,000) (11,729,000)
------------ ------------
Total beneficiaries' equity 18,000 943,000
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Total liabilities and beneficiaries' equity $ 86,000 $ 969,000
============ ============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
STATEMENTS OF INCOME AND EXPENSE
(UNAUDITED)
_________
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Quarter Ended Nine Months Ended
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September 30, September 30, September 30, September 30,
1997 1996 1997 1996
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Income:
Other Income $ 25,000 $ 0 $ 25,000 $ 0
Rental income --- 318,000 --- 712,000
Gain (Loss) on Sale of Investment (35,000) 491,000 (180,000) 491,000
Short-term investment interest
and other income 4,000 0 11,000 0
----------- ----------- ----------- -----------
(6,000) 809,000 (144,000) 1,203,000
----------- ----------- ----------- -----------
Expenses:
Rental operating expenses 0 126,000 27,000 279,000
Interest on mortgage loan --- 1,709,000 0 1,998,000
Depreciation --- 39,000 0 133,000
Directors' fees and expenses --- 4,000 0 12,000
General and administrative expenses 39,000 26,000 70,000 55,000
----------- ----------- ----------- -----------
Total expenses 39,000 1,904,000 97,000 2,477,000
----------- ----------- ----------- -----------
Net income (loss) before
extraordinary items (45,000) (1,905,000) (241,000) (1,274,000)
----------- ----------- ----------- -----------
Extraordinary Items 0 (12,000) 0 (12,000)
----------- ----------- ----------- -----------
Net income (loss) (45,000) (1,107,000) (241,000) (1,286,000)
=========== =========== =========== ===========
Net income (loss) per unit $ (.01) $ (.39) $ (.09) $ (.46)
=========== =========== =========== ===========
Average number of units utilized in
net income (loss) per unit $ 2,803,169 $ 2,803,169 $ 2,803,169 $ 2,803,169
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
STATEMENTS OF CASH FLOWS
(UNAUDITED)
_________
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For the Nine Months
Ending
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September 30, September 30,
1997 1996
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Cash flows from operating activities:
Net income (Loss): $ (241,000) $ (1,286,000)
Adjustments to reconcile net income (Loss):
Depreciation and amortization 0 133,000
Increase (decrease) in other liabilities (973,000) 1,448,000
Decrease (increase) in prepaid expenses and other assets (16,000) (17,000)
----------- ------------
Net cash provided by operating activities (1,230,000) 278,000
Cash flows from investing activities:
Proceeds from sale 0 (12,697,000)
Property development costs 0 (4,389,000)
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Net cash provided by (used in) investing activities 0 8,308,000
Cash flows from financing activities:
Dividends paid (880,000) 0
Decrease (increase) in restricted cash 1,813,000 (1,841,000)
Principal payments on mortgage loan payable 0 (7,770,000)
Construction loan proceeds --- 3,598,000
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Net cash used in financing activities 0 (6,013,000)
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Net decrease in cash and cash equivalents (933,000) 2,573,000
Cash and cash equivalents, beginning of period 308,000 64,000
----------- ------------
Cash and cash equivalents, end of period $ 11,000 $ 2,637,000
=========== ============
Supplementary information:
Cash paid for interest $ 0 $ 1,992,000
=========== ============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Organization of the Trust:
Grubb & Ellis Realty Income Trust, Liquidating Trust (the Trust), a
California trust, was organized under an agreement dated May 14, 1992,
between the Trustees and Grubb & Ellis Realty Income Trust (the Company)
whereby the trustees received all of the assets and assumed all of the
liabilities of the Company, which was subsequently dissolved. The purpose
of the Trust was to liquidate the remaining Trust property in a manner to
conserve and protect the liquidating trust estate, and to collect and
distribute the income and proceeds to the beneficiaries of the Trust by May
15, 1995, the date of intended termination. As further explained in Note 3,
although the purpose of the Trust remains the same, the disposition plans
for the Trust's remaining property, the Vintner Square Shopping Center
(formerly the Livermore Arcade Shopping Center), are such that the Trust's
liquidation period has extended beyond May 1995.
2. Basis of Presentation:
The financial statements included herein have been prepared by the Trust,
without audit, pursuant to the rules and regulation of the Securities and
Exchange Commission for reporting on Form 10-Q. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In addition,
certain reclassifications have been made to the prior year financial
statements to conform to the current year's presentation. The statements
should be read in conjunction with the Company's report on Form 10-K for
the year ended December 31, 1996 and the audited financial statements
included therein.
In the opinion of the Trustees, the financial statements reflect all
adjustments necessary for a fair presentation of financial position,
results of operations, and cash flows for the interim period presented. The
results of operations for the nine-month period ended September 30, 1997
are not necessarily indicative of the results to be expected for the full
year.
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
NOTES CONDENSED TO FINANCIAL STATEMENTS
3. Net Real Estate Investment:
Prior to the inception of the Trust, the Vintner Square Shopping Center
property became subject to an environmental clean-up and remediation
program to remedy soil contamination caused by a former tenant. As of May
15, 1992 (date of inception) $241,000 had been paid in connection with the
testing and remediation program. During 1993, the procedures required to
complete the remediation were approved by the Regional Water Quality
Control Board (RWCB). The Trust had taken legal action against the former
tenant, previous owners and other related parties of the property in order
to recover all costs of the clean-up program. A settlement agreement and
general release was executed on January 18, 1994 which shifted the
liability for the clean-up to a separate entity and incorporated the RWCB's
plan approval. On April 30, 1996 the Trust received a No Further Action
Letter from the Regional Water Quality Control Board indicating that the
clean-up requirements imposed by the RWCB have been satisfied and that a
monitoring program will be required for a period of approximately 24
months.
Due to the environmental clean-up program, plans to expand and ultimately
sell the Vintner Square Shopping Center were delayed. However, on July 7,
1995, the Trust executed a loan agreement which provided funds for
financing the rehabilitation and expansion of the shopping center. In
addition, the Trust finalized lease renewals with the three major tenants
in the center, Orchard Supply Hardware, Long's Drugs and Safeway Stores.
The renewed leases result in increased annual rental income and expire in
the years 2011 and 2016.
The Orchard Supply lease involved a build-to-suit agreement for a new
building. Construction activities started in July, 1995 and include the
demolition of a portion of the shopping center. The Trust recorded a
reserve approximating $1,300,000 in the quarter ended June 30, 1995, to
reflect a reduction in the net book value of buildings and improvements for
those assets being demolished. The new Orchard Supply building was
completed on April 1, 1996. The construction schedule called for the
completion of 20,000 sq. ft of new shop space at various intervals from May
24, 1996 to August 15, 1996. The rehabilitation of the original
undemolished shop space and the existing Safeway and Long's stores was
completed in August, 1996.
The Trust recorded an additional net realizable value reserve allowance of
$1,300,000 as of June 30, 1995 and increased the reserve to $1,500,000 as
of December 31, 1995.
Continued
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GRUBB & ELLIS REALTY INCOME TRUST, LIQUIDATING TRUST
NOTES CONDENSED TO FINANCIAL STATEMENTS
4. Restricted Cash
The Vintner Square Shopping Center was sold on September 18, 1996. As part of
the Sales Agreement, the Buyer's lender held-back the distribution of $1,234,000
pending completion of tenant improvement construction. The tenant improvements
were substantially completed in February, 1997. Various lender requirements such
as Tenant Estoppel Statements and Certificates of Occupancy from the City of
Livermore have been delivered to the Lender. Distribution of $992,000 of these
funds to the Trust was made in June, 1997 and an additional $166,000 was
distributed in July, 1997. Distributions of the remaining balance of these funds
has been held-up by the buyer of the shopping center as a result of a dispute
involving post-closing adjustments. The Trust has been aggressively attempting
to resolve this dispute since June, 1997. It is currently anticipated that final
resolution should be accomplished prior to December 31, 1997.
Continued
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Changes in Financial Condition:
Cash and cash equivalents decreased from June 30, 1997 to September 30, 1997 by
$716,000 due to a cash distribution to unit holders in the amount of $880,000.
Results of Operations:
Nine Months Ended September 30, 1997 Compared to the Nine Months Ended
September 30, 1996:
A $241,000 loss was recorded in the nine months ended September 30, 1997 as
compared with a loss of $1,286,000 in the comparable period in 1996. This
is a result of the shopping center operating expenses, construction loan
interest and depreciation charges partially offset by rental income and
gain on sale of the property that were recorded prior to sale in September,
1996.
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PART II - OTHER INFORMATION
Items 1 through 4 are not applicable.
Item 5, Exhibits and Reports on Form 8-K:
None
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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.
GRUBB & ELLIS REALTY INCOME TRUST,
LIQUIDATING TRUST
By: /s/ Harold A. Ellis Jr.
-------------------------------
Harold A. Ellis, Jr., Trustee
Dated: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 43,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,000
<CURRENT-LIABILITIES> 68,000
<BONDS> 0
0
0
<COMMON> 12,737,000
<OTHER-SE> (12,719,000)
<TOTAL-LIABILITY-AND-EQUITY> 84,000
<SALES> 0
<TOTAL-REVENUES> (144,000)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 97,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (241,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (241,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241,000)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
